The dream of buying a house nowadays is largely dependent on the approval of a housing loan. Many home buyers are starting the process without a clear financial plan , real estate purchase is the biggest financial decision in one’s life .
When a loan gets rejected, individuals get disheartened and lose the hope of buying his own home. To avoid heartbreak , here we are putting down a few important pointers to maintain a good cibil score before you buy a flat or plot.
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Understand How CIBIL score works:
CIBIL score is a three digit number that varies between 300 and 900 given by the credit rating agencies to validate the creditworthiness of the taxpayer based on his credit profile.
The credit score of 300 is poor and the score between 650-699 is satisfactorily fair above 750 is considered to be ‘Good” and get you the loan application approved quickly.
This number indicates the buying and repaying parameters of the individuals like timely repayment, Credit limit utilisation, Age of the credit accounts, number of active accounts, number of credit enquiries and derogatory remarks rated by credit agencies.
Maintaining the credit score of 750 above is super important to go for a housing loan at a lesser interest rate. Housing loan is a very long term commitment in one’s life even 1% reduction in interest rate will help you save lakhs of money.
Check your CIBIL score in any app or check with a bank representative on your loan eligibility a year before planning to purchase a new home.
If you have a good score, congratulations! If not, don’t lose hope it is easy to build a good score.
How to improve your credit score ?
- Ensure all the monthly bills like phone bills,rent, EMI for car loan and Personal loans are paid on time
- If you are using a credit card start purchasing via the card and pay the due on or before everytime, by making timely payment you can establish a good score.
- Avoid loans from any high interest lenders.
- If you have other existing loans try to close the loans as quickly as possible by pledging jewels or with the help of friends and family and close the multiple credit accounts.
- Maintain a low credit utilisation ratio,A higher utilisation will negatively impact your credit score.
- You need to monitor your credit score periodically for any discrepencies , if you find any you have to report to the rating agencies and get it fixed as quickly as possible. A bad/average credit score will defer the loan approval and sometimes at a higher interest rate.
It takes time to show changes in credit score so be patient and disciplined. It will eventually help you. If you have an average CIBIL go for higher down payment.
Save for down payment:
Many of us miss out or fail to save for down payment. Though you have plans to opt for the housing loan. It is important to save for the initial payment.
Banks can offer you upto 80% of the flat or house value and incase of buying gated community plots or individual land you can get upto 90% of the plot cost, remaining 10-20% you have to pay besides down payment you have to pay for the registration, GST and other miscellaneous as well.
A year before planning for a purchase you have to plan for the down payment. You can start saving in a Mutual fund scheme or in gold bonds or through pledging jewels. Try to reduce the loan amount and maximise the down payment.
Banks may sometimes offer you a higher loan amount than you asked for based on your CIBIL, politely decline the offer and take only whatever is required. Overdrawing yourself in today’s economic climate is more dangerous than ever before. Your housing loan EMI must not exceed 20% of your monthly income.
Check the ongoing price of the property online to plan for the down payment and EMI accordingly so that you can start working on improving CIBIL.
If you plan well in advance then your home buying process would be seamless. By maintaining good CIBIL you will have the bargaining power on interest, document charges, you have the upper hand here and the banks are mostly willing to negotiate.
