A home loan, today, is a function of more than one factor. In addition to your income and ability to replay, your credit score is another very important factor that determines your eligibility for a home loan and also the interest rate at which the loan would be sanctioned.
There are four credit bureaus in India that prepare credit reports and tag you to a credit score. They are: Experian, Equifax, CIBIL and Crif High Mark. The credit score basically sums up your
behaviour as a borrower basis all the positives and negatives in your credit report.
These credit bureaus collate only credit information i.e. information on loans such as home loans, automobile loans and personal loans and information on credit facilities such as overdraft facility and credit cards. Their reports do not take into account other information pertaining to customers’ savings accounts, fixed deposit accounts or other such investments which constitute the liability portfolios of banks or financial institutions.
Here we will talk about one of the most popular scores, the CIBIL TransUnion score. CIBIL TransUnion Score ranges from -1 (or NH) to 0 (or NA) and 300 to 900. The closer the score is to 900, the
better it is.
An applicant gets a score of NH or -1 when he does not have a credit track record at all and a score of NA or 0 when his credit track record is less than 6 months.
As per CIBIL, a credit score of NA or NH is not a matter of concern. This may mean:
- One does not have a credit history at all or enough of a credit history to be scored, i.e. the applicant is new to the credit system.
- One does not have any credit activity in the last couple of years.
- One has just add-on credit card(s) and no direct credit exposure in his/her own name.
There are also a few common mistakes that can adversely affect your score:
- Default in EMI payment
- More unsecured credit in the form of credit card or personal loans, than secured credit like home loan or car loan
- High utilization of credit card limit
- Rising outstanding credit amount
- Applying for multiple loans at once
Maintaining a good credit score will help you secure any loan with quite an ease, that too at a lower rate of interest and maybe with a waiver of processing charges too. Get your CIBIL score checked today and make amends if necessary. It’s never too late for good practices!