Credit or CIBIL scores are crucial in deciding whether or not you get a loan as a potential home buyer. And with good reason. Since buying a house requires large sums of money, lenders want to be assured of your creditworthiness before lending you funds. Naturally, they are more likely to offer loans to a borrower who will repay their loan on time, in other words, someone with a good repayment history and credit profile.
For lenders, the credit score is the numerical reflection of the same. And lenders are paying even more attention to it during these times. Here’s why.
The impact of COVID-19 on the home loan market
On the one hand, the pandemic disrupted the cashflows of millions of people around the country. And more people are now relying on loans to make ends meet. Naturally, their credit or CIBIL scores have taken a hit.
On the other hand, since people are spending more time in their homes, many are looking to upgrade their space. At the same time, thanks to the RBI policy changes, home loan rates have witnessed steep cuts, and there have been relaxations in the stamp duty charges as well. All of these factors have made it the perfect time to invest in a home.
Additional Read – Do’s and Don’ts to Improve Your Credit Score
How lenders are coping
Simply put, the pandemic impacted the finances of the borrowers in the current home loan market in varying ways. So, lenders are now segregating riskier borrowers through a credit score check and offering them loans on higher interest rates.
For instance, you are less likely to land competitive interest rates on your loan with CIBIL scores between 700-750 than borrowers with a credit rating between 750-800.
By now, it’s pretty evident that the importance of credit scorein the home loan segment has increased recently. Are you a prospective homebuyer struggling with keeping your CIBIL score in check? Here are some tips to help you out.
Tips to increase your CIBIL score
- Repay your debts on time and set periodic reminders for recurring payments of EMIs.
- Maintain older credit cards even if they are currently inactive. This helps in keeping your total credit high, impacting your credit utilisation ratio (CUR) and thereby increasing your credit score for home loan.
- Avoid applying for more than one loan simultaneously, as multiple credit enquiries from lending institutions in a short period can dent your score.
- Limit your credit spending, and work on increasing your credit limit. Both impact your CUR, thereby increasing your credit rating.
- Check for errors in your credit report regularly, and if you find one, report it to the concerned authorities immediately.
- Diversify your credit profile by opting for multiple forms of secured and unsecured credit like auto loans, personal loans, etc., whenever possible.
Additional Read – Do Credit Scores Affect Your Home Loans?
So, now you know how the CIBIL score is pivotal in maximising your home loan eligibility. Therefore, before approaching a credible lender, perform a credit score check online with Tata Capital for good measure.