A good credit score is essential for instantly getting approval for a home loan application. However, most of the time, borrowers have certain myths about their CIBIL scores, which can lead to a lowering of these scores. Thus, it becomes mandatory to have a thorough idea of CIBIL scores so that borrowers can easily maintain a good one. Here are 10 essential facts about CIBIL scores one must be aware of.
10 essential things that borrowers should know about CIBIL score
Following are some crucial things that people should be aware of about housing loans:
- Borrowers can check their CIBIL score numerous times: There are no restrictions on the checking of CIBIL score. People have the complete liberty to check it as many times as they want without negatively affecting their scores. They can easily check their CIBIL score using a PAN card or other techniques as many times as they want.
- CIBIL score is somewhat different from CIBIL rating: Although both the terms have been coined by TransUnion CIBIL, both are different to some extent. CIBIL score for individuals ranges between 300 and 900, where 900 is the best. Whereas, CIBIL rating is for businesses and range between 1 and 10, with 1 being the best.
- No credit history does not represent a good CIBIL score: Many people presume that not using a credit card or never opting for a loan, will give them a good CIBIL score. However, if they have no credit history, they also will not be able to issue a credit report.
- Credit score from other bureaus is different from CIBIL: India has four credit bureaus – TransUnion CIBIL, Experian, Equifax, and CRIF High Mark. Each of them has different criteria based on which they assign a score to the borrowers. Thus, the credit score they assign notably varies from each other.
- CIBIL does not alter information on credit reports: CIBIL reports reflect the information that financial institutions provide them. CIBIL has no authority to add or remove any data from the report. So, borrowers can reach out to financial institutions in case they find any mistakes on their credit reports.
- Savings or investments do not impact CIBIL score: The savings or investments that one makes is not taken into consideration when calculating the credit score. Officers consider factors like credit repayment history, and others when assigning CIBIL scores to individuals.
- Lower CIBIL score does not always prevent loan approval: Many borrowers get loan approval even on having a low CIBIL score. All they have to do is go for a guarantor, collateralise their property, produce additional income proofs or maintain a good relationship with their creditor to request loan approval.
- Closing old credit accounts does not improve CIBIL score: It is an absolute myth that closing old credit accounts can improve the CIBIL scores of an individual. Officers consider the credit history when assigning the score. Hence, closing old accounts at times can deteriorate the scores of an individual.
- Multiple loans and credit cards lower CIBIL score: Availing multiple loans at a time can make it difficult to manage all efficiently. Arranging the EMIs and paying them on time becomes a financial burden. Also, if the dates are missed, it can hurt the CIBIL score of a borrower.
- CIBIL never keeps a detailed record of defaulters: It is a myth that CIBIL maintains a record for defaulters. In reality, CIBIL only gathers the credit information of the person that the financial institutions request from them. After that, it is up to the creditor if they want to approve their credit application or not.
After knowing about these facts, borrowers should be aware of the correct interpretation of different CIBIL score ranges.
Different CIBIL score ranges and their meaning
Follow are the various CIBIL score ranges and their associated meanings:
- 300 to 549: Poor
- 550 to 649: Fair
- 650 to 749: Good
- 750 to 799: Very Good
- 800 to 900: Excellent
Once borrowers are aware of these meanings, they can proceed with the application for a housing loan. However, before that they should check if they are eligible for it or not.
Eligibility criteria for a housing loan approval
Following are some of the eligibility criteria that one needs to fulfil to get approval for a housing loan:
- Applicants must be a citizen of India
- Self-employed individuals must have 5 years of business vintage in the present enterprise
- Salaried people should have a minimum of 3 years of work experience in a public or private sector company.
- Age of self-employed individuals must be between 25 years and 70 years.
- Age of salaried people must be between 23 years and 75 years.
However, these criteria can vary to some extent depending on the financial institution. Once a borrower fulfils all the eligibility criteria, they can begin the housing loan application process.
Steps to apply for a home loan
One can follow the steps below when applying for a housing loan:
Step 1: Visit the official website of a financial institution.
Step 2: Navigate to the “home loan” page.
Step 3: Click on the “Apply Now” button.
Step 4: Enter the necessary details and fill out the application form.
Step 5: Upload the essential documents asked for.
Step 6: Review the application form and finally submit it.
Also, individuals can keep the necessary documents ready before beginning the application process.
Documents required when applying for a home loan
Following are some crucial documents that applicants need when applying for a housing loan:
- KYC documents for identity proof such as PAN card, voter card, Aadhaar card, or driving licence.
- Income proof documents such as last three months’ salary slips for salaried applicants and business proof for self-employed individuals.
- Property-related documents such as title deeds, allotment letters, property tax receipts, and more.
- Educational certificates like MBBS, valid COPs, and more for self-employed individuals.
Applicants should note that financial institutions can ask for some additional documents at the time of loan approval if needed.
There are several top-rated financial institutions that provide pre-approved offers to their existing customers. Interested individuals can check their pre-approved offers by entering their personal and contact details on the official website of the financial institutions. This applies to products like home loans and loans against property. Availing this offer can hasten the credit approval process.
Once borrowers are aware of these facts about CIBIL scores, they can accurately understand which factors affect them. Accordingly, they can work on those factors to get a good credit score. Once this happens, borrowers can instantly get a home loan approval, and begin with the construction of their new house.
