The term ‘Credit score’ or ‘CIBIL score’ is one of the most common terms often referred to by lending institutions when evaluating a loan or credit card application. It is a major parameter determining an individual’s eligibility for a loan or credit. That is why a credit score check online is important before applying for financial aid. Read on to know all about credit scores – what is a good CIBIL score and how to check CIBIL score for free.
What Is Credit Score?
A credit score represents an individual’s creditworthiness i.e. how capable one is of repaying the loan amount on time. It is denoted by a three-digit number ranging on a scale of 300-900. The higher the score, the more attractive their profile appears to lenders. The credit score is generated by one of the credit rating agencies – Credit Information Bureau (India) Limited. It is determined on the basis of one’s repayment history, existing debts, pending loan EMIs or credit card bills, delay or default in payment etc.
What Is a Good CIBIL Score?
A borrower should know the minimum cibil score for home loan. However, most lenders consider 750+ the ideal CIBIL score for home loan as it implies an excellent credit history. On the other hand, any score below the desired range indicates poor credit history and bad debt management. Potential borrowers can take a look at the credit score range and what they mean before CIBIL score check.
|CIBIL Score Range||Rating||What Your CIBIL Score Means|
|750-900||Excellent||This implies an exceptionally good credit history with the best offers from lenders|
|650-749||Good||This implies a fairly good score but needs a bit of improvement to fetch the best interest rates in the market and faster approvals|
|550-649||Average||This indicates a lower score that may have resulted from various factors, which need to be addressed immediately|
|300-549||Poor||This summarizes a bad credit history which may have been due to consistent delays or defaults in payments, potentially leading to loan or credit rejection right away|
|Below 300||No Score||This implies no record of credit or loan and one must start building the score|
Factors That Affect Your Credit Score
There are five factors that are majorly known to impact the CIBIL score for home loan. Knowing about these factors can help you boost your credit score.
Accounting for 35% of the total credit score, your payment history is the most important factor affecting your CIBIL score for home loan. It includes previous loans, EMIs, outstanding credit card bills and debts that have been missed or delayed due to your inconsistency or inability to pay off the amount on time. These details help future lenders to assess whether or not you are likely to repay the loan or credit.
Credit Utilization Ratio
The second most essential factor is the credit utilization ratio accounting for 30% of the CIBIL score. The credit utilization ratio refers to the percentage of revolving credit currently in use. Overutilization of credit implies one’s inability to plan their expenses and irresponsible behaviour in the eyes of the lender, which is why one must aim to keep their credit utilization ratio below 30%.
Duration of Credit History
The length of credit history accounts for 15% of one’s CIBIL score. A short, negative credit history showing missed payments or delays are one of the many reasons why cibil score is going down and makes it difficult to avail of credit.
Not Having a Credit Mix
If you have a history of taking unsecured loans, then the lender may not see you as fit for easy credit. This is because since these types of loans do not cost you collateral, the lender considers the risk involved to be high. This automatically lowers the credit score.
Raising multiple queries or applying for too many credit or loans at once shows you are already struggling to pay off your dues, which does not go well with your credit score. Every time you raise a claim, these get recorded and are viewed later by the lender.
Tips to Improve Your CIBIL Score
Once you are aware of the factors keeping you away from having a good CIBIL score, you can adopt a few smart measures to rectify those. Here are the top things to do if you want to increase your CIBIL score for home loan:
- Be regular with your payments – it takes around 6 months of timely payments to make a difference to your credit score.
- Credit card holders should check with providers to increase their credit limit. However, be mindful about not spending this amount so as to keep your credit utilization ratio below 30%.
- Avoid closing your existing credit card account even if you do not require it at present.
- Keep a track of your CIBIL report from time to time to look for errors or discrepancies and resolve those at the earliest.
- Opt for a longer repayment tenor when taking a loan as it means low EMIs and just enough time to pay the dues. This can help plan your repayment schedule better and reduce the possibility of a missed or delayed payment.
Steps for Credit Score Check Online
Talking about keeping track of their credit score, borrowers can now opt for the CIBIL score check online facility that allows them to know their eligibility in minutes. The steps involved in credit score check online process are as follows –
- Go to the lender’s website and click on the ‘Get Your CIBIL Score’ option
- Enter your mobile number and wait for the OTP (One-Time Password)
- Provide the OTP to sign in and access the online form
- Fill in all the details as instructed and submit the same
- Check CIBIL score for free on the screen
While the credit score check online facility allows borrowers to check their CIBIL scores once a year for free, one can also choose to go with a customized plan if they wish to monitor their score more frequently throughout the year.
Credit score plays a vital role in determining your loan and credit eligibility. Knowing about the factors that affect your score and working towards achieving a good CIBIL score can make a world of difference as you get to enjoy cheaper interest rates and faster approvals by lenders. With the credit score check online facility, you can monitor your score for free before applying for a loan or credit.