A home loan is a costly financial obligation, and for the majority of people, it is a once-in-a-lifetime expense due to the large sum of money that is spent on purchasing your dream home. It is now relatively easier to obtain a home loan because there are numerous lenders available in the market offering home loans at attractive interest rates with long-term tenors and a sizable sanction amount that can help you purchase the home of your dreams without hesitation.
A lender has a number of eligibility criteria that a borrower must meet when applying for a home loan, and these factors are in place to ensure the lender that the borrower is financially capable of repaying the home loan without defaulting on their monthly installments.
Your CIBIL score is the most important factor that a lender will consider, as well as one of the most important eligibility factors. A CIBIL score is a three-digit numeric value that ranges from 300 to 900 and is based on your financial records such as credit card balances, personal loans, existing and past loan records, and payment history. If you have ever missed an EMI or been late with payments, your CIBIL rating will reflect this.
Your home loan EMI is an important factor to consider because you will be paying this amount on a monthly basis for the duration of the loan, and if you are not careful with your planning, you may lose your property. Furthermore, choosing a long-term tenor will allow you to repay your home loan EMI in a more comfortable manner.
Maintaining a healthy CIBIL score is critical because it can help you receive advantageous lending terms such as low-interest home loan rates, long-term tenors, larger sanctions, and faster approvals. A CIBIL score of 750 or higher is considered good and will keep you in good standing with lenders. If your CIBIL score is between 300 and 750, your loan application may be rejected entirely; if you do receive a home loan offer, the interest rate will be much higher and the term will be much shorter.
How can you check your CIBIL score?
There are numerous websites available online that can assist you in determining your CIBIL score. You can view your CIBIL score by following these steps.
Step 1: Shortlist a website that provides you with a CIBIL score.
Step 2: Enter your full name, gender, date of birth, PAN card, pin code, email address, and phone number.
Step 3: Accept the terms and conditions to allow the website to collect your credit card information.
Step 4: After submitting the information, your CIBIL score report will be emailed to you at your registered email address.
How can you improve your CIBIL score to avail of a home loan at a lower interest rate?
Clear your dues on time:
As previously stated, a lender will review your previous financial records and CIBIL score to ensure that you have a stable source of income and are creditworthy, so it is critical that you pay off your existing debts on time. If you use your credit card to make payments or have an existing personal loan, it is crucial that you make your monthly payments on time to avoid defaulting and lowering your CIBIL score. A lender will be less hesitant to approve loans at a lower interest rate for an applicant who is punctual and pays their bills on time.
Do not carry too much debt or close old credit cards:
It is common knowledge that if you want to obtain credit, you must first establish a credit profile, which is made possible if you obtain credit in the form of credit cards, personal loans, or any other type of loan. Your CIBIL score will be maintained based on your credit performance, which means that if you miss payments, exceed your credit limit, or take out too much credit, it will negatively affect your CIBIL score. It is in your best interest not to close any of your old credit card accounts because once you surrender these cards, you will be surrendering all of your credit histories with them. Keep the old accounts open and closed, as well as the relative new credit cards, if possible, as this credit history will help you obtain a low-interest home loan.
Review your credit history:
It is essential that you check your CIBIL score for a home loan on a regular basis to avoid surprises when approaching a lender for a home loan. If you discover that your CIBIL score has dropped by a few points, you can take corrective action to improve it. If you discover any discrepancies in your CIBIL score, you must contact your lender immediately to correct the error so that they can work with the CIBIL authorities to correct your CIBIL score. The CIBIL department will not change your CIBIL score unless you receive confirmation from your lender, so you must approach your lender rather than the CIBIL department.
Avoid multiple home loan enquires:
If you are looking for a home loan, rather than making hard inquiries with the lender, you should consider making rough estimates of the offers you may receive via their website. This will significantly lower your CIBIL score and give the lender the impression that you are credit-hungry. Select a lender to approach, and then make a hard inquiry to ensure you receive a low-interest rate because the lender will consider you responsible and creditworthy.