CIBIL Score for Home Loan

The concept of credit scores and credit reports was introduced in India in the year 2000. One of the primary institutions when it comes to preparing the credit report of individuals and business organizations is the Credit Information Bureau of India Limited. This organisation collects all the information about your credit history and gives you a score based on your credit activity. This score is called the CIBIL Score.

The information that is used to create your credit report is:

• Your personal details such as your name, email ID, and phone number
• Your current employment status
• Track record of your previous repayments towards your loans and credit card
• A record of the number of applications and enquiries that you have made with different lending organizations.

Based on these details, each individual is scored between 300 and 900. Any score that is closer to 900 makes you more eligible for loans and credit cards. When it comes to a Home Loan, most banks require you to have a credit score of at least 650 in order for your application to be reviewed and approved.

A Home Loan is a special type of loan that is provided for the following purposes:

• To buy or construct a home or an apartment
• For renovation or repair of an existing property
• To expand an existing property by adding a new room or a new portion to the house
• To buy land as part of an investment or you construct a property in the future

You can also get a loan against an existing property to manage any personal expenses that you have. Home Loan is a secured loan which means that you have to provide an asset against the loan based on the value of the property that you wish to purchase or construct or based on the loan amount that you have applied for. In most cases the property that is being purchased or constructed itself is the security that is provided.

In order to avail a Home Loan, an individual will have to fulfill certain eligibility criteria as mentioned before. This varies from one bank to another. However, some of the most common eligibility criteria are as follows:

• The individual should be salaried or self-employed
• The applicant should be at least 21 years of age
• The applicant must have a good history of employment with a steady income source
• The CIBIL score should be according to the requirements of the bank, usually 750 or more

You can borrow a loan amount that is equal to up to 90% of the value of the property. They are available on both fixed and floating interest rates. With Home Loans, the repayment tenure is usually between 5 years and 30 years. This, too, depends upon the bank that you are applying for a loan with. The repayment tenure is calculated based on the repaying capacity of the individual, which is calculated as per any existing EMI, and the current income of the individual.

There is no doubt that the CIBIL score affects your chances of getting an approval on your Home Loan. The higher your CIBIL score, the better are your chances of getting an approval on your loan.

There are various factors that affect your CIBIL Score and each one has a different implication when it comes to the Home Loan as mentioned below:

Banks rely on providing loans as a means of business. Therefore, when you have an impressive credit history or a good credit score, you become a very eligible candidate to give the Home Loan to. This is why, when an individual with a better credit score applies for a loan, a bank or any other financial institution will reduce the interest rate to increase the chances of the individual taking the loan.

On the other hand, a candidate with a low credit score is usually considered a liability by the bank. They are most likely to be unable to make regular repayments. As a result, they become a high-risk candidate which leads to a higher rate of interest.

Applying for a Home Loan is straightforward these days. You can also get instant approvals on loans based on your CIBIL score even with an online application. In general, when you want to apply for a Home Loan, here are a few steps that you need to follow:

• Check your CIBIL Score: This will help you understand if you are eligible for a Home Loan. And, it also helps you narrow down your options. If you don't have your CIBIL score yet, you can get a free CIBIL score on cibil.com. To get a second CIBIL report in the same year, you will have to subscribe to the unlimited access packages.
• Narrow down your options: Based on the CIBIL score and the eligibility criteria, narrow down your options and only apply in banks where you are most likely to get a loan. Too many applications or any rejection of these applications can lead to a reduction in your CIBIL score. It is also a good idea to check the EMI that you will incur using an online EMI Calculator to look for the most affordable choice.
• Fill up the application form: You can visit the bank that you have chosen to fill up a form. You also have the option of filling the form online through MyMoneyMantra or bank's website. You will have to provide details like your name, income, employment status, and nature of employment.
• Submit the application: Along with the application form, you will have to submit 2 passport sized photos, proof of income, Photo ID, proof of employment, and other required documents.

Once all the documents have been check and the application has been verified, you will be given the best possible loan deal. Once approved, your loan will be disbursed as per the sanction letter provided to you.

If your CIBIL Score is low, it does not mean that you cannot get a loan. There are ways to improve your CIBIL score easily:

• Make sure that you repay your EMI and any credit card dues well before the due date
• If you have multiple loans and credit outstanding, make sure that you repay a few of them before you apply for a new loan.
• Do not apply for credit cards unless you need one
• Maintain a healthy balance of secured and unsecured loans. This helps you improve your credit score quite a bit.
• Avoid complete debt utilization. If you have a credit card, do not utilize it to the full limit. In case of any personal loan or another loan, make use of your loan amount in parts or only when you need it.
• Consolidate your debts. The faster you repay your loans, the better your CIBIL score will be.
• Avoid too many cash withdrawals on your credit card. This is a sign of financial distress that will affect the CIBIL score.