CIBIL score is extremely important in determining your home loan eligibility. We have got you covered if you are wondering how to improve or upgrade your CIBIL score, what role it plays, and what minimum credit score is required to be eligible for a home loan. This article explains the CIBIL score calculation, how our day-to-day activities impact it, its role in getting a home loan, and so on.
What Does the CIBIL Score Refer To?
CIBIL stands for Credit Information Bureau Limited. It was established in 2000 to maintain the credit information of individuals and organisations. Eligibility for a loan, Interest Rates, and terms and conditions of loans are decided using the CIBIL Score.
How does the CIBIL Score impact your House Loan Application?
CIBIL Score is a three-digit number between 300 and 900, which is determined based on the historical financial transactions of the applicant. The score is dynamic and impacted by the financial transactions at any financial intermediary.
The higher the score, the higher the chances of getting a home loan. A credit score of 650-850 is considered fair, and home loan applications are approved easily. A credit score below 550 is considered the riskiest bracket, and credit institutions refrain from giving house loans to such individuals or organisations.
CIBIL Score determines eligibility for not only a house loan but also the interest rates. People with good credit scores are offered attractive interest rates. Lower interest rates would mean lower EMI. You can calculate the differential instalment advantage using a home loan calculator. It would help in reducing the overall cost of your house.
Therefore, your CIBIL score affects your home loan eligibility directly. If you have a good score, your eligibility terms become simpler, and your application is accepted quickly.
If you have a good CIBIL score, you will also be able to negotiate and avail a higher loan amount for lower interest rates, and the entire procedure will be speedy.
Factors Affecting CIBIL Score
Here is the list of all the factors which affect your CIBIL score.
1. Financial History of payments – Regular payment of outstanding bills contributes to a high credit score.
2. Paying a percentage of the outstanding loan amount – If you are paying merely the minimum amount due on credit card bills, your
CIBIL score would be poorly affected.
3. Types of credit and loan accounts include home loans, personal loans and credit cards.
4. Usage of Credit – Excessive usage of available credit limits leads to lower credit scores. One should only use 30% of the available limit to keeping a good and healthy credit score.
How to Improve Your CIBIL Score?
To increase your chances of getting a Home Loan, you need an excellent CIBIL score. Here are a few tips to help you increase your chances of getting a home loan.
1. Timely payment of Outstanding Dues – You can set up payment reminders to timely pay outstanding dues. Payment delays significantly affect your CIBIL score apart from the penal interest.
2. Do not stop using old credit cards – Older credit cards help you lengthen your credit history. Timely payments of such credit cards over a long period help you increase the CIBIL score for the future.
3. Do not exhaust the limit of credit card – Exhausting the credit limit hurts credit score. Therefore, you should judiciously choose the credit limit such that you utilize 30% of that limit regularly.
4. Close existing loans – To increase the chances of getting a home loan, you should pay off existing loans. You can quickly get a new line of credit by reducing the exposure to an outstanding amount.
5. Opting for a joint loan – A joint loan means a loan in the name of two or more persons. You can opt for a joint loan with your spouse.
This way, you can improve your CIBIL score and take advantage of lower EMIs on a house loan. Before making the final call, check the eligibility criteria and compare different home loan schemes to determine which would suit your requirements the best.