While purchasing a house, usually there are two options you can choose from. You can either pay for the house from your earnings or avail a home loan. If you have enough savings to purchase the house, nothing better than that. But if not, a home loan could be a viable option. However, to avail a home loan, you must fulfil the lender’s eligibility criteria.
Your credit score is an important eligibility criterion that affects the home loan approval process. So, it is essential that you know about CIBIL score and the impact it has on your home loan eligibility Read on to learn more.
CIBIL is the acronym for Credit Information Bureau (India) Limited. The company is now known as TransUnion CIBIL. It is a credit information company set up basis the recommendations of the Reserve Bank of India in the year 2000 to address credit-related risk in India.
How Does Credit Score Affect Home Loan Eligibility?
Having a good credit score means that you are more likely to repay your loan on time, which is a favourable factor for lenders. However, if you have a poor credit score, the lender might consider it risky to sanction your loan anticipating default in loan repayment. Therefore, to get the best interest rates and terms on a home loan, it is important to have a high credit score.
How to Improve CIBIL Score?
Your CIBIL score largely depends upon your debt management. Therefore, the easiest way to increase the CIBIL score is to manage your debt well without defaulting on payments. You can improve yourCIBIL score with the following tips –
- Ensure timely payment of loan EMIs.
- Avoid taking more than one loan at a time as it reduces your repayment capacity and consequently could affectthe credit score.
- Avoid applying for multiple loans at once.
- Pay your credit card dues at the earliest.
- Keep a check on the credit report and rectify the errors, if needed.
- Use less than 30% of your credit card limit and maintain a low credit utilization ratio.
- Do not use too many credit cards.
A credit score is an important parameter that will determine your home loan eligibility as well as help you negotiate a better interest rate. If you anticipate taking a home loan anytime in the near future, make sure you know your credit score and take steps to improve it, if needed.