How CIBIL score affects Home Loan Application


The Credit Information Bureau India Ltd. of India prepares a report known as Credit Information Report (CIR), based on which a CIBIL score is generated which is nothing but the credit score. CIBIL is the first credit information company in India that maintains the records of individuals’ and companies’ data about their loans and credit cards. The credit scores given by the CIBIL indicate the creditworthiness of both the companies as well as an individual. CIBIL has been licensed and legalized by the RBI and Credit Information Companies (Regulation) Act of 2005. It gets valid information regarding the credit history by the report submitted to it by banks and other financial institutions. Further, it uses this data and reports to generate credit or CIBIL scores.

Everyone applying for a home loan must know that they need a good CIBIL score in order to get approval from banks or other financial entities. A home loan is a secured loan as the property is mortgaged until the repayment of money. Still, you need to get a score of 750 or above if you want to avoid rejection of your home loan or get benefited from lower home loan rates of interest.

The credit card report is the first thing that is assessed by the lender before approving a loan. Other things like the salary and the company of the applicant are also important parameters. The creditworthiness is measured mainly from a CIBIL score, and it can eventually affect the applicant in getting better deals and conditions on a home loan.

CIBIL scores are computed on a scale of 300-900. In order to get an ideal score of around 750, an applicant must take care of some of the crucial aspects. Make a habit of paying the bills in due time. Late payment or paying less than the original amount can deteriorate the scores. Timely payment can be made with the aid of tools like automated payments and calendar reminders. It is also wise to not rely too much on credit. Credit payment on loans and credit cards should be made on time, but it is better not to take too much credit unnecessarily. Too many unsecured loans also drag down the credit scores, so the applicant must be cautious about maintaining a balance between a secured loan and an unsecured loan. Another parameter of the CIBIL score is the credit utilization ratio which might get hampered if you increase your credit card spending. Make sure to keep vigilance on the credit scores if you have a joint account.

Credit score, along with Credit Information Ratio, has helped the lenders in making an assessment of an individual before sanctioning a home loan. Earlier, it was a challenging task for preparing an internal assessment report. Now lenders have swift access to these data through CIBIL credit scores and database.

There are a few things that a candidate must know before applying for a home loan. The lenders will make a thorough analysis of the data like your payment history, overdue, and default payments. They will also track your monthly EMI to income ratio. The chances of getting loans can go down if your monthly EMI is 50% more than your present salary. They also assess the company profile where you are engaged. Now, there is a way to correct your CIBIL score by providing accurate facts and data if you find it is not appropriate. Besides, you can also track your credit history by purchasing the Credit Information Report. Take necessary measures to address the issues if your scores are way behind.


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