Posted by Buying a home has become an expensive dream. Fortunately, home loans allow many borrowers to convert this dream into a reality. Home loans are high-value, long-term loans sanctioned only to buy a home. The repayment plan involves the borrower paying affordable EMIs for their desired loan tenor.
Lenders check several different things while deciding whether to sanction a loan to the applicant and on what terms and conditions. For instance, the loan amount to be sanctioned and the housing loan interest rate to be extended is decided after carefully assessing the loan applicant’s age, income, job stability, and CIBIL score for home loan. In this article, we focus on the CIBIL score and how it impacts the loan terms and conditions one gets on their home loan.
What is the CIBIL Score?
The CIBIL score is a three-digit number between 300 and 900 assigned to credit users by TransUnion CIBIL, one of the credit information agencies authorized by the Reserve Bank of India to collect information on credit users. TransUnion CIBIL has been operational in India since 2000 and is, therefore, the oldest and most trusted credit information agency in India. TransUnion CIBIL assigns CIBIL scores primarily based on five different considerations: repayment track record, credit utilization ratio, credit mix, hard enquiries and age of credit.
The CIBIL score is important as it reflects an individual’s ability to repay debt on time as well as the amount of trust that a lender can pour into a borrower’s creditworthiness. A high CIBIL score can make it very easy for an individual to get a housing loan on loan terms and conditions that they find desirable. A low CIBIL score, on the other hand, can make it quite difficult for a borrower to get approved for a home loan.
If you do not have the desired CIBIL score to get a housing loan, here are a few simple things you can do to improve your CIBIL score and home loan eligibility.
Simple Things You Can Do to Improve Your CIBIL Score
- Your repayment history is very important. Having a clean repayment history with no cases of loan default or missed EMI and credit card bill payments is crucial. So, to build a strong CIBIL score, start by building a clean repayment track record.
- Having a low credit utilization ratio indicates that you are not excessively dependent on credit and therefore, can be trusted with timely repayment of the home loan. Always maintain your credit utilization ratio under 30%. If your credit utilization ratio exceeds this limit, pay off the excess on your credit card and do not use it until and unless you can afford to clear the pending entire amount due at the end of the month.
- The longer your credit history, the better. So, never close old loan accounts and credit cards. Further, always try and have a mix of both secured and unsecured loans. Having a healthy credit mix boosts one’s credit score.
- Lastly, never have too many hard enquiries under your name. Apply for credit only when you need it and when you can repay it comfortably and without failing to honour your commitment.
Those planning to get a housing loan must do a free CIBIL score check online at least a few months before beginning their loan application process. This way, if your CIBIL score turns out to be below satisfactory, you can take corrective measures and improve your CIBIL score by the time you actually begin the loan application process. In the next section, we discuss how to check the CIBIL score online.
Free CIBIL Score Check Online: Here’s How to Do It
These days, doing a free CIBIL score check online is easy. Go to one of the websites that offer this service and next, simply follow these steps:
- Enter your name, email address and other personal details, as required.
- Next, enter your PAN details. PAN is a unique identification number assigned to Indian citizens by the Tax Department of India. Since no two people can have the same PAN number, PAN is the most ideal way to connect an individual to their CIBIL profile.
- Submit the details and you will be able to see your CIBIL score.
If your free CIBIL score check online delivers satisfactory results, apply to get a housing loan. However, if your score is below expected or required, either improve your CIBIL score by following the tips mentioned in this article or add a co-borrower or loan guarantor to enhance your chances of home loan approval.