The CIBIL score is important under the various criteria that are factored in. It is thus crucial to know the CIBIL score meaning as well as its impact on one’s borrowing profile. When processing loans and advances, financial institutions go through a few mandatory checks and verifications to assess the lending risk associated with the borrower.
The meaning and scope of the CIBIL score.
CIBIL, or credit score, is a 3-digit number assigned to each individual based on his/her previous credit behavior and habits. The CIBIL score meaning thus extends to any credit behavior undertaken, whether good or bad and reflects on your credit history and helps in credit score computation.
When it comes to understanding what is good CIBIL score is, one must know that the minimum threshold can vary from one lender to another. Within the range of 300 and 900, a good credit score goes anywhere beyond 750. A higher credit score always stands well among lenders, entrusting them with the borrowing applicant’s creditworthiness. Such a borrowing profile and impression means easy loan approval with minimal hassle.
When applying for home loans, it can be wise to check your CIBIL score, which involves a simple process and may or may not be chargeable. Note that your credit score can determine your home loan EMIs as well. It is thus best to work on your creditworthiness before availing of a long-term, high-value loan.
Your credit score may also be affected when you apply for a joint home loan, so it is essential to assess your financing avenues and their impacts when borrowing.
Your credit score’s meaning spans over four essential segments, namely the following:
1. Summary of your past credit behavior:
The section has a detailed record of any credit-based account that the individual has or had. Such an account may be related to aspects like loans, revolving credit options, home loans, etc.
2. History of your accounts:
The details related to your credit account, like the lender names, type of credit amount borrowed, repayments made, and current balance of your account.
3. Public records of the individual, if any:
As any public records related to the individual define their profiles and the risks associated with them, they are included in the credit history as well.
4. Recent credit inquiries:
Any third-party inquiry on your credit score is also recorded in the history, and multiple detailed inquiries, such as hard inquiries made by lenders for loan application assessment, do not fall favorably among lenders.
It is thus essential to know the meaning of your credit score and keep all records straight and updated for an appropriate reflection on your credit score.
Importance of CIBIL score
Here are a few pointers that emphasize the importance of CIBIL scores for home loans in India and such other advances.
The Minimum Threshold for Credit Scores:
Even though not for home loans, a credit score is a mandatory requirement for availing several advances and has a minimum threshold that one must meet for availing of financing.
Creditworthiness assessment from lenders:
The credit score of an individual is suitably indicative of his/her creditworthiness, allowing the lender to assess the associated risk and approve or decline the loan application accordingly.
Low-Interest Rates for High CIBIL Score Holders:
Individuals with high CIBIL scores find it easier to avail of low home loan interest rates, making financing affordable.
Availability of a Higher Loan Amount:
Individuals holding high credit scores stand a better chance of securing a high loan amount as and when needed.
Even though it is not a mandatory home loan eligibility criterion, a high credit score allows individuals to avail of pre-approved financing with ease.
Some financial institutions extend these pre-approved offers to make funding quick and convenient. These promotions are offered on a variety of financial products, including house loans and property loans. Simply provide your name and contact information to verify your pre-approved offer.
Better negotiation on loan terms.
Individuals holding a high credit score above 750 also have a better chance of negotiating and securing favorable terms on these loans. It is primarily because high-score holders pose lower risks for lenders than low-score holders.
With this understanding of credit score’s meaning and importance, one must also know that it is possible to improve the score with the necessary steps in place and time. Once you have checked what the best credit score for home loans is and how to improve it, you can start working on it at least 6 months before applying for your housing loan.