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How CIBIL Score Has an Impact on Your Home Loan Application?

CIBIL score is a three-digit number which defines the credit history of an individual, and ranges from 300 to 900. Nowadays, it has almost been mandated to sanction a home loan only if the applicant holds a credit score of more than 750. A good credit score is indication of the fact that the person will be able to pay the loan dues on time. As the relationship between credit score and home loan is significantly precious, there are ways to improve the score and build your dream abode easily.

Importance Of CIBIL Score In Home Loan Application

Financial institutions fix the interest rates, period, loan amount and EMI schemes after thoroughly scrutinising the stability of your income. Risky candidates whom financial institutions perceive may abscond with the amount or create deliberate mishaps with credit payments are never given the green signal of getting the desired loan amount. The credit report s the spending behaviour, loan enquiries, overdue, default history, remarks made by lender and defaults in history. When you are choosing a home loan product, the CIBIL score is highly significant. This is why loan officers instruct customers to download the credit report for checking whether they are eligible to opt for a loan. When the credit score is high, all the odds are in your favour in ensuring you avail a home loan product. With a satisfactory CIBIL score and a clean credit history, you can bargain some of the fees to be lowered down. A low score adversely affects your eligibility to get a loan. CIBIL gathers all the required credit linked details from the NBFCs, credit card companies, banks and other lenders.

CIBIL Score Required For Home Loan

After getting the credit report, you may be caught in confusion what the three digit numeric summary actually implies. If you are racking your brain on whether 300 is a good credit score or 800, take a look at the below classification.

  • 750-above : There is a high chance of securing a home loan when your credit score is more than 750. In this case, the loan approval process is done swiftly and you can get hold of a large amount of loan. There is also provision for negotiating the interest rate and the rate is likely to be lowered. In a nutshell, the whole process of applying for a housing loan is done in a simpler way.
  • 600-749 : An individual with credit score between 600 and 749 poses moderate risk to the institution. The applicant can manage to get the loan application approved by ensuring that all other factors are met as per the institution’s requirements. Other factors such as monthly salary, the stability of the income and other extended liabilities are taken into consideration.
  • 300-599 : This range indicates poor credit score and you are not likely to secure a loan with this figure. As it is the very opposite of the good credit behaviour history, most of the lenders will reject your home loan application right away.

How To Improve CIBIL Score For Housing Loan

As you may have understood by now, CIBIL score plays a huge role in securing a housing loan. In case your credit score is not up to the mark, no need to fret and worry. By following certain financial discipline, you can easily improve the credit score record and make yourself eligible for the loan.

  • Check accounts daily and monitor the financial transactions. Do not miss any payment; especially, during the month-end. If you have a joint account, do not ignore it either.
  • Always clear due payments on time and leave the habit of paying in instalments behind. The part-payments are considered as overdue in the report and the banks never appreciate late payments.
  • Focus on a balanced number of unsecured and secured loans instead of juggling between way too many unsecured loans.
  • Do not exceed credit limit and maintain its utilisation for bettering the score.
  • Regularly monitor the credit history and score by using a credit report. If there is any sign of mishap, rectify it pronto.

FAQs On Ways CIBIL Score Affects Home Loan Application

How do I check my CIBIL Score?

Visit the official webpage of CIBIL Score and create an account with authentic email ID, your name and contact number. Never share your username and password with a third party and use the details to check CIBIL report. The second step requires entering an address, date of birth and identity proof which may be Aadhaar number or PAN card. Always provide correct information for accessing the CIBIL score for an unlimited period. In the next step, you have to verify your identity and enter OTP in the mentioned section. Make sure that the mobile number is functional and you have access to check emails. After successfully passing the verification stage and proving your unique identity, you can check CIBIL score and report.

Why do I need a credit report?

The numeric summary defined as a credit score indicates all the debts and unsecured or secured loan information. By paying a little amount of money, you can get to know the credit score before applying for the home loan. In the credit report, you can see the collective data about late payments, existing credit cards and loans, availability of credit and information about a loan application.

I have the perfect CIBIL score but why did my loan get rejected?

Other than CIBIL score, there are various factors that can result in rejection of housing loan. They are:

  • Imbalanced ratio of unsecured loans to secured loans
  • Details (address, age, name, employment) matching by default with another person
  • Poor tax-paying history
  • Unfavourable debt-to-income ratio
  • Remarks on credit score report

How do I avoid mistakes leading to negative performance of credit score?

CIBIL score cannot be taken lightly; hence, there is a set of mistakes to be avoided at any cost for maintaining a good score.

  • Never delay credit card payments and always add credit bill to auto-biller list
  • Raising numerous loan enquiries
  • Holding several credit cards
  • Obtaining many unsecured loans

How can I remove my name from defaulter list?

The authority of CIBIL does not publish any list about defaulting borrowers. However, if you rebuild the credit profile, you can avert the chances of facing rejection. Complete the credit or loan obligations on time without skipping any payment. Get a copy of credit report and search administrative or reporting errors. If there is any dispute, contact the credit bureau and the designated bank. The changes may appear after 30 to 45 days in the report and do not forget about follow-ups.

Is it wise to get professional help to repair credit profile?

You can repair your credit profile by rebuilding it from scratch without spending one penny further. However, the task of rebuilding the credit profile is a time-consuming task and the credit issues are too complex to handle. The professional companies can help you increase the credit score efficiently but beware of the unethical companies. Many of the companies promise an instant rise in the credit score but it is impossible to raise CIBIL score within a short term. In the meantime, you lose all options for securing a housing loan due to the irreversible financial damage.

How do I repay my home loan?

If you have a moderate CIBIL score, you may find it a little difficult to repay the loan amount on time. But if you are given the option to pay through EMI, the payment will be automatically deducted from the bank account per month.

Do I need to submit any documents with my home loan application?

As seen above, the credit report is essential for proceeding with the home loan application. However, the lender asks for a certain set of documents including residence proof, identity proof, passport photograph, duly filled loan application, cost estimation, a copy of house plan along with all government approvals for construction and bank statement with recent acknowledgement ITR.

I am a non-resident of India. Do I have a credit rating as well?

If you are an NRI, you have a credit rating in the country you’re currently residing in. Should you take a housing loan in India, the credit report needs to be displayed while processing the application. But if the respective country does not follow the credit scoring system, you do not have to disclose any such report. On the basis of Indian residential address and PAN, an Indian lender can generate the credit report of an NRI. Therefore, your NRI status does not get in the way.