Understanding the Importance of a Good CIBIL Score

The CIBIL score is a number that is reflective of a person’s dependency on credit and their ability and intent to repay it on time. This number ranges from 300 to 900, with 300 being the lowest CIBIL score and 900 being the highest. A good CIBIL score is anything in the range of 700 to 900. 

Credit information agencies or bureaus are companies that collect information about credit users and study it to analyse how responsible a credit user is towards credit repayment. Though many credit information agencies are operating in India, Experian, Equifax, CRIF Highmark and TransUnion CIBIL are the recognised ones. Of these four, TransUnion CIBIL is the oldest as well as the credit information bureau that the majority of lenders use to assess the creditworthiness of loan applicants. 

If you are planning to take a home loan, you should understand what a good CIBIL score is and how it will impact your chances of loan approval. 

CIBIL Score Ranges and Their Significance for Loan Approval 

Excellent (800 to 900)

If you have an excellent credit score, you are a creditworthy borrower. Lenders will be willing to sanction you a loan at favourable terms. 

Very Good (750 to 799) 

With a very good CIBIL score, loan approval comes quite easily. More importantly, borrowers have good negotiating power and can convince lenders to sanction a loan on desirable loan terms and conditions. 

Good (700 to 749) 

Individuals with a CIBIL score in this range get approved for loans quite quickly. However, their negotiating power is not pronounced and therefore, more often than not, these individuals have to accept loans on terms and conditions that work best for the lender and not the borrower. 

Average (600 to 699)

If you have a CIBIL score in this range, loan approval will be difficult. In this case, you can enhance your chances of being approved for a loan by either adding a loan guarantor or a borrower with excellent creditworthiness. 

Below Average (599 and below)

If your credit score is below 600, it is unlikely that the lenders will sanction you a loan. In this case, it is best that you focus on improving your CIBIL score first and then apply for a loan. 

Those planning to take a home loan can check CIBIL online before beginning the loan application process. They can move ahead with the process only if their CIBIL score is adequate and will help them seal a lucrative home loan deal. 

The Importance of a Good CIBIL Score 

Here’s why you should maintain a good CIBIL score:

1. As previously mentioned in this article, a good CIBIL score makes it possible for individuals to avail of a home loan at the most beneficial terms, including a low home loan interest rate. Home loans are long-term loans and therefore, good loan terms and conditions are essential as they make loan repayment stress-free and easy. 

2. Individuals with a good CIBIL score also easily get approved for the most premium credit cards. Premium credit cards not only offer better reward points but also come with more premium services. 

3. These days, other than loan companies, employers and lessors also check an individual’s repayment capacity and creditworthiness. They do so primarily to gauge the risk involved in hiring an individual as an employee or lending a property to a renter. Individuals with good CIBIL scores have better chances of landing their dream jobs and homes. 

4. A good CIBIL score can also help you become pre-approved for a loan. When you are pre-approved, not only does it become easier for individuals to navigate the whole process quickly and without any hassles, but their ability to negotiate for better loan terms and conditions increases too.  

5. Lastly, individuals with a good CIBIL score find it much easier to get approved for multiple loans than individuals with a low CIBIL score. They are also able to get loans without mortgage insurance, which is an added expense that most of us want to avoid.  

Conclusion

The importance of a good CIBIL score in the home loan approval process cannot be reiterated enough. So, if you are planning to take a home loan, calculate your CIBIL score beforehand and move ahead with the loan application only if your CIBIL score is at least 750 or above.