CIBIL Score: Overview
When a Home Loan borrower applies for a Home Loan with any bank or NBFC, the lender checks the borrower’s creditworthiness to decide on the loan application and the eligibility of the borrower. For this, they approach credit information bureaus. Four credit information bureaus have been authorized by the Reserve Bank of India to collect information on credit users and use this information to assign borrowers credit scores. The credit score is a number between 300 and 900 that reflects a borrower’s ability to repay credit on time, their behaviour towards credit and the chances of them defaulting on the loan. TransUnion CIBIL is the most credit rating agency in India and the credit rating it assigns borrowers is known as the CIBIL Score. So, what is a good CIBIL score for a Home Loan? Is a CIBIL score above 700 considered good? Read on to know the answer.
Is a CIBIL Score Above 700 Considered Good?
The CIBIL score is a number between 300 and 900 and the closer this number is to 900, the better it is. For Home Loans, lenders consider anything above 750 a good CIBIL score. Such a CIBIL score belongs to borrowers who always pay their loan EMIs and credit card bills on time, maintain a low credit utilization ratio as well as a healthy mix of both secured and unsecured loans, apply for credit only when they need it and general, have a very healthy attitude towards credit. Lenders know that there is almost no risk involved in lending money to such borrowers and therefore, borrowers with a good CIBIL score get offered the best Home Loan deals.
So, is a 700 CIBIL score bad? If your CIBIL score is 700, it will be considered fair. Such a CIBIL score belongs to borrowers who have a responsible attitude towards credit but have made a few small mistakes here and there in the past. So, if you are someone who has missed paying some EMIs on time or does not have a healthy credit mix, your CIBIL score may be 700. A 700 CIBIL score is certainly not bad. However, it is also not excellent. If you have such a CIBIL score, your lender will see some risk in lending you money. Therefore, they will not offer you the lowest interest rate and may not be willing to negotiate with you on the loan terms and conditions they are offering you.
Before applying for a Home Loan, check CIBIL score online and if yours is not a good CIBIL score, do not apply for the loan immediately. Instead, wait a few months, work on improving your CIBIL score and then apply for a loan. This will help you get approved for a loan quickly as well as get loan terms that will help you save money and repay the loan easily. Our next section discusses what borrowers can do to improve their CIBIL score.
How to Improve and Maintain a Good CIBIL Score?
If your CIBIL is not above 750, do not worry. Simply practise the following and your CIBIL score will improve eventually:
- To start with, start paying your credit bills and EMIs on time. Your credit history can make or break your CIBIL score. So, make it a point to keep your credit history clean and the best way to do that is never missing a payment due date.
- Yet another thing you can do as a credit user that will instantly increase your credit score is to reduce your credit utilization ratio. The credit utilization ratio is the ratio of credit used to credit available. Borrowers who have a high credit utilization ratio have a low CIBIL score. To reduce your credit utilization ratio, do not exceed more than 30% of your credit card’s limit. Further, always try to clear the entire amount due on your credit card.
- Maintaining a healthy mix of both secured and unsecured loans will also help you maintain a good CIBIL score.
- Do not apply for credit and loans too often. Doing so will portray you as someone highly dependent on credit and lead to you having a low CIBIL score.
- Lastly, check your credit report for errors on a regular basis. If you see a mistake that’s bringing down your CIBIL score, report it immediately.
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Benefits of a Good Credit Score
A good credit score or CIBIL score above 700 signifies good credit health, offering benefits like easier loan approval, lower interest rates, larger loan amounts, improved negotiating power, and greater access to financial opportunities.
