Home loan is the best way to buy a home with the increase in the property prices. Though there are so many terms which affect a home loan application, the CIBIL score might take an extremely crucial place in rejection. Mr. Raghu wanted to buy a Gated community villa in OMR, but he was rejected for a home loan for his poor credit score. Many of you might have come across this word-CIBIL score. But what exactly is this score mean? What is it?
What is a CIBIL Score?
The CIBIL (Credit Information Bureau Limited) is a 3-digit numeric value which indicates your financial credit history. It is the payment history of your credit for a period of time. This shows how well you manage to pay your loan back on-time, i.e. within the due date.
Why it matters?
As soon as you submit the home loan application, the first and foremost document you should produce is the CIBIL report. If your CIBIL score is low, the banks will reject your application right away. In case the CIBIL score is good and positive, then the lender considers your application and continued with the other supplementary documents.
What is a good CIBIL Score?
The minimum credit score required for approval of the home loan must be above 750.
What does the Credit Score Chart say above?
- Above 760 means Excellent Credit
- Above 700 means Good Credit
- Above 640 means Fair Credit
Currently, more than 75% of the home loan applications are approved based on the CIBIL score. It is the pivotal element of any home loan approval. The CIBIL Score indicates an individual’s financial payment behavior. Any home loan application approval is strictly based on CIBIL Score for the past couple of years. And only individuals having CIBIL Score of about 750 and above are sanctioned for a home loan.
What are the reasons for a bad CIBIL Score?
1.Not paying the EMIs within due dates.
2.Late payments of the outstanding dues.
3.Not paying the penalties.
4.Having unsecured loans like personal loans. And this will affect your credit score negatively.
How would you improve the CIBIL SCORE?
Do you know what a bad credit score is? Well, it is 300. A credit score of 300 is considered as poor. How do you improve this? Let’s see what impacts your CIBILE Score negatively and how to improve it.
|What are the deciding factors?||How this impacts your CIBIL Score?||How to improve?|
|Your credit payment history||If you pay your current loan EMIs late, it shows you are not financially fit enough in handling monthly payments.||Paying your credit EMIs should be the first priority.Save some money on your income and spend the rest for other things. Plan to pay your home loan monthly instalments on-time.|
|Maximum credit card usage for everything||While spending more, it leads to increase in credit limit which is troublesome in repayments beyond your financial status.||Try to control your splurges. And use the credit card wisely and avoid unnecessary purchasing|
|More personal or unsecured loans and credit cards||Having more credit cards, unsecured loans like auto and
Home loans can affect your score.
|Maintain a healthy blend of both secured and unsecured loans. Or pay off all the loans and apply for a home loan after few months.|
|Having several new accounts opened||Having multiple credit cards, and personal, home loans opened will show you as a credit-hunger customer. This impacts your CIBIL Score badly.||Always be cautious of the credit card. Be minimalistic when it comes to spending and taking personal loans. Have a healthy credit portfolio.|
Keeping all these things in mind would definitely help you get a good credit score. This is the pivotal key for any individual to get through the home loan application process. The rest of the things come to place if this goes well in the process. Using all these tips, Mr. Raghu gradually improved his credit score (CIBIL score) and owned a luxury villa in OMR.