There are times when you have to opt for a loan where your CIBIL score is the first requirement the bank asks to check your eligibility. But have you ever wondered what the bare minimum is and why it is so important? Well, do not worry! We are here to discuss the CIBIL score, its importance, and its implications. In this article, we have collated all the must-known facts about the CIBIL score—from its importance to its implications.
What is CIBIL Score/Credit Score?
A CIBIL score is a three-digit score between 300 – 900 that speaks a numeric summary of your credit history. It is calculated by the credit bureau, named TransUnion CIBIL, and derived using the Credit Information Report, which is an individual report based on the consistency in repayment of the current and previous loan.
Minimum Credit Score
Having a minimum credit score is the first and foremost requirement to be eligible to apply for any of your loans, especially home loans. The minimum credit score to get your home loan sanctioned must be 750 or above, which may vary depending on the type of loan you apply for. In case you do not meet the minimum CIBIL score criterion, banks and other financial institutions will not approve your loan sanction request.
Creditworthiness
A good CIBIL score improves your creditworthiness by tracking your financial history of credit repayment. It builds trust between you and your bank, ensuring that the loan drawn from the bank will be repaid and will not turn into a defaulter.
Application Approval
The process of loan application gets easier when you have a good CIBIL score. Yes, you read that right! A good CIBIL score helps you ease the struggle during home loan application approval. With a good credit score, you build your creditworthiness. Hence, banks or financial institutions will approve your loan application without much interrogation and investigation, as your CIBIL score has already spoken for your past financial history in volume.
Loan amount
Wondering how your CIBIL score would impact the loan amount? Well, the CIBIL score is used by banks to determine how large the ticket size should be approved. Yes, that’s true! Banks work on a simple formula—the higher the CIBIL score, the bigger the loan amount sanctioned. Based on this formula, banks can more easily identify good loan borrowers who will repay the loan amount following their loan schedule. However, if you have failed any EMIs due to any reason and it has impacted your credit score, check out how you can increase the CIBIL score.
