What Is Credit Score & How Does It Impact Your Loan Application?
A credit score is a crucial aspect when it comes to loans. Particularly if it is a home loan, then credit score plays a vital role as the home loan is a credit option of long repayment tenure as far as repayment is concerned. A credit score is nothing but a three-digit numerical summary of your while credit behaviour. It generally differs between 300 and 900 numeric scores. And a score of 750 is looked upon as good. Note that your score is dependent on your credit history. You can get the same from the CIBIL website by paying a nominal charge to know about your score before you place an application for a loan. Note that whether it is a BOI home loan or an SBI home loan CIBIL score is an important parameter to consider.
Your credit report consists of details like a record of credit card dues, defaults of previous credits, late payments, credit cards, loans, current info of loan or credit card application and others. Credit records and CIBIL scores are closely linked in terms of disbursing the loan. If you apply for a loan with a strong credit score and an appreciable past credit record, you are most likely to avail of credit simply as the lenders can put considerable faith in you. If your credit records are excellent, there is a high potential for your loan to get disbursed. However, if you do not hold a strong credit record, there are substantial chances for your loan to face rejection, and the same is applicable for your home loan too.
CIBIL collects all your details linked with your financial history and helps better organize the same to provide to the financial institutions or banks whenever required. CIBIL manages to get all details from financial institutes or banks that are registered with the same. The info is offered monthly to CIBIL and based on this info, and the CIR (credit information report) is formed along with scores for all the commercial organizations and individuals. This decides your credibility and plays a crucial role in determining whether the home loan or other form of loan will be approved.
You can check the CIBIL score easily on its official site. For this, you can fill up the application form with basic details like your name, date of birth, address, ID proof, income, and loans that you avail. After the details are filed, the page is redirected, where you must make a payment of around Rs 470. Upon successful payment, your authentication details are taken, and CIBIL will send over the score over mail in just 24 hours.
It is always recommended for you to ameliorate your CIBIL score and credit records before placing an application for a loan. For any loan, whether from BOI or SBI CIBIL score is an important parameter that is viewed. If your credit score is not good, then you can ameliorate your score by paying all your EMIs and bills by the due date without any type of delay. Also, you must ensure the payment must be completed in full mode and not on partly basis, as the part payments will even be recorded as overdue in your credit report, which will create an adverse impact on your credit record. Lenders or banks never appreciate your late payments. You must even keep a thorough check on the credit limit usage too. It is recommended not to use the whole credit card limit. It is important that you keep checking on your utilization of the available credit. Nil or low amount of outstanding balances may ameliorate your credit score, and hence try to maintain this. Also, it is required that you assess all the bank accounts that you hold, be it joint or single accounts, so that you do not miss out on any of your payments. You can keep a good track of your credit transaction and history by ensuring timely updates. Continuous monitoring will be useful to identify and remove errors on an instant basis. Also, you must maintain a balance between unsecured and secured loans. A combination of unsecured and secured will be useful in maintaining a strong credit score. A lot of unsecured loans may be risky for you as a loan holder.
Knowledge linked with CIBIL score is crucial not just for individuals with credit histories but even for those that have not placed an application for a loan or credit card yet. CIBIL score is a three-digit number generated by the TransUnion CIBIL based on your previous credit info. This ranges anywhere from 300 to 900. The closer your credit score is to the digit 900, the higher your chances of availing yourself of credit from lenders.
Important FAQ (frequently asked questions) to be aware of –
How are credit scores computed?
CIBIL score is computed based on different parameters like your payment history, type and number of loan accounts, your credit history length, outstanding debt, and other parameters. Based on the credit score, banks assess the credibility of being eligible for credit cards and loans.
Why is CIBIL score vital?
CIBIL score is vital to avail credit and gets your loan or credit card application approved. Your credit score or CIBIL score is reviewed through CIBIL’s official site. A score basis your credibility will help you in receiving loans easily. Also, it makes an instant impression on bank lenders. Having a higher credit score is appreciated than having a lower credit score.
How effective is your credit score?
A credit score is one of the prominent factors in availing of credit approvals. Having a higher credit score endows you with the potential and power to bargain on the rate of interest for any credit borrowing.
How does the CIBIL score matter?
One of the major parameters in deciding your loan eligibility for availing a loan or credit card is your CIBIL score. Thus, credit score matters a lot when it is about credit approvals from lending institutions, as your eligibility is based on your assigned credit score and past repayment behaviour. A strong credit score endows you with the benefit of negotiating the terms and conditions and rate of interest. It can even be used to avail approval on loan and credit card applications.