Many of us pay no heed to terms like credit report, or CIBIL score. Many of us have an inkling of what they mean, but don’t know or care enough to see what our reports and scores say, until it is too late. Every individual who has a financial record, has a credit report and it is instrumental in their future as a loan borrower. One’s credit report starts as early as their first bank account or card, and documents all their financial movements and payments – a record that helps potential lenders and bankers assess the individual’s credit worthiness.
Home loan lenders are no different and request the applicant’s credit report and score to take stock of their profile before approving their home loan application. Often individuals realise the importance of their credit report far too late, when it impacts their loan feasibility. To avoid such circumstances, all individuals and not just home loan applicants are advised to stay cautious of their credit habits and do their best to keep their report in top form. Before we highlight the ways to bring your credit report to its best shape for a smoother home loan journey, let us understand a bit more about the functionality of a credit report and the authority it holds.
Understanding CIBIL Reports
CIBIL reports are issued and maintained by the Credit Information Bureau (India) Limited, one of the country’s most reputed and trusted credit information authorities. The report is a summary of your financial history and the CIBIL score is a three-digit number that grades your current creditworthiness. The CIBIL range extends from 300 to 900, with 900 being the highest an individual can aim for. Most lenders accept a score of 725 or higher, to sanction home loans at favourable terms, banking on the individual’s creditworthiness. interest
However, what comprises your credit report? The CIBIL authorities monitor four broad aspects (that is then looked at finely) that builds your credit report. They are listed below –
- Payment history
- Credit exposure
- Credit type and duration
- Other factors
In short, if individuals are mindful of the factors stated above, their credit report would be poised to be strong and reliable.
How to Up Your CIBIL Score for a Competitive Home Loan
Now that we’ve understood what your credit report, or CIBIL score is, let’s understand how it impacts your chances of securing a low interest home loan. Your credit report is an accurate representation of the following:
- Repayment history
- Repayment habits
- Employment and income sources
- Debt to income obligation
- Other ongoing financial commitments
- Repayment capacity
These are all important factors in home loan lenders’ eligibility criteria, as it allows them to gauge the applicant’s loan viability in terms of being able to undertake a financial commitment of that size, and their intent to repay the home loan amount in full, as per schedule.
Any red flags identified through an applicant’s credit profile can endanger their chances of securing a favourable home loan. Home loan applicants are in fact advised to boost their credit report to the best of their efforts before applying for the loan. Not only does it ensure a smooth home loan borrowing journey, but it also helps applicants avoid home loan rejection – that only further dampens their current credit score.
If you’re a prospective home loan borrower, here are some corrective measures you can employ to enhance your credit report:
- Avoid irresponsible repayment habits
Your payment habits bear the most impact on your credit records. An irresponsible attitude towards your payment obligations can mean trouble for you, as missed bills and payments rank high on the CIBIL radar. According to a report, a 30-day delinquency can reduce your CIBIL score by 100 points.
- Avoid multiple loan enquiries simultaneously
Another box to take care of is multiple credit enquiries. While this may not seem like a commonly occurring CIBIL red flag, a lot of us may unknowingly tank our scored by making multiple loan enquiries all at the same time. This depicts you as credit hungry, where no lender is willing to offer a loan to you. To address this, applicants should first rank their loan eligibility and then shortlist lenders who are most likely to offer a home loan to them on their preferred terms. Not only does this give you an opportunity to boost your loan eligibility, but it also insulates you against futile applications and subsequent rejections.
- Look for errors in your CIBIL report
This part may not be your fault, but as the owner of the credit report, the onus falls on the loan applicant to keep an eye out of for system, or clerical errors on their credit report. Unmarked errors in your report can lead to your score being lowered, while the fix for this is extremely simple – one can reach out to the agency and request a rectification. This also means that individuals must keep a keen eye on their credit reports regularly, so such mistakes won’t be a miss from them.
Once you are sure that you have done your best to enhance your credit report and home loan eligibility, apply for a home loan confidently.
Also Read: How Can People With Bad Credit Get Online Payday Loans from Direct Lenders?
