CIBIL Score is a crucial aspect in determining your home loan eligibility. Every time you apply for home loan, your lender checks this score for approving/disapproving your application. It is a summary of your credit history as per your credit behaviour. It depends on the following factors:
Past payments: All your previous payments, whether on time or delayed, are recorded with CIBIL. Consistency in making payments is considered good whereas more recent delays are seen negatively.
Settlements, defaults and write-offs: Multiple write-offs, defaults on previous loans and more recent write-offs (as opposed to older ones) have negative effects on your credit score. Defaults and delays on secured loans are worse than on unsecured loans.
Credit as proportion of income: The higher the loan balance you have, the lower your credit score will be. Less loan balance shows smart credit utilization on your part.
Credit cards: If you have high credit card balances, your credit score will be low. Consistency in repaying credit card debts improves the score. Credit cards (unsecured loans) are viewed negatively by lenders as compared to secured loans.
Different ranges of CIBIL Score
Every person with a financial history has a CIBIL score and it can range anywhere between 300 and 900, with 900 being the highest. A person can also have a score of 0 or -1, which means that they have no credit history in terms of loans and credit cards. So to get the credit history started, you must have at least one credit card or applied for a loan. Here is a breakup of CIBIL scores and what it means:
- 550 – 650: It is a fair score and accepted by many lenders. This score shows that you have been quite regular with your repayments, other than a few exceptions. Most lenders trust borrowers with this score and approve their home loans but usually with a higher interest rates.
- 300 – 550: This is the worst score anybody can have and it means that you have been defaulting on your payments. With such a score, getting credit is extremely difficult.
- 650 – 750: For home loan eligibility, this score is very promising. And if you have this credit score, you will not face any issue regarding approval of application.
- 750 – 900: It is the best possible score anybody can have and it indicates your expertise at managing your finances. Lenders will approve even a larger loan amount to you at great rates when you apply for home loan.