Why Is Your CIBIL Score Important_Banner_WC
Why Is CIBIL Score Important for Your Financial Health_WC
If there is one thing that the COVID-19 pandemic taught us, it is that life is uncertain and that you cannot ever be fully prepared for what is to come. However, those who plan well and in advance can better navigate through stressful times than people who live one day at a time. Millions of people lost their jobs after the pandemic – debt piled up and cases of loan default reached an all-time high. However, those who had set an emergency fund aside were able to meet their financial obligations and keep their family safe. The CIBIL score is important because it reflects a borrower’s attitude towards credit and tells a lender how likely or unlikely it is that the borrower will default on loan repayment.
A borrower’s credit score is a three-digit number that is calculated based on their repayment capacity, past repayment behaviour, credit mix, new credit applications, etc. and highlights their creditworthiness or repayment capacity. The CIBIL score ranges from 300 to 900 and lenders consider anything above 750 a good CIBIL score. If you are planning to avail of a loan, check CIBIL score online before beginning the application process. Apply only if your CIBIL score meets your lender requirements, doing so will improve your chances of getting approved for a loan on lucrative loan terms and conditions.
Let us look at how important is your CIBIL score for your financial health and the importance of CIBIL score in the loan application process.
Reasons Why Your CIBIL Score is Important
A Good CIBIL Score Helps One Get Approved for a Loan Quickly
Lenders look at a borrower’s CIBIL score to understand their creditworthiness and repayment capacity. A high CIBIL score i.e., anything above 750 indicates that the borrower has never defaulted on a loan payment in the past and can be trusted with the timely payment of EMIs. On the other hand, a low CIBIL score, i.e., anything below 700 indicates that the borrower has defaulted on loan payments in the past and therefore, cannot be completely trusted with the timely repayment of loan money. Therefore, when a lender belongs to the good CIBIL score range, lenders see no risk in lending them money and approve their loan application quickly. For this same reason, borrowers with a low CIBIL score find it difficult to get approved for a loan.
You Have More Options to Choose From
A high credit score indicates high repayment capacity. Lenders see a borrower with a high credit score as someone who will pay money on time and therefore, adding them to the company’s client list will help the lender make money. Therefore, borrowers whose credit score is above 750 make excellent clients and get approved by almost all lenders they apply to. Thus, when it comes to lenders, borrowers whose credit score lies in the good CIBIL score range have more options to choose from.
Also Read: How to Increase Your CIBIL Score Above 800
You Get Better Loan Interest Rates
The loan terms that a lender will offer you also depend on your credit score. When lenders know that a borrower will repay the loan money on time, they extend their best loan offers to them. Thus, a good CIBIL score gives borrowers high negotiating power when it comes to loan interest rates. Borrowers who have a high CIBIL score can ask for lower interest rates and borrowers who have a low CIBIL score often find themselves paying off the loan at low-interest rates. The interest rate is important, especially in the case of big-ticket and long-term loans. In the case of such loans, even a decimal point difference in the loan interest rates can help borrowers save a lot of money in the long run as low-interest rates not only help borrowers make their EMIs affordable but also help reduce the overall cost of borrowing the loan by reducing the total interest pay-out.
With a Good CIBIL Score, a Borrower May Also Be Able to Ask for a Longer Tenor or Higher Loan Amount
People don’t buy homes every day. Therefore, when they finally decide to do so, they want to buy the best property they can afford. This often requires borrowers to have access to a considerable amount of money, which is made possible with the help of home loans. Borrowers who have a good CIBIL score find it easy to negotiate with lenders and ask them for better loan terms and conditions, such as a higher loan sanction and a longer repayment tenor to make repayment easy. A low CIBIL score, on the other hand, reduces a borrower’s negotiating power and forces them to settle for lower loan sanctions and longer repayment tenors.
It is Easier to Get a Job and a House
A borrower’s CIBIL score is important for their financial health. A good CIBIL score makes getting approved for a loan of any kind – secured or unsecured – easy and quick. It helps borrowers avail of high-sanction loans at low-interest rates and for a longer repayment tenor. A good CIBIL score proves helpful in other regards as well. For instance, if your CIBIL score is in the excellent range, you will find it easy to get a job and rent out a house. These days, many employers and landlords also check a borrower’s CIBIL score to understand a person’s creditworthiness and financial standing. You may also be able to get a better reward credit card and better terms on insurance.
The importance of the CIBIL score cannot be undermined. A good CIBIL score is indicative of excellent financial health and makes life easier in general. Therefore, if you are planning to avail yourself of a home loan in the near future, make sure your CIBIL score is excellent. If it is not, work on improving it first and then apply. This will help you get better loan terms and conditions, which will help you save money in the long run as well as make repayment easy for you.
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