Numerous factors are taken into consideration before a home loan is sanctioned. Amongst them, the CIBIL score is one of the most crucial parameters.

CIBIL Score: What Is It?

CIBIL score is a three-digit number that ranges from 300 to 900 and represents the creditworthiness of a person. This score is a summary of your credit history and your repayment behaviour. Generally, financial institutions consider a CIBIL score of 750 and above as ideal and a score closer to 300 as poor. Your credit score measures your capacity to repay the borrowed loan amount on time. A high CIBIL score will get you better access to home loans that too, at favourable terms.

The impact of CIBIL score on eligibility is undeniable. To your lender, a good CIBIL score indicates responsible past credit behaviour and good repayment record, thus higher creditworthiness. If an applicant has a lower CIBIL score, the lender starts suspecting their repayment capacity and refrain from extending loans to such candidates.

Benefits of a Good CIBIL Score

A high CIBIL score ensures that you get several advantages like –

• Quick approval of loans

A good CIBIL score makes you a responsible borrower. Therefore, the lender is more inclined to give you home loan as early as possible. Applicants with a low credit score will have to provide several documents and find guarantors, making the entire process more time-consuming.

• Easy credit

A higher CIBIL score shows your creditworthiness and assures the lender that you will repay your loan on time. Therefore, it helps you in getting loans from financial lenders quickly, with minimal paperwork, and without the fear of having your application rejected on this parameter.

• Low-interest rate

A good CIBIL score can get you a relatively lower home loan interest rate. It also gives you more negotiating authority to bring down your loan’s ROI. However, if a candidate’s CIBIL score is low, then there is a good chance, the lender will grant the loan at a higher rate of interest.

 

Maintain a good credit score to get your desired financial aid in the nick of time. Pay your credit card dues or prior loan EMIs on time to maintain solid creditworthiness. This might prove to be tricky now, due to the COVID-19 pandemic and the government-imposed Coronavirus lockdown.

The Coronavirus lockdown has led to a disruption in cash flows as many businesses have been shut down. With a shortage of funds, you might find it challenging to make timely loan repayments, which can ultimately harm your CIBIL score.

As the effect of CIBIL score on home loan eligibility is significant, you cannot let your score plummet. Control your expenses, prioritise between your essential and non-essential spending and treat the repayment of dues as your priority. Even then if you are unable to make payments due to the Coronavirus outbreak, talk to your financial lender and inform them about your situation, so that you can together find a solution.

Your credit score is not the sole criteria that determine whether a financial institution will grant you a loan or not. But, you cannot ignore the significant effect of CIBIL score on eligibility for a loan. It certainly is one of the most crucial factors a lender looks into when evaluating your loan application.