Home Loan 101: Understanding CIBIL Scores and Boosting Your Home Loan Eligibility

By LODHA

If you've ever had a candid no-holds-barred conversation with your parents, you must've concluded that purchasing property was a fair bit easier in their times. From lower real estate rates to lenient payment norms, one could purchase property with relatively less funds and hassle. However, while times might've changed, the desire to own a home hasn't. If you live in a bustling metropolis, owning a home allows you to save on rent and create a space that is truly yours. 

However, whether you're a first-time buyer or simply don't have enough liquidity, you might need a bit of financial assistance to see your purchase through. Thankfully, you can always fall back on home loans. Especially today, with modern banking revolutionising things, you can apply for and access home loan facilities with greater ease. One of the factors that plays a critical role in whether your home loan application gets approved is your CIBIL score. If you're unsure what this metric means and how it can impact your home loan eligibility, here is a guide to help you through it all. 

What Does the Term 'CIBIL Score' Entail?

Before you go on a CIBIL score-checking spree, you must understand exactly what this metric means. Let's start with the basics. The acronym CIBIL stands for the Credit Information Bureau (India) Limited and refers to one of the most popular credit information companies licensed by the RBI (Reserve Bank of India). 

As its name suggests, CIBIL is an organisation that keeps track of your credit history. The organisation maintains credit files on over 600 million people and 32 million businesses. One of how your credit score is translated is a numeric score. Known as your CIBIL score, this is a 3-digit number. It indicates your credit history and acts as a rating and report for the same. Normally, CIBIL scores range from 300 to 900, with the lower end indicating a poor credit history and 900 being the best CIBIL score. 

Unlocking the Significance of Your CIBIL Score

Now, you might be wondering why your CIBIL score report matters. One of the circumstances where your CIBIL score is bound to come up is when you apply for a loan. While applying for a loan, a lender will most likely check whether you are creditworthy. Usually, a lender wants to be rest assured that you are capable and likely to repay borrowed sums. One of the best ways to gauge your creditworthiness is through your credit history, i.e., what is your record with financial institutions and repayment of debts? 

Normally, your credit report will include information sourced from banks, credit card companies, governments and collection agencies. A mathematical algorithm is applied to this data to churn out a score that depicts your creditworthiness. Once you understand what your CIBIL score indicates, it becomes easier to understand how your home loan application might hinge on this metric. 

Influence of Your CIBIL Score on Home Loan Approval

If you're considering applying for a home loan, then its important you know your CIBIL score. If you have a lower CIBIL score, it might alert a lender to low creditworthiness. As a result, your loan application might not qualify. To expedite the process, today several lenders have made having a good CIBIL score range part of their eligibility criteria. To check whether you are eligible for a home loan, you must check your CIBIL score along with using a home loan eligibility calculator. Apart from helping you qualify for an application, a good CIBIL score also helps speed up the approval process. Lastly, a good CIBIL score can also help you secure a larger loan amount and reduce your financial burden. 

Checking Your CIBIL Score: A Step-by-Step Guide

If you're wondering 'how can I check my CIBIL score for a home loan application', here's what you must do:

a) Head to the official CIBIL website. 

b) Select the tab 'Get Your CIBIL Score' and fill in your details such as your name, email ID, and password. You will have to provide proof via your PAN Card, Aadhaar Card, Voter ID and plug in your PIN code, birth date and phone number. 

c) Once you've filled in the fields, click on 'Accept and Continue'. 

d) Type in the OTP you receive on your mobile number and click on 'Continue'.

e) You can head to the dashboard where you will be redirected to the website. Log in by clicking on 'Member Login' and check your CIBIL score. 

Ways to Boost Your CIBIL Score? 

Say, you've checked your CIBIL score and it's not as high as you expected. Worry not! You don't have to flush your dreams of applying for a home loan down the drain. You can easily boost your CIBIL score by making the small changes.

One of the first things to do is evaluate if you have any outstanding debt and clear the same by repaying it within a stipulated timeline. If you have to pay EMI on a loan, make sure to do so on time. Missing EMI due dates can hurt your CIBIL score. Lenders also check how much credit you've used while assessing your application. So, make sure to stay within limits and use only the amount of credit you can repay. While your knee-jerk reaction may be to stop borrowing altogether, this results in you having no credit history or score. To improve your credit score, borrow a mix of credit, including secured and unsecured credit. Repay borrowed sums diligently. Once your credit score is within a good range, you can apply for a home loan and purchase a property that will tick all your boxes.