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The importance of CIBIL score in a home loan application and ways to improve the same

CIBIL score is a numeric summary of one’s credit history and it helps the borrowers get their loan applications evaluated and approved. A good credit score is one of the most important eligibility criteria based on which a bank gives loan.

Indicator

The credit score is an indicator of one’s credit history. It reflects factors like record of late payments and defaults, loans and credit cards that are currently held, diligence towards paying loans and credit card bills, and number of loans and credit card applications submitted.

History

CIBIL scores are important when it comes to availing credit, especially loan approvals.
A CIBIL credit report contains all the details pertaining to the borrowing history and its repayment discipline. That is why, the banks and the financial institutions check the CIBIL score or credit score through CIBIL. It helps determine the creditworthiness of the borrower which in turn helps the borrower avail loans faster and easier.

Impression

The CIBIL score acts as the first impression for the lender, the higher the score, the better chances of the loan/credit card being approved. Hence it is extremely important to keep tabs on the credit score, especially if one is aiming for a loan anytime in future.

Ways to improve your credit score

There are various ways to improve the CIBIL score. All that you need to do is be conscious about a few things.

• The most important thing is to maintain a good credit history. Always pay your dues on time or before time. Late payments are viewed negatively by lenders.
• Keep your borrowings and credit requirements to a realistic level. One word is “Don’t stretch unless and until it is absolutely needed”. Take a loan only when you really need it. Check if the required amount can be raised from other sources.
• It is better to have a healthy mix of secured (such as home loan, auto loan) and unsecured loans (such as personal loan, credit cards). Too many unsecured loans may be viewed negatively.
• Don’t allow defaults on joint account payments and don’t guarantee someone who may default on their payments because such actions could be as damaging to your CIBIL Score as non-payment on any of your own accounts.
• If there are mistakes in your personal account or credit card records communicate with the bank immediately and make sure that these are corrected; else for no fault of yours, your credit score will suffer.

Purchase your CIBIL report from time to time to avoid unpleasant surprises in the form of a rejected loan application.

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