A critical factor that can ensure easier and hassle-free access to home loans is keeping a watchful eye on your Credit Information Bureau India Ltd (CIBIL) Report and CIBIL TransUnion Score.
Most of us aspire for a home of our own and the real estate market boom is a reflection of these collective aspirations. Increasing real estate developments and availability of easy and fast home loans has enabled fulfillment of these aspirations for the common man.
Apart from your income, this factor is an important tool in evaluating your eligibility for a home loan. Therefore, do check your credit score before applying for a home loan to avoid any delay.
Understanding your CIBIL Report will help you assess your own credit exposure and enable you to ‘see yourself as loan providers’ does. If your CIBIL TransUnion Score is low or if the CIBIL Report shows defaults and delayed payments you can always take corrective actions and improve the score before applying for the home loan.
Your Score is simply a numeric indicator of your credit history which reflects your financial and credit health. CIBIL calculates the credit score through advanced analytics and assigns a number between 300 and 900 to a borrower, based on his/her credit history.
The closer your score is to 900, the more confidence the credit institution will have in your ability to repay the loan and hence, the better the chances of your application getting approved. While each bank will have its own credit scoring cut-off based on the credit sanctioning policies, it has been observed that most banks are lending to consumers with a credit score of 750 and above. If you have a good CIBIL TransUnion Score and healthy credit history you may get to avail a home loan without any hassles.
However, if your credit score is low due to poor credit history you can always work towards improving it. Financial discipline coupled with regular repayment of loan and credit card EMIs will help improve your credit history and score significantly.
Here are a few tips to improve your Credit Score:
• Avoid late payments or defaults as far as possible: Your payment history has a significant impact on your CIBIL TransUnion score. Late payments are negatively viewed by lenders because this indicates that you are having trouble servicing your existing obligations
• Wise use of credit card: While increased spending on your credit cards may not necessarily negatively affect your Credit Score, an increase in the current balance on the card over time is an indication of an increased repayment burden and may negatively impact your Score. It's always prudent to use your credit card wisely
• Maintain a healthy mix of credit: A higher concentration of home loans or auto loans (commonly known as Secured Loans) is likely to be more favourable for your credit score than a large number of unsecured loans. Although unsecured loans offer easy access to finance, it’s also by far the most expensive form of credit. More the number of unsecured loans with high utilisation, larger are the payments resulting from its high rate of interest
• Avoid behaving 'Credit Hungry': If you have made many applications for loans, or have recently been sanctioned new credit facilities, a lender is likely to view your application with caution. This 'Credit Hungry' behaviour indicates your debt burden is likely to, or has increased and hence may be less able to service additional debt obligations
• Monitor your co-signed, joint accounts monthly
• Monitor the loan accounts for which you have stood as a 'guarantor'
• Review your CIBIL TransUnion Score and credit history frequentlyYour CIBIL Report and CIBIL TransUnion Score not only determines whether or not you qualify for the home loan, but it may also has an impact on the terms and conditions you can avail on the loan. The higher the score, the better will be your chances of availing the loan faster and on favorable terms
Illustration: Uttam Ghosh/Rediff.com
The author is senior vice president, consumer relations, Credit Information Bureau India Ltd
