Nowadays, to grant you loan application approval, lenders tend to review your CIBIL score. Lenders may turn down your loan application or offer you a loan at a higher rate of interest or provide you with a credit option at the lowest rate possible in the market. Note that, all this boils down to the CIBIL score. CIBIL is the credit agency that ensures to keep a thorough tab on your past credit record and all other credit info. NBFCs (non-banking financial companies), banks, and financial institutions that issue credit cards are among the members of the credit bureau. These institutions tend to send your credit records periodically. Your credit history details in your credit report are then updated according to your financial behaviour. Note that to check CIBIL score free, you must visit CIBIL’s official site. You can just fetch one credit report for free every year from CIBIL’s website. To conduct CIBIL score check online by PAN card free, you can also visit online financial marketplaces.
A CIBIL score is nothing but a numerical representation of your borrowing habits. It involves the debt you have taken up, the way you are repaying the debt, the kind of credit accounts maintained by you as a customer, the account’s age, any delinquency. In simpler terms, every financial information is recorded in your CIBIL credit history. Before lending a loan, lenders or financial institutions tend to assess your CIBIL report to make a sound decision. Your CIBIL score can assist lenders to understand the involved risk and accordingly decide whether to lend you the required funds.
CIBIL score and its impact on the approval of loan applications?
When assessing your submitted loan application, lenders basically look for a credit score of 750 and above. With a credit score of 750 and above, you hold a high chance of being accepted for a credit card or loan. On contrary, financial institutions are hesitant to extend your credit if you hold a poor credit score and may nearly deny your credit card or loan application. When it is about loans, there are distinct types of loans you might want to place an application for. Let’s understand the impact of credit scores on every loan product.
Additional Reading: Check CIBIL Score by Pan Card
Impact of CIBIL score on 4-wheeler loan approval procedure –
To buy a 4-wheeler, you can avail a car loan. The amount you may need to repay is decided by distinct parameters including your salary. The next advantage is that you can borrow as high as 90 per cent of the 4-wheeler’s invoice value. While there is zero minimal credit score requirement, you may consider availing a car loan if your credit score is nearly 750. In case you do not have a CIBIL score of 750 and above, you might still get the loan approval but at a higher rate of interest. So, you might end up paying a lot due to the higher interest rate charged over the long term.
Impact of CIBIL score on your personal loan approval –
As a personal loan by nature is an unsecured loan form, it already comes with a high rate of interest. There are zero restrictions on loan usage. This means, you can use this credit option to pay for any of your financial requirements like your child’s higher education, or you might spend it even on your dream vacation. As the loan by nature is unsecured, zero security or collateral is required to hedge the risk. There is zero set minimal CIBIL score by lenders, however, for quick loan approval within the required deadline, it is recommended to keep a score of 750 and above. As the financial institution tends to analyse your credit profile and score before providing you with the funds, a higher score enhances your chances of availing personal loan application approval at a lower rate of interest.
CIBIL score impact on your home loan application process
Once you begin earning an income, you can submit the application for your home loan to purchase the home or property of your dream. It is known as a mortgage loan. Also, you can borrow money against your prevailing property. A loan of as high as 80 – 85 per cent of the cost of the property might be offered. Note that the repayment tenure in this loan type usually ranges between 5 – 30 years. Various variables like your city, location, present property costs, etc. impact your rate of interest. Alongside the above-mentioned parameters, your CIBIL score plays a massive role in your home loan approval procedure. If you hold a high score, financial institutions may consider that you are a responsible applicant and can timely repay your debt without fail. Thus, the offered rate of interest on a home loan may also be on the lower end.
A CIBIL score of anywhere between 750 and 900 is looked upon as prudent by lenders to simply approve your application for a loan. This range suggests that you as an applicant have practised financial restraint while conducting your debt repayments. Any CIBIL score ranging between 550 and 700 is looked upon as moderate by lenders suggesting you as an applicant may hold some risk but still have a high chance of availing loan approval. However, in such a case, most lenders may flatly even refuse to offer you a loan deal. In case your CIBIL score ranges anywhere from 300 and 549, then your chances of availing loan approval may extremely be low. In this case, your chance of rejection is extremely high and thus, you are recommended to first improve your credit score and then submit your application for a home loan.
You can improve your credit score easily by following specific healthy credit practices. These practices include repaying your credit card and loan dues in full and by the due date, avoiding applying for any credit facility with multiple lenders in a short time span, maintaining a balanced mix of credit, keeping your credit utilisation ratio or CUR within 30 per cent and periodically checking your credit report to figure out any mistakes in it. In case you find any mistakes in your report, ensure to instantly report the same to the concerned bureau for instant rectification. Doing so would also enhance your credit score automatically.
