Amit applies with bank for his home loan requirement. Apparently his loan application gets rejected on account of poor CIBIL record. Amit never bothered to check nor did he keep track of his CIBIL history until recently when he faced rejection for his home loan requirement. Like Amit there are many who do not bother to keep a regular track of their CIBILs and thereby creates hurdles for themselves in future.
The ignorance towards the significance of CIBIL can prove fatal in due course of time especially when you engage to apply for a home loan. Those who understand the importance of CIBIL are always alert and constantly monitor their CIBIL from time to time. CIBIL has a cruel role while applying for home loan, so it is very important for you to Know- what is CIBIL, its significant role in home loan and what are the do’s and don’ts for CIBIL scores.
What IS CIBIL?
CIBIL stands for Credit Information Bureau of India. It is the authority that provides the credit ratings to you on the basis of the repayment track records of your loans taken, which we all know by the name CIBIL Score. It keeps the track of your every credit transaction and thereby maintains all your credit records.
CIBIL Score’s Significance In Home Loan
A CIBIL score is of great importance in home loan industry. It is determined based on your several facts and details like payment history, outstanding and opening loan amounts, number and types of loan accounts, credit enquiries and guarantors on the loan, etc. Bank ascertains the risk involved in funding your home loan by drawing your credit history-CIBIL scores from CIBIL and hence draws a base whether to approve or reject your home loan application. An average score of 750 and above is considered as a good CIBIL score in home loan industry providing the base for approving your home loan subject to your income eligibility. A poor/low CIBIL score is a definite nod for rejections in home loan.
You CIBIL report contain the following in-depth information on:
1) Number of loan taken.
2) Type of loan taken.
3) Loan amount taken.
4) Bank from where the loan is taken.
5) Number of loan inquiries made.
6) Loan commencement date.
7) Loan closure information on date and amount.
8) Settled loan dues.
9) Outstanding loan dues not settled if any.
10) Overdue payment on credit cards.
11) Loans defaulted.
12) Repayment track record of the loan for the EMI bounces if any.
The low CIBIL scores affect you in many ways. It hampers your loan eligibility, refrains you from getting a better deal on rate of interest, doesn’t allow you to make balance transfer of your loan, reject your future loan applications also do not allow you to take a top-up facility on your existing loan.
Do’s For CIBIL Score
1) Regularly monitor your CIBIL score. Many online companies are now allowing checking your CIBIL score online with no extra cost. It helps you to monitor your CIBIL score from time to time.
2) Make timely payments of your loan EMIs. Maintain sufficient balance in your account for smooth repayments of your EMIs.
3) If you hold any outstanding debt over a period and have made settlement with the bank, do not forget to take the debt closure letter or the no claim letter from the bank.
Don’t For CIBIL Score
1) Be cautious when you sign as a guarantor for anyone. A signing authority for guarantor means you are equally liable to repay the loan in case of default by the loan applicant.
2) Do not take it lightly – the small EMI bounces. Even if the EMI is as small as Rs. 1000 or Rs. 2000 per month do not skip it. A regulator and timely payment add positively to your credit score, and gives you an upper hand when you apply for a fresh new home loan.
3) Avoid doing late payments. Many of you assume that late payments do not affect. They are under the impression that if you are paying the EMI and have not default the loan it doesn’t affect you. But you better clear your misconception. Even if you skip a single EMI it means that the EMI is bounced and it definitely has adverse effect on your CIBIL score.
4) Many a times you find that you are been cheated on the additional charges, undisclosed charges, loan charges, high interest rates, etc. by the lender’s and their service executives, and on noticing the same you stop making payments towards your EMI debt that eventually gets accumulated and is disclosed as bad debts in your CIBIL, reclaiming you as a defaulter. It is suggested of you, to speak to the banking officials before you stop making the EMI payment and ask for a solution. Also take preliminary precaution to recheck the offers before you choose to apply with the selective bank for your home loan requirement.
5) Do not blindly apply with multiple banks if your loan gets rejected from one bank, unless you learn the reason for your loan rejection. Multiple enquires / applications get reflected in CIBIL and it reduces your CIBIL score.
6) Do not add a co-applicant with poor CIBIL score to your loan application. A co-applicant in home loan is equally liable to pay the loan if you as an applicant default the payments. This increases the risk for the bank and hence there exists chances of your loan being rejected by the bank.