An individual’s credit rating is important. It is reflective of their ability to handle debt and pay it on time. Four different credit information agencies analyze credit users’ behaviour and study it to assign these credit users a credit rating. Of these four credit information agencies — TransUnion CIBIL, CRIF Highmark, Experian and Equifax — TransUnion CIBIL is the one that most lenders use.
The CIBIL score that TransUnion CIBIL assigns credit borrowers is known as the CIBIL score. It ranges from 300 to 900 with 900 being the highest CIBIL score an individual can have. The ideal CIBIL score for home loan is 750 or above. Those planning to apply for housing finance must check their CIBIL score at least a few months before they are to apply for the loan.
If the CIBIL score check delivers a satisfactory result, they should move ahead with their loan application as planned. However, if the CIBIL score check does not deliver a satisfactory result and your CIBIL rating is below 750, the loan applicant must take immediate steps to improve their CIBIL score and apply for a home loan only after their CIBIL score has improved. Depending on what your CIBIL score is, improving your CIBIL score can take from a few weeks to a few months.
Here are some important things you must know about CIBIL score and home loan approval
- The CIBIL score is the credit score assigned to credit users by TransUnion CIBIL, the oldest and the most popular credit information agency in India. Lenders check people’s CIBIL scores as it is indicative of their ability to handle debt and their intent to repay it on time. A CIBIL score in the range 750 to 900 is considered very good or excellent and with such a CIBIL score, getting access to credit on the most beneficial loan terms and conditions becomes easy. If your CIBIL score range from 750 to 900, not only will you get approved for a home loan quickly, but you will also enjoy high negotiating power regarding loan terms and conditions.
- If your CIBIL score ranges from 700 to 749, you have a good CIBIL score. With such a CIBIL score, you may not be able to secure the highest loan sanction or the lowest home loan interest rate, but home loan approval will come quickly.
- If your CIBIL score is below 699, it is best that you increase your CIBIL score first and then apply for a loan. Bettering your CIBIL rating becomes easy when you understand the factors that affect CIBIL score calculation. The two factors that have the maximum impact on CIBIL score calculation are your repayment history and credit utilization ratio. Combined they make up for 65% of your CIBIL rating. So, to build a strong CIBIL score or to maintain your score in the ideal CIBIL score range, always pay your loan EMIs and credit card bills on time. Further, never let your credit utilization ratio exceed 30%.
- The other factors that affect CIBIL score calculation are the type of credit mix you have, the length of your credit history and your dependency on credit. People who are excessively dependent on credit have a low CIBIL score. People who have only one type of loan, i.e. either secured or unsecured also have a low CIBIL score. To increase your CIBIL score, limit the hard enquiries under your name, preserve your credit history and have a healthy mix of both secured and unsecured loans.
- These days, checking one’s CIBIL score has become fairly easy. For instance, borrowers can check their CIBIL scores on TransUnion CIBIL’s website. This is the most reliable way of checking one’s CIBIL score. However, you will be required to pay a fee if you decide to check your CIBIL score this way. Alternatively, you can also check your CIBIL score for free on any of the websites that allow users to check their credit rating for free through their PAN card.
Whether you are applying for housing finance or a loan against property, having a high CIBIL score can make life much easier for you. So, make sure to keep track of your CIBIL score and make sure it is at least 750.
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