SBI defies rate hikes to offer cheaper home loans for higher CIBIL scores, here’s how to increase yours

Like most central banks across the globe, the Reserve Bank of India has also raised repo rates by 50 basis points, in the wake of the US Federal Reserve’s rate hike. This has led to higher interest rates in fixed deposits and loans in Indian banks, which has made returns on investments higher while borrowing became costly. But despite speculation, the festive demand is expected to boost real estate sales, and State Bank of India is offering discounts based on CIBIL scores.

Home loan EMIs are bound to go up

Since the rate hikes were announced, interest rates on home loans at HDFC have been between 8.6 per cent to 9.5 per cent, while for ICICI they have been as high as 9.45 per cent. After offering interest rates of 8.55 per cent to 9.05 per cent, SBI is offering a discount of up to 30 basis points for customers with a CIBIL score of beyond 800. This brings home loan interest rates down to 8.4 per cent, but how can one increase CIBIL scores?

So what’s a CIBIL score and how to amp it up?

The Credit Information Beureau of India Limited (CIBIL) score is based on the credit history of a person and can range between 300 to 900. It depends on the financial health of a person’s bank account, and goes up when you pay off loans as well as credit card dues on time. It also keeps a record of defaults by a person, to reduce their rating, and is an accurate indicator of creditworthiness of an individual.

Hence the CIBIL score is a crucial factor when you apply for loans, because approvals will depend on the credit history that is reflected through it. Even the frequent calls you get offering loans and other schemes from banks including credit cards, are all thanks to a healthy CIBIL score. Anything above 700 is considered to be a decent credit score, and CIBIL is for borrowers that credit ratings are to companies.

What’s SBI’s strategy?

SBI has decided to extend the perks to people with high CIBIL scores, since the demand for homeloans will be driven by post-pandemic festive euphoria. It seeks to cash in on real estate sales, since property is still considered a safe investment option especially ahead of a recession, apart from gold among Indians.