Learn how your CIBIL score impacts home loan eligibility. A complete guide for first-time homebuyers to understand credit scores and secure the best loan rates.
CIBIL score
For a first-time homebuyer, owning a dream home can be a major financial milestone. The right home loan can make this goal achievable. However, one key factor that determines loan approval and interest rate is your CIBIL score. A high CIBIL score not only improves your chances of getting a loan but also helps in securing better terms and a competitive interest rate.
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If you are looking to build a good credit history, knowing the required CIBIL score for a home loan and taking proactive steps to improve it, if required, can make a big difference. This guide explores how you can check your CIBIL score for a home loan along with effective ways to build and improve your CIBIL score.
What is a CIBIL Score?
A CIBIL score is a three-digit number ranging from 300 to 900 that represents your creditworthiness. It is generated and assigned by TransUnion CIBIL – one of India’s leading credit bureaus – based on your credit history, repayment record, and credit utilisation.
Why Does a CIBIL Score Matter for a Home Loan?
Lenders evaluate your CIBIL score, among other factors, to assess your ability to repay the loan. A higher score indicates responsible credit behaviour and can help you secure a sizeable loan amount at a competitive interest rate.
Here is how your CIBIL score can impact your home loan approval:
- 750 and Above: Ideal score for quick approval and a lower interest rate
- 650 – 749: Loan may be approved but at a higher interest rate
- Below 650: Loan application may get rejected
Checking your current CIBIL score before applying for a home loan can help you plan to improve your financial profile if needed.
Factors that Influence Your CIBIL Score
Understanding what affects your CIBIL score can help you take corrective measures before applying for a home loan:
1. Payment History: This factor assesses how consistently you repay your debts, including EMIs and credit card bills. Consistently paying your dues on time demonstrates financial responsibility and positively influences your creditworthiness.
2. Credit Utilisation Ratio: It is the percentage of your total credit limit that you are using. Keeping your credit usage below 30% of your credit limit is advisable.
3. Credit Mix: It shows the diversity of your credit portfolio. A balanced mix of secured loans and unsecured loans reflects well on your credit profile.
4. Length of Credit History: It is the record of debt repayment. A long and well-maintained credit history can showcase positive repayment records.
5. Number of Hard Enquiries: When you apply for a home loan, your lenders assess your credit score. Such enquiry is known as a hard enquiry. Applying for multiple loans or credit cards in a short period of time can result in hard enquiries and lower your score. It is prudent to space out credit applications to minimise negative impacts.
How to Check Your CIBIL Score Before Applying for a Home Loan?
Before applying for a loan, it is advisable to perform a CIBIL check for loan eligibility. Here is how you can check your CIBIL score online:
- Visit the official website of CIBIL
- Sign up or log in to access your credit score.
- Select a subscription plan.
- Enter your personal details, including PAN, name, and date of birth.
- Authenticate using OTP and get your check CIBIL score.
A CIBIL score for a home loan plays a key role in determining your loan eligibility and interest rate. You can perform a CIBIL check loan before applying for a loan to improve your chances of securing a home loan on favourable terms.
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