With A Good CIBIL Score, You Save Money and Enjoy Perks
CIBIL, as you know, is India’s first credit bureau. It stores details about the credit history of borrowers, retail and commercial. After taking into consideration your credit history, repayment schedule, and loans defaults, it assigns a three-digit score called CIBIL credit score.
Lenders look at this score before deciding on a candidate’s loan application. Credit score, in a nutshell, tells lenders about borrower’s credit worthiness.
The CIBIL score ranges from 300 – 900. Information from all lenders from whom a borrower has taken credit and about all loans taken so far is considered for calculating the credit score. For example, if you have taken a home loan from HDFC bank and a personal loan from ICICI bank, information about both loans will be used, as will be the information about your credit card usage, in calculating your credit score.
How is the CIBIL score calculated?
A few important things about the CIBIL score and how it is computed are as follows:
- The score is computed using an algorithm to rule out any human bias
- The score is calculated only when the credit history is at least six-months old
- The score is derived at using 258 variables, some carrying significantly more weight than others
- You can get a copy of your score by paying a fee (lenders can access the information for free)
- In case you are not satisfied with the score, you can contact the CIBIL dispute cell.
What are the benefits of a good CIBIL score?
- Sanction of loans –Different banks have different cut off levels for approving loans. However, most banks approve loans for a score above 750. With a good score, you will not face a problem in getting your loan application approved by the lender.
- Negotiate a lower interest rate – A high score, something in vicinity of 850, can help you negotiate a lower interest rate with your lender. Even a small drop in interest rate translates into huge savings if the time period is long.
- Speedy processing of your application – Banks and financial institutions take considerably less time in approving loan applications of borrowers with a healthy credit score. A speedy approval, in turn, ensures that you don’t miss out on an opportunity because of a held up in the loan approval process.
- Waiver from the processing fee – Banks may agree to waive off the processing fee if your credit score is good. But remember that this is not a done thing, meaning you can’t just walk in saying “I’ve got a good score, so now let go off the processing fee”. Depending on the bank’s rules and regulations, how good your score is, and your negotiation skills, however, this is something that you can pull off.
It pays off to maintain a good CIBIL score, with benefits and flexibility with your loan options, banks will fight for your business instead of the other way around.