Financial institutions are more likely to offer credit to individuals who pay their installments on time. CIBIL score is a parameter used to measure the creditworthiness of a borrower based on his/her past loan repayment history.
The CIBIL ranges from 300 to 900. A higher CIBIL score (above 750) denotes that the person is trustworthy to avail credit-based financial products from relative institutions.
Role of a credit information report
TransUnion CIBIL, one of the leading credit information companies, has affiliations with over 5,000 financial service providers and helps them to measure the creditworthiness of the borrowers or prospective applicants for financial products.
Financial institutions and non-banking financial corporations provide monthly records of loans to CIBIL. CIBIL maintains and evaluates these records and provides a detailed report called Credit Information Report along with the CIBIL score.
The CIR and the 3-digit score are then used by lending institutions to assess the loan repayment potential of the borrower.
Factors affecting credit score
Before applying for any credit, an individual should check CIBIL score for a secured loan. The person should keep in mind the following factors which determine the score –
- Payment history of a borrower: Timely payments improve the credit score of a borrower and help to increase the chances of his/her eligibility for a new loan. Payment history is an essential factor for lending institutions as it accounts for nearly 35% of the credit score. One should never forget to pay instalments before time to avoid a decline in the credit score.
- Amount of debt: Overutilization of credit can result in decreasing scores. Applying for multiple credit cards or loans simultaneously or in a short span of time can showcase you as a credit-hungry individual, a negative for your CIBIL score.
- Duration of credit history: Longer credit duration implies a better credit score of an individual as the financial institution can evaluate the creditworthiness of the borrower concerning long term loans. Credit duration determines 15% of the credit score.
- Frequent credit inquiries: Each time when an individual applies for new credit, financial institutions perform a credit check which reduces the score. Repeated queries can lower your credit points as they account for 10% of credit score.
How to check the credit score online?
One should check the CIBIL score online from various trusted websites following the below-listed steps –
- Visit any trusted website and enter the name as mentioned in PAN card along with the birth details.
- Provide your PAN card number.
- Select your gender.
- Fill up other contact information such as email address, personal contact number, and residential address.
- Click on the ‘I Agree’ section and enter the submit option to generate the score.
Based on the credit points generated, an individual can be eligible to avail various loans such as home loans, loans against property, etc. Trusted housing finance companies also depend on the CIBIL report before approving any loan to an applicant.
For instance, they provide pre-approved offers on home loans, loans against property, etc. One can check their pre-approved offer by providing only some basic information online.
To avail any housing loans, one should check their CIBIL score for home loan eligibility. One can also check the number of instalments in advance that one requires to pay via home loan EMI calculator.
Prior financial planning reduces worries during loan tenor. One should also learn about the hidden charges on home loans before applying for them as these are charges which will be processed from the approved loan and affect your property purchase.
An individual should also maintain a healthy CIBIL score to avail the most beneficial terms on a loan. A healthy credit history shows the credibility and creditworthiness of an individual to the lender, reducing the latter risk weightage to lending the credit to the former.