What’s a Good CIBIL Score to Negotiate Loan when Buying a Flat

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Buying a flat requires a large amount of money. Largely, we turn to home loans to increase our purchasing power today with a promise of repayment of the principal loan along with the monthly interests at a later date in the future. To have access to the loan for buying a property in Kolkata or any city in India, you need to go through a process of personal document verification along with the property papers. 

A home loan is a vital step for buying a flat or building a personal asset – your own home. Loan givers or lenders assess your repayment capacity, which is usually judged based on earnings, expenses, savings, age, work, and repayment history of loans and other dues. And, a good credit score or CIBIL score plays a vital role in your loan sanction or approval. In fact, a good CIBIL score can help home buyers negotiate better interest rates while buying new flats in Kolkata as well as the ones available for resale.

What is a CIBIL score and why is it important when buying a flat?

Under the Credit Information Companies (Regulation) Act, 2005, the RBI has extended permission to companies that can legally provide a credit rating or a credit score based on prior history and credit behaviour recorded by public sector as well as private sector banks as well as credit institutions. The Credit Information Bureau India Ltd (CIBIL™) is India’s leading institution for credit information. 

By and large, a credit score is issued by the following credit bureaus, namely, CIBIL™, Equifax , HighMark™ and Experian. However, since CIBIL™ is one of the oldest in the business, it is widely regarded by most financial institutions seeking a rating of a person or entity. It is now mandatory for all lenders to submit data to all four bureaus.

Your credit score is seen as a direct indicator of your credit health. The number of loans and types of loan accounts, outstanding debt, and length of credit history also play a major role in determining your CIBIL™ score or Equifax score. In simple words, it is a three-digit numeric summary of the customer’s credit history and a reflection of the person’s credit profile. It is based on previous credit behaviour, such as repayment or borrowing habits shared by lenders and banks with CIBIL. A CIBIL score carries a phenomenal weightage as most financial institutions here have relations with the bureau. As such, your lender is more likely to give preference to a CIBIL score over other valid credit scores.

With a good credit score or CIBIL score, buying a flat is easy; along with the fulfillment of other formalities as decided by the bank, you can get financing up to 85% of the property’s total cost. Moreover, a good CIBIL score improved the scope for negotiation of home loan interest rates with the bank; leading financial lenders are aligned to offer lower interest rates to those with a better credit history.

The least CIBIL score for a home loan for buying flats depends on the lenders. For some, the cut-off may be 700 and for another 650. Since the scores in the range of 650 and 749 are considered acceptable, and scores above 750 are considered excellent.

CIBIL Score Ranges and what they mean when buying a flat

An understanding of these scores is extremely crucial to understand your loan eligibility while buying a flat or an apartment. Below are the credit scores ranges along with an explanation to what these numbers mean for you: 

• 300-599: A credit score below 600 drastically decreases the chances of getting a loan. It conveys to lenders about the borrower’s bad credit history. Due to this, there are increased chances of loan applications getting rejected unless the lender agrees to offer a low loan at a very high-interest rate or against collateral like assets, shares, gold loans—FD’s. If a borrower cannot get a loan with this score, he or she must increase his/her credit health to be eligible for a loan.
  
• 600-749: With these middling scores, the chances are lower than those with a score of more than 750. In this case, lenders look at other factors such as employment stability, monthly income, other on-going loans, etc., to assess the prospects of obtaining loan repayments from the borrower and decide on your loan eligibility accordingly.
  
• 750-900: If you have a CIBIL score in this bracket, the loan approval process will be quick and tension-free. Not just that, you will also be able to negotiate on the loan amount and interest rate with several lenders and avail the best offer available across properties in Kolkata or anywhere in India.

How to check the Credit score offered by CIBIL? 

You can check the CIBIL score online through CIBIL’s official website once a year without any charges or multiple times in a year at a fee. Below are the steps for checking CIBIL score:

1. Go to CIBIL’s official website.
2. Click on the orange button – located at the top-right corner.
3. Choose a subscription plan.
4. Fill in the details like date of birth, email address, and mobile number.
5. Create a password of your choice.
6. Select your ID type and enter the ID details.
7. The process to “verify your identity” and answer all the questions correctly.
8. Complete the procedure at the “make payment” tab.
9. If you need 1 CIBIL score in a year, skip the subscription plans, and go to your account.
10. Login by authenticating with the help of OTP or email.
11. Fill in the details in the form that appears.
12. After doing all these formalities, the website will show your CIBIL score on the dashboard.

How to increase CIBIL score?

Stalling your application and improving your credit score is the best way of buying a flat at an affordable home loan. Here are some methods to improve your CIBIL score:

• Pay your credit card bills within the due date.
• Keep your credit utilization below or around 30%
• Pay existing loan EMIs on time.
• Monitor your credit report and rectify mistakes by intimating the credit bureau.

While a credit score proves your financial mettle, being able to service loan hinges on other parameters and such as your debt-to-income ratio. To secure a home loan that matches both your debt-to-income ratio and CIBIL score, use a home loan eligibility calculation before applying and avail of home financing on personalized terms.

How to improve home loan eligibility while buying a flat

Importance of the CIBIL score for a home loan when buying a flat

If you’re considering buying flats in Kolkata, you’d most likely attempt to procure a home loan fast and as per your budget requirements. Before you purchase a house or even pay token money to the seller, it’s better to check CIBIL score because the token amount often constitutes a significant portion of the total cost of the property in Kolkata, given the rise in real estate prices over the years. There is always a possibility that your loan is denied due to bad credit history, in which case you’ll have to forfeit your token money altogether. 

As a caveat, we must mention that sometimes a mistake on the part of the lender may result in a flawed credit report, thus impacting your credit score. It could be an incorrect credit card outstanding reflecting in the CIBIL report or The EMI paid for a previous loan that is incorrectly reflecting on CIBIL. IF you face such a situation, bring it to the concern of the respective financial institution while keeping CIBIL in the loop. Always ensure that you check your score before filling out a home loan application; it doesn’t matter if you’re buying 3 BHK flats in Kolkata or looking for villas in Kolkata, the process remains the same. It’s better to plan ahead. 

Let us take a broader look at how your CIBIL score determines your home loan eligibility:

• CIBIL Score Implications: A good credit score of 750 or above facilitates the loan process and makes you acceptable for a large loan amount and better interest rate, and that too from a broad range of lenders. After the loan is processed, the amount will be disbursed into your account without any delay. The higher the score, the greater the loan amount and low-interest rate will be eligible for a home loan.
  
• Defines credit health: Assessing credit health or creditworthiness gives lenders an idea about how you will repay the debt on a home loan. A high CIBIL score assures them that you will be able to repay the home loan within the given time. Whereas a low score is proof of a bad credit score history, making the lender skeptical of your capability to repay the loan. However, a low score decreases the chances of being eligible for a loan but does not nullify the chances completely. Such loans are offered on a low amount and higher interest rate, along with rules and regulations.
  
• Determines the home loan amount: A good score will allow you to be eligible for a higher loan amount for the same reason you can ask for a lower interest rate, which would not be feasible if you have a low score. In fact, lenders will offer a lower amount if you possess a low score than what they usually provide.
  
• Determines interest rate for a home loan: With a good CIBIL score, you will be in a position where you can bargain with the lender to reduce the interest rate. Also, a vast group of lenders would show interest rates in offering you a home loan with a good credit history, allowing you to choose the one that is offering you the best deal. On the other hand, a low credit score not only decreases the chances of getting a home loan it also deducts the chances of negotiating on the loan amount and rate of interest being offered by the lender.

Conclusion: CIBIL Score and Buying a Flat

Hope this blog clarifies your doubts regarding home loans and CIBIL scores. Flats in Kolkata are plenty, but homes are not made every day; it takes a lot of hard work and hard-earned money to build that perfect home for you and your family. We understand how important a home is for everyone but do not blindly take up a loan just because you are in a hurry to create something of your own, market research is advised before taking any kind of loan in your name. Market research as well as going over your CIBIL score data ensures that you are not caught in a fix at the time of applying for the loan as well as during repayment.

Good research assures a decent and stress-free situation in the future and you may sit relaxed in your newly built home, sipping that tea and spending quality time with your family.

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