Factors Affecting Your CIBIL Score - Tata Capital

CIBIL SCORE - FACTORS AFFECTING

Mar 09, 2017

Everyone aspires to own a house. Turning the aspiration into reality depends on circumstances. One of the factors which play an important role in this is getting a loan for house purchase or building the same. In order to get a home loan, CIBIL score is one of the vital factors.

The CIBIL score acts as a base for lenders to determine the quantum of credit to be given as well as the percentage of interest to be charged - higher the risk, higher is the finance cost. CIBIL score varies from 300 to 900; higher CIBIL score indicates the individual has got credit worthiness and lenders can give loans and the vice versa is true in the case of low scores. Also, the lower score increases the chances of your loan application to get rejected.

Among the various factors in ensuring a good score is loan settlement. An individual may take a loan or use a credit card extensively, only to find at a later stage that his financial situation is not allowing him to repay the credit amount back. In this scenario, the lenders and the borrowers reach opt for a settlement, according to which, the certain amount shall be repaid by the borrower and balance waived off depending on the amount and circumstance. This move by the lender and the borrower introduces a win-win situation for both - the borrower is relieved that he had to pay lesser than actual to clear his debt and the lender is satisfied that at least some amount could be recovered. These kinds of instances where the borrower is unable to repay the loan amount affects poorly in his CIBIL score. This is so because CIBIL score in based on the borrower's financial transactions and a person who evades from clearing his debts on time are not considered worthy enough to be trusted for future loans, thereby, resulting in lower CIBIL score.

There is another factor that affects the CIBIL score. Certain individuals possess credit cards but do not utilize the same. Either they fear the cost or are not sure of their repaying ability in case the credit card bill is high. In such a case also CIBIL score is counted as low on account of non-usage of credit instruments.

Hence, it is always better to understand the various factors that can affect your CIBIL score and take necessary steps to meet the requirements.