Finding the right home is a process that involves a lot of research and effort, and one aspect of this process is finding the right home loan. You have to meet the lender’s eligibility criteria to get the loan sanctioned.
Multiple factors determine your loan eligibility, and your credit score is one of them.
What Is The Credit Score?
A credit score is a three-digit number that reveals your creditworthiness and is based on your credit history. The score considers your repayment history, credit utilisation, credit enquiries and credit mix.
CIBIL is the pioneer in credit rating in India and is synonymous with credit scores in India.
The past repayment record of your loan EMIs and credit card dues has the maximum impact on your score. Regular and timely repayments influence the score positively, while delayed and missed payments lower your score.
Using your credit card above 30% of the sanctioned credit limit indicates overdependence on credit and is bad for the overall rating. A proper mix of secured and unsecured types of loans and not making too many credit enquiries within a short span also help improve your CIBIL rating.
The score ranges from 300 to 900; a higher score indicates good credit health and improves your chances of getting a loan application approved.
Lenders have different acceptance levels for the credit score; above 700 is considered a good CIBIL score for a home loan.
PNB Housing is a leading financial institution that offers a wide range of products, including home loans; to avail of a home loan from them, the score should be above 700.
Why Is The Credit Score Important?
You may wonder why it is crucial to have a healthy credit score to apply for a home loan. As said earlier, the credit score reflects your credit health. Financial institutions (FIs) can assess if you are a responsible borrower based on your credit history.
The score also indicates if you are a risky borrower or not. FIs want to sanction loans to applicants who are not likely to default and will pay the dues regularly.
Applicants who have defaulted on payments in the past, have too many running loans or exhibit credit-hungry behaviour will have a low rating and are more likely to default; financial institutions hesitate to sanction loans to such applicants.
What Are The Advantages Of A Good Credit Score?
A good CIBIL score for a home loan ensures that your loan application is approved and also offers some advantages. They are:
- Lower interest rates on your home loan
- You can get a bigger home loan
- Faster loan approvals
- More choice of lenders
- Longer loan tenure
How Do You Improve Your Credit Score?
Now you know the importance of a good CIBIL score; if you have a low score, what can you do to improve it?
Credit ratings reflect your credit history and do not improve or fall immediately. If you want to improve your score, remember it is something that will not happen instantly. A good approach is to check your credit report regularly and be aware if some improvement is required.
Here are a few steps to be credit healthy:
- Always pay your credit card dues and EMIs regularly; it is a good idea to have an auto repayment facility.
- Do not use your credit card for more than 30% of the sanctioned limit in each billing cycle.
- Check your credit report thoroughly to spot any errors and get them rectified as soon as possible.
- Avoid applying to too many lenders within a short span as it results in hard enquiries, which can lower your score.
To Wrap Up
A home loan is your gateway to realising your dream of buying a home of your choice. A good CIBIL score can aid you in securing any loan with ease. Be a responsible borrower and remain credit healthy to get a loan from PNB Housing at competitive rates and customer-friendly terms.