CIBIL Score and Home Loan: Here’s What to Know

/ /

CIBIL Score

The RBI authorized the Credit Information Bureau India Ltd (CIBIL), India’s first credit rating agency to evaluate a borrower’s creditworthiness. The Credit Information Companies (Regulation) Act of 2005 governs this agency. The CIBIL score is a 3-digit score that determines your credit health based on your repayment habit of dues, credit history, number of existing loans, frequency of loan applications, and other factors.

A lender grants you a housing loan after checking your credit score and few other things. When buying a home, you need to take the necessary steps to be well eligible for a home loan.

Factors to Determine Housing Loan Eligibility

Lendersassessyourhomeloaneligibilitydependingonthefollowingfactors:

  • Payment history:The more the cases of payment defaults or uncleared dues, the fewer are the chances of qualifying for a new loan.
  • CIBIL score:A credit score between 700 and 900 implies good credit health, favorable to be approved the best housing loan.
  • Employment and income status:If you earn the minimum annual income specified by the bank and have 3-4 years of experience in your employment or business,you’ll get a loan.
  • EMI to income ratio: You may have a higher chance of securing a loan if the EMIi swith in 50% of your monthly income. The EMI will be lower if you’re yet to repay other loans.
  • Account information: A lender would check any suits and whether they are written off.
  • Property papers: If your property documents don’t show any record of disput esassociated with the home or land, your housing loan eligibility in creases.

What Does Your Credit Score Say about Your Housing Loan Eligibility?

Below are the implications of your CIBIL score for home loan eligibility:

  • 300-599: If your score is below 600, chances of loan approval will be the least as your creditworthiness is considered low. You may get a property loan at a high interest rate.
  • 600-749: The odds of qualifying for a loan increase in this score range but are lower than those with a score above 750. To determine your creditworthiness, the lender may consider other factors like employment stability and monthly income. 
  • 750-900: This score range maximizes your chances of getting a loan as the lender deduces you have a good repayment capacity. So, you can enjoy a quick loan approval, borrow a large amount, and get access to the lowest property loan interest rates.

How to Boost CIBIL Score to Increase Home Loan Eligibility?

Follow these tips to up your credit score and improve your housing loan eligibility:

  • Pay credit card bills regularly in full within the stipulated dates, and clear all dues. Even better, opt for an auto-debit. Then the lender can debit the outstanding amount from your bank account on a fixed date every month. Keep enough balance in that account.
  • Close any existing loan with regular EMI payments in full. If the interest amount bothers, consider transferring the balance of the property loan to a bank offering lower interest rates. 
  • Get any errors in your credit report rectified by raising a CIBIL dispute before applying for a loan.

Before buying a home, boost your credit score and be eligible to get the best house loan.