Buying a dream home is a dream every man cherishes till it becomes a reality. However the escalating cost of property calls for huge financial planning and investment. Most of us indeed opt for a fund lender in order to materialize this dream. Herein your credit score plays a pivotal role.
Your credit score is the score of your financial worth. In order to seek a hassle free home loan in India you need to have a good credit score by Credit Information Bureau of India Limited (CIBIL). Besides, other factors such as your age, salary and job also play a key role in the backfield. You would be required to submit documents for each of these factors to become authorized for raising the loan.
Role of CIBIL score in home loan approval:
Your CIBIL rating helps lender to evaluate your credit worthiness and repayment ability before approving a Home Loan. That’s why a good CIBIL score is a must to get a loan approved.
The CIBIL score is the summation of the credit history of a person. Factors such as your earlier loan payment history, outstanding loan amounts, credit enquired, payment history of credit card bills and more build your credit history. When you apply for a loan the first thing that the bank will check is your cibil rating.
The lender always want to cover the risk they are taking by lending you loan. So by checking your CIBIL score they assess your repayment track record. The low score reflects bad financial decisions including excess use of credit limit, non-repayment or late payment of loans and more. Thus with low score, there is a high possibility of rejection of your loan application. Similarly with a good score your loan application becomes attractive and lender shows confidence in your application by offering loan.
What does a good CIBIL score actually signify?
A good CIBIL score to be eligible for a home loan is 700 and above. The nearer you are towards 900 the higher is the chance of getting the approval. Furthermore, an upper credit score means that you can bargain for attractive offers like lower interest rates, higher loan amount, simpler documentation, discount in related fees and longer repayment periods. The lender might approve up to 80% of the total cost of the property.
If you have a low CIBIL Score are you still eligible for a home loan?
While it is not easy to get home loans for bad credit score, you can still take some steps to roll the dice in your favour. You can either use professional help or credit improvement counseling or take some steps to improve your score.
- The first step should be to pull out your free credit report from CIBIL.
- Next mark all the weak points that have hurt your CIBIL score. You can take small steps to boost your score. The better the score the better rate you can expect.
- Now you can list all small, high cost loans and try to repay them at the earliest. This will substantially improve your score.
- If your spouse has a good credit score then you can apply for the home loan jointly. This way you will have better chance of having your loan approved.
- If you have defaulted the payment of a loan or credit card bill then negotiate with the financial institution, clear the dues and get a no objection certificate from the financial institution. This will bring a good appreciation to your score.
- If you have a poor score then try to get the loan from the bank with which you have your savings account and FD’s.
Using these points you can raise your chances for loan approval. However getting loans with bad credit score has its own advantages and disadvantages. The biggest advantage is that it will make you take constructive steps to improve your CIBIL score. It will inspire you to close the earlier loan and repay the entire amount in a one go. The biggest disadvantage however, is that you will have to pay high interest rates and even the fees and charges that are associated with the loan approval will be higher for you. But as you would learn to protect your credit score, you would soon become credit ready for lifetime.