Do you understand CIBIL?

CIBIL Score

 

The credit score is an important aspect when it comes to loan.Especially if it is a  home loan. it plays a major role because the home loan is a loan of long tenure as far as repayment is concerned. A credit score is a 3 digit numeric summary of entire credit behavior of a person.It usually varies from 300 to 900 numeric score. The credit score is dependent on the credit history. You can obtain the same from CIBIL by paying nominal charges and come to know about your credit score before you apply for the home loan. The credit report will be consisting of the information such as a record of credit card bills, late payments, defaults of past credits (if any), loans, credit cards, recent information of the credit card or loan application and many more.

Terms for CIBIL score

The CIBIL score and credit record are closely related in terms of sanctioning of the loan. If you apply for a loan with a good credit score and an appreciable credit history, you are likely to get that credit easily as lenders can put a faith on such applicants. If the credit records are good,  there will be high chances for the loan to get sanctioned. if the person does not hold the good credit record there are considerable chances for the loan to get rejected and the same is applicable in terms of home loans also. Rather, it impacts home loan more because the amount of the loan and duration of the loan tends to be high in such cases.

CIBIL collects all the data related to your financial history and organizes the same to provide to the banks or financial institutions whenever required. CIBIL manages to get all the information from the banks or financial institutes that are registered with it. The information is provided on monthly basis to CIBIL and on the basis of that information; the CIR (credit information report) is prepared along with the credit score for all commercial organizations as well as the individuals. This determines the creditworthiness of the person and that plays a significant role in deciding whether the home loan or any other kind of loan will get approval or not.

Factors That Don’t Affect Your Credit Score

  • Savings accounts
  • Education
  • Income
  • Gender
  • Race/ Ethnicity

Advantages of a good CIBIL score:

  • Ability to get a line of credit easily.
  • Quick approval for mortgages.
  • Low interest rate credit cards.
  • No security deposit on cell phones.
  • More negotiating power.
  • Easy approval for rented/leased houses and apartments.
  • Low interest rate home loans and car loans.

Where does CIBIL get its information?

It’s important to note that CIBIL is merely a database that processes a credit score with information that it receives. It does not contribute anything to lower or raise a score.

CIBIL Score

How Does my CIBIL Score Matter?

  1. Credit approvals : Your approval of credit by a bank or financial institution is mainly based on your CIBIL score. Lenders need to know if you are a reliable candidate before granting you credit and CIBIL score helps in determining your eligibility to avail credit. A bad CIBIL score will lessen your chances of getting credit without any hassles. A good CIBIL score is a must to avail a credit card, home loan, mortgage loan, personal loan, car loan or any other types of loan.It is still possible to avail credit without a CIBIL score but this will result in borrowing from unreliable lenders with high interest rates.
  2. Interest rates : A good CIBIL score will help you get the best interest rates and terms. Higher the credit score, better the interest rate. A good CIBIL score will help you save money.
  3. Other factors :CIBIL scores not only affect your ability to get favorable loans and good interest rates . it will also help in getting approved for a new cell phone plan or help you get lesser insurance premiums.

Mistakes That can negatively impact your Cibil Score

  • Delayed credit card payments:  Amidst our busy daily schedules, there are a lot of things that simply slip out of our minds; credit card bill payment is one such thing. One of the most prevalent reason for this is procrastination. The other reason is that most of the times, if you are a regular customer, banks tend to reverse the late payment fee. This in turn makes you feel relaxed and ignorant of the effect of late payment on your credit history. A single late payment can have a drastic effect on your credit score
  • Not depositing enough cash in your loan account:  There are times when people suffer a dent in their credit reports for delayed or non-payment of loan installments. Any car loan account or home loan account which is supposed to auto-debit your monthly loan installments. it should have enough cash to ensure timely loan repayments. Any miss on that front may result in a lowered credit score.
  • Availing too many unsecured loans:  Obtaining loans for various personal needs has become extremely common. These loans are availed for housing, education, vehicles and a host of other requirements. While this sounds like an extremely convenient and flexible financial arrangement, too many loans associated with your name can dampen your CIBIL score.
  • Owning multiple credit cards:   Maintaining multiple credit cards may be a status symbol and appear to act as a great source of funds. However, multiple credit cards do not reflect well on your credit score.  your credit score is affected negatively in such instances. Keeping track of many cards is difficult and can strain your income unless managed meticulously.

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