How Does Cibil Score Impact Home Loan Eligibility - Home Loan Blog - Tata Capital

The Influence of Cibil Score on your Home Loan Eligibility

Mar 08, 2017

Buying a house is a common dream that transcends across people from different backgrounds. However while a fortunate few seem to have funds ready for purchasing their desired property, most of us have to depend on a home loan to fulfil our dreams. While those of us with a steady job in an MNC or a respected Indian corporate, think it is easy to secure a loan because of the recurring income that turns up in our bank account every month, which is certainly not the case. This is because, even before getting introduced properly to your bank's branch manager, you would be meeting your first hurdle in securing a loan - CIBIL Score.

What is a CIBIL Score?

A CIBIL Score is a three-digit number which summarizes an individual's credit history. It is derived from the Credit Information Report (CIR). An individual's entire credit payment history across various loan types and different lending institutions is captured by the CIR. The CIBIL Score ranges between 300 and 900 with 900 being the highest score which one can achieve. It would be simpler to state that a CIBIL score showcases credit worthiness of an individual.

How will it impact your home loan eligibility?

Let us look at two scenarios: You have either taken a loan in the past/used a credit card or you haven't ever taken a loan/used a credit card.

  • If you have taken a loan in the past: Factors which can impact your CIBIL score if you have taken a loan in the past can be: Late payments or default while paying in the recent past, frequent utilization of credit limit, availing higher number of unsecured loans (personal loan) as compared to secured loans (housing or vehicle finance loans) and applying to many times for loans during a short time frame.
  • If you have never taken a loan in the past or used a credit card: This will result in a NA or NH score. This would mean that you are categorized as an applicant who has never availed of credit. Although this isn't perceived negatively by lending institutions, however there might be certain institutions which may not lend to individuals who have an NA or NH score.

CIBIL score highly influences the maximum home loan amount which an individual can secure.

What to do if you aren't eligible?

If you aren't eligible for a home loan because of low credit score, there is no need to lose heart. One can do the following to improve one's CIBIL score:

  • One can ensure that all dues are paid on time
  • One can ensure that one never crosses the assigned credit limit
  • One must ensure that there is a wholesome contribution of both secured and unsecured loans to one's credit score rather than only unsecured loans contributing to maintain a higher score.
  • Prudently apply for new credit
  • If one needs a loan urgently, one can borrow from co-operative banks, private money lenders or even avail of a loan against existing assets.

Today one can not only search but even apply for home loan online. Similarly one must also apply for CIBIL score every six months to one year, especially if one uses a credit card often and keep a track of the same.