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Buying a home is one of the most expensive investment for most of us. Many of us opt for a Home Loan to finance our dream home. If you are also planning to apply for a Home Loan, you must know that your CIBIL score can be the prime determinant of your Home Loan Interest Rates. Your CIBIL score can increase or decrease your Home Loan interest rates. Find out how:
CIBIL Score and Home Loan Interest Rates
A good CIBIL score is very important when you are applying for any type of loan, particularly when it comes time to buy your dream home. To get the best Home Loan interest rates, make sure you have an excellent CIBIL score, minimal debt and a large down payment. Our handy guide helps you understand how the CIBIL score impacts Home Loan interest rates so you can adapt your financial strategy to get the best Home Loan possible.
1. How is a CIBIL Score Determined?
The CIBIL score basically sums up your history as a borrower using information from your credit report. As a credit bureau, CIBIL collates your credit information, that is, details of your loans and credit facilities, such as overdraft facility and credit cards, and your payment history on each one. CIBIL does not take into account information pertaining to your savings accounts, fixed deposits and recurring deposits, which form part of the liability portfolios of banks, financial institutions and non-banking financial institutions.
2. What Does Your CIBIL Score Indicate?
The first thing a lender does when evaluating your Home Loan application is to check your CIBIL score. Your CIBIL score essentially paints your financial picture, and helps lenders determine the likelihood of you paying back the loan that was given to you. A good credit score also helps you ensure that you are financially healthy and are not overleveraged.
3. How Does a Good CIBIL Score Help?
If your credit score is less than the threshold level that is acceptable to a lender, your Home Loan application is rejected outright. Thus, a good credit score is a must for Home Loan approval. A good CIBIL score could also help you save money by getting you lower Home Loan interest rates, maybe a waiver of Home Loan fees and charges by the lender and faster Home Loan processing. Check your CIBIL score today and make amends if required. It is never too late for good practices!
4. What is a Good CIBIL Score?
Your credit score operates within the range of 300 to 900. Within this range, credit scores are classified into different categories, which are:
750+: excellent credit score
700-749: good credit score
650-699: fair credit score
600-649: poor credit score
Below 600: bad credit score
However, different lenders have different definitions of what is a good credit score for a Home Loan. Generally, lenders consider a credit score of more than 750 as acceptable for sanctioning a Home Loan. Some might also approve Home Loan applicants with CIBIL scores of 680 or higher.
5. The Higher the CIBIL Score, the Lower the Home Loan Interest Rate
Lenders consider Home Loan applicants with higher CIBIL scores as less of a risk. In other words, if you have a high credit score, lenders will perceive you as more likely to repay the loan on time and in full, than an applicant with lower scores. Lenders reward such lower-risk consumers with lower Home Loan interest rates. Your credit score grades a pattern of your borrowing behaviour and Home Loan rate of interest is determined on the basis of this grade.
6. What Can Lower Your CIBIL Score?
Few factors that can affect your credit score like:
Defaulting on EMI payments
More unsecured loans, such as a personal loan, than secured loans like a car loan
Heavy usage of credit card limit
Rising outstanding balance on your credit card
Applying for multiple loans in a short period
If your credit score is not the best, do not stress. Take advantage of the many different ways to improve your credit score, such as paying any outstanding debt or opting for a secured loan.
Bajaj Finserv offers various financial benefits on Home Loans. These include a low Home Loan interest rate and three EMI-free months in addition to easy repayment options, minimal documentation and online account access.