Navigating CIBIL Scores for Home Loans: What’s Ideal?

Property prices have increased exponentially over the last few years and today, for a middle-class person, it is nearly impossible to fund a property purchase solely with savings. Therefore, the demand for home loans has also increased exponentially over the last few years.

Individuals planning to avail themselves of a home loan must make the best efforts to avail of their loan at the lowest interest rate possible. Low home loan interest rates help fetch better returns by reducing the interest payout on the loan and therefore, the total cost of borrowing. However, to establish eligibility for low home loan interest rates, a borrower must have the ideal CIBIL score for home loans.

What is CIBIL Score and why is it so important in the home loan approval process? The CIBIL score is the credit score assigned to credit users by TransUnion CIBIL, the most famous credit information agency in India.

The CIBIL score is a statistical representation of a loan applicant’s creditworthiness and repayment capacity. Individuals with high CIBIL scores are people with high creditworthiness and repayment capacity. These are people who can be trusted with timely repayment of loan EMIs. These are also people who are not excessively dependent on credit and have their debt situation under control.

Therefore, such individuals are quite unlikely to default on loan EMI payments and so, these individuals are extended loans on the best possible loan terms and conditions, including low-interest rates. They are also sanctioned higher loan amounts. It is for these reasons that individuals applying for a home loan are asked to check their CIBIL score and go ahead with their loan application only if they have the ideal CIBIL score for home loans.

In India, the ideal CIBIL score for home loans is 750 or above. But, what should one do if one does not have the ideal CIBIL score for home loans? Building the ideal CIBIL score is easy if one practices financial discipline. Here are a few simple things borrowers can do to build and maintain a strong CIBIL score.

Simple Tips on How to Maintain an Ideal CIBIL Score for Home Loans

1. Maintaining a clean repayment history is crucial if you want to build a strong credit score. So, one must never miss paying EMIs and credit card bills. If you do miss a due date, clear the pending EMI or credit card bill as soon as possible to minimize the damage to your credit score.

2. Credit users must also maintain a low credit utilization ratio. A high credit utilization ratio indicates an excessive dependency on credit, which lenders perceive as a negative sign and is one of the causes of a low CIBIL score.

3. Repaying both secured and unsecured loans will work in your favour as this establishes your ability to handle all kinds of credit.

4. The age of your credit history is important too. The older your credit history, the better will be your credit score. For this reason alone, credit users must never close old loan accounts and credit cards.

5. Lastly, loan borrowers must never apply for too many loans and credit cards as doing so leads to one having too many hard enquiries under one’s name, which in turn, negatively impacts one’s credit score by portraying them as credit-hungry.

Doing these simple things will help you build and maintain the ideal CIBIL score for home loans and therefore, get approved for these loans quickly while also having significant negotiating power concerning the loan terms and conditions.