People planning to apply for housing finance are often advised to read about the different factors that affect home loan terms and conditions. Their research inevitably reveals to them the importance of a good CIBIL score. 

What is the CIBIL Score? 

Credit has become an integral part of our lives. Most people rely on credit for fulfilling life’s basic needs. Car loans, home loans, property loans, education loans and personal loans are loan products we are all familiar with and most of us, at least, have a few of these loan products in our portfolio. 

When an individual applies for a loan, lenders want to know the risk involved in extending credit to the loan applicant. The metric or value that allows them to assess this risk accurately is the credit score. An individual’s credit score is a three-digit number that reflects their repayment capacity and creditworthiness. 

In India, four credit information agencies have been permitted by the central bank of the country, i.e. the Reserve Bank of India, to collect information on credit users and how they use credit. These credit information bureaus are Experian, Equifax, TransUnion CIBIL and CRIF Highmark. 

Of these four, TransUnion CIBIL is the oldest. It is also the credit information agency that most financial institutions trust. TransUnion CIBIL calls the credit score it gives to borrowers the CIBIL Score. The CIBIL score can range from 300 to 900. The closer your CIBIL score is to 900, the better it is. 

How Does a Good Credit Score Help Credit Users

Having a good credit score, i.e. anything between 750 and 900 can benefit you in many ways. Here are some simple and important ways in which a good CIBIL score proves useful. 

  1. A good credit score helps borrowers in many ways. To start with, when someone applies for a loan — secured or unsecured — one of the first things that lenders check is the loan applicant’s credit rating as it allows them to determine the terms and conditions on which to extend the loan to the applicant. A good credit score indicates good repayment capacity and creditworthiness. 

Thus, people with a good CIBIL score for housing loans are extended loans at low interest rates, which in turn, allows them to keep loan EMIs affordable and the cost of borrowing money low. Further, such individuals are also able to access substantial loan amounts easily and also get their desired loan tenor alongside low processing fees and other costs. 

  1. A good credit score can also help people get hired. These days, many employers check an individual’s credit score or CIBIL score to ascertain how responsibly they can handle credit. People with good CIBIL scores obviously leave a better impression and have a higher chance of getting hired. 
  2. Similarly, when individuals with high credit scores apply to buy insurance, they are often asked to pay low EMIs. 
  3. Credit users with good credit scores also find it easier to find good rentals. These days, most property owners also check all interested candidates’ CIBIL scores to understand how reliable each of them is. People with good credit scores often find it quite easy to find good rental homes.  

Final Words

Maintaining a good credit score helps in many ways. Therefore, every credit user must check their credit score from time to time and make sure it is at least 750. If your credit score is below 750, you can do some simple things to improve your credit rating and avail of all the benefits mentioned above. 

Start paying your loan EMIs and credit card bills on time. Set up reminders or authorize autopayments to make sure you never miss an EMI due date. 

Maintain a low credit utilization ratio, a healthy mix of secured and unsecured loans, and never apply for too many loans at the same time. More importantly, never close old loan accounts and credit cards. 

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