Lenders now lay
major emphasis on the CIBIL score of the borrowers. If you are looking for a
home loan, read this post to know the right CIBIL score for the loan and how
you can improve it.
While there are
a lot of reasons for a lender to reject your home loan application, one of the
most important is your CIBIL score. Also known as credit score, the CIBIL score
is a three-digit number calculated based on your credit files. In a way, it
helps lenders to understand your credit history and whether or not you are a
responsible borrower.
If you are
planning to take a home loan, it is very important for you to know the right
CIBIL score in order to get approved for the loan. If your score is lower than
required, we’ve also listed some useful tips to help you improve it.
Right CIBIL Score for Home Loan Eligibility
CIBIL score
ranges between 300 and 900. If you want to qualify for a home loan, you should
have a score of at least 700. The higher your score is, the better are the
chances of loan approval and getting a better deal on loan.
While some
lenders do offer loans to people with CIBIL score in the range of 600-700, the
interest on such loans is generally higher than a loan given to someone with a
score higher than 700. If your score is above 700 and you fulfil all the other
eligibility criteria of the lender, you can get up to 80% of the cost of the
property as a home loan.
Improving CIBIL score
If your CIBIL
score is below 700, there are a few ways to improve it to make yourself
eligible for a home loan. Some of the most useful tips are as follows-
1. Repay on
"Time"- Be it an existing loan or
credit card bills, make sure that you make all the payments on time. Pay the
credit card bills on time and ensure that loan EMIs are paid regularly.
1. Do not be "Credit
Hungry"- Using multiple credit cards and
applying for loans at multiple loan providers affects your CIBIL score
negatively. Moreover, lenders consider this as a credit hungry behaviour and
might reject your loan application.
2. Avoid Reaching the
"Maximum Limit" of your Credit Card-
A simple and very effective way to improve your credit score is to not use a
credit card up to its maximum limit. Keep it around 50%-60% of the limit and
pay the bills regularly.
3. Avoid
"Settling" Credit Cards and Loans-
Settlement is when your lender or credit card provider lets you close a loan or
credit card by paying an amount lower than what you are supposed to pay. While
banks entertain such requests at times, it reduces your credit score.
4. Check the "Credit
Report" Periodically- If you want to improve
your CIBIL score for home loan, checking
the credit report is an excellent idea. This will not only help you know the
credit cards or loans that are reducing your score but will also enable you to
check if there are some errors in the report. In case of any error, you can get
in touch with CIBIL to get it rectified. However, do not ask for CIBIL report
too many times as doing so may have a negative impact on the score too.
Your CIBIL score
works as an indicator for the lenders and helps them whether or not you are a
good borrower. If your CIBIL score is above 700, start searching for a top
lender and if it is below 700, use the tips mentioned above to improve it
before applying for the loan.
