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If you do not have any past credit-related experience, it will affect the lender’s decision to give you a loan. They may be unconvinced about your repayment capacity, resulting in the rejection of the loan application or loans extended at a high-interest rate. You might find this a daunting process if you're new to credit and borrowing.
Also, while experiencing a financial crunch, paying EMIs becomes difficult or nearly impossible, which in turn, leads to missed EMI payments. Thus, a short tenor can, sometimes, indirectly affect your credit rating negatively. If your credit utilization ratio is high as of now, one of the easy ways to reduce it is to increase your credit limit. If you have been a disciplined and reliable borrower, your lender will most likely offer you a higher credit limit on their own. However, if you are guilty of having made mistakes in the past, you may have to submit a request.
What is the minimum CIBIL score for home loan?
Having zero credit score or no credit history is still a better situation than a poor CIBIL score. When you have a bad CIBIL score, lenders straightforwardly reject your application since your score shows your ill-treatment with past payments. Coming back to the scenario when you have zero CIBIL score, there are many financial institutions that offer credit facilities to such score holders. For instance, HDFC Bank does give credit cards and personal loan to no CIBIL score holders on the basis of their present income and other relevant factors.
A score lower than 700 is considered poor among most lenders, indicating a lack of appropriate credit behavior. In such cases, the risk of default is highest and the loan account may turn bad. Whereas, a score closer to 900 indicates maximum creditworthiness. Regularly monitor your accounts to ensure that neither you nor the joint account holder misses a payment at the end of the month. Keep track of your credit score and history by reviewing your credit reports on a regular basis and correcting any inaccuracies. A low CIBIL score increases the chances of your loan application being rejected.
How can I raise my credit score?
Nothing is impossible, so is getting a loan if you have a low CIBIL score. However, keep yourself prepared for the tussle you are about to approach. Lenders entirely depend on CIBIL score as it mentions your repayment capacity. When you have a lower score, the chances of being at risk are higher. CIBIL score plays a huge role in determining whether you are eligible for a home loan or not.
However, the most common good score is considered above 750 and less than 750 is regarded as a bad credit score. It is normal for people to want to close old accounts or get rid of credit cards that they do not use anymore. Unfortunately, doing so will negatively impact your credit rating as it will lower your overall credit limit and in turn, increase your credit utilization ratio. So, do not close old credit card and loan accounts as they pay testimony to your good repayment capacity and behaviour. CIBIL collects and organizes all your data and provides the same to all banks and financial institutions when required. It gets hold of this information with the help of banks and credit institutions which are members of CIBIL by default.
What is the Minimum Cibil Score Required To Get A Loan?
Monitor your accounts regularly so that no payment is missed at the end of the month either by you or the joint account holder. Mentioned below are a few tips that you can follow to improve your CIBIL score. You will be eligible for bigger loans since you have high credibility. While a high CIBIL score indicates a good history with credit, a low score is indicative of defaults or insufficient exposure to credit. However, this article will only cover CIBIL and Experian scores. If you’re in the market for a Loan Against Property, the term ‘CIBIL Score’ is probably not new to you.
The amount that is financed typically depends on the status of the borrower (resident/non-resident), type of home loan and the lender. If your credit score is low and you wish to get approved for a Home Loan quickly, consider applying for a Home Loan amount lower than what you had planned to apply for. As a potential Home Loan applicant, you must now be wondering how to calculate CIBIL score for Home Loans?
Great Ways to Improve Your CIBIL Score
Often, your CIBIL score helps create the first impression on the lender. You have better chances of the loan getting approved if you have higher scores. You should remember that the choice to lend is entirely at the bank’s discretion, and a CIBIL score cannot influence this decision. Have a credit card to build a healthy credit history and take loans to get lower interest rates. A credit score of less than 750 makes the home loan application process more difficult and expensive .
It can be beneficial to have a good CIBIL score to avoid any hassle during your loan application process and also speed up the process of approval and disbursal. The first step is to get your credit report and evaluate it for errors and mistakes. Even if you have been paying on time, there can be scope for error which can affect your score negatively.
If you want to keep your CIBIL score on the higher side, maintain a healthy credit mix of secured and unsecured loans. Maintaining a healthy mix depicts you as someone reliable with the ability to manage different types of credit. Never close a credit accountClosing an account affects the CIBIL score calculations badly. If one is unsure about using a credit card, don’t close the account. But if you closed one of the credit accounts, the credit utilization rate would go down, which would hurt your CIBIL score.
If you are consistently late in paying your credit card dues or are maxing out your credit limit, your credit score can be negatively impacted. If you are applying for a collateral-free business loan, having a credit score of 700 or more is ideal. If you are applying for a secured business loan, your loan application may be approved with a lower credit score, say between 600 and 700 too. A high CIBIL score gives you the option to choose and pick lenders as you are eligible for home loans. Also, shorten the documentation process because a high score assures lenders that you can repay the loan. In addition, you are also eligible for lower home loan interest rates.
If you have a good CIBIL score for a home loan, eligibility terms become simpler, and your application gets approved quickly. Lower scores imply risk, and lenders may have to tweak the loan offering accordingly. For example, a loan offered for a credit score of around 600 may mean that you have to settle for a lower principal amount, say up to only 40% of your asset’s value.
Make sure that you have paid your EMIs on time and your credit card bills within the decided period. If you are planning to take a loan of any kind, try to opt for a longer tenor. Most borrowers opt for a short tenor as they want to save on their total interest outgo and become debt-free as soon as possible. The problem with short tenors is that though they help you save money, they do so by making your EMIs hefty. This, sometimes, leads borrowers to feel burdened and stressed.
Your CIBIL score is based off information found in your CIBIL Report or Credit Information Report. Be careful with expensesIf one worries about how to improve CIBIL score, one should start with spending within the credit limit. Credit card statements are a great way to keep tabs on expenses.
With a high credit score, you are in a position to negotiate for better rates. You should first check your credit score before applying for a home loan. Checking your credit score will give you an idea of your current state of credit.
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