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How can Current Loans and Credit Report- CIBIL impact your loan eligibility?
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For an individual planning to take a loan, it is a pre-requisite to be aware of the factors impacting loan eligibility.
The post talks about 2 primary factors affecting your likelihood of getting a home loan - "Existing Loans and Credit Score". Keep reading to find out more.
Owning a house is a life goal for the majority of Indians.
As per a report published by Economic Times, the property prices to monthly income ratio in India as of March 2019 rose to 61.5 times. An immense gap, isn't it?
Home Loan can help you bridge this gap.
Here are the factors that can impact your home loan eligibility and how you can improve it.
Impact Created by Your Existing Loan
Lenders do not consider your complete income as EMIs. This is because you need to meet your monthly expenses and other commitments out of your income. Hence, lenders generally accept an EMI to Income Ratio of 60-70%. The same can even be extended to 100% at times
If you are also serving an existing loan, the maximum EMI that can be charged from you will be reduced. As a result, your home loan eligibility will also take a hit because of reduced EMIs. Let's understand it with an example.
Suppose your monthly income is Rs. 50,000. EMI to Income Ratio is taken as 50%.
In Case -1, you pay Rs. 10,000 as EMI towards an existing Car Loan, and there is no loan in Case-2.
Particulars |
Case-1: With Existing Loan |
Case-2: No Existing Loan |
Monthly Income |
Rs. 50,000 |
Rs. 50,000 |
Maximum EMI (50%) – A |
Rs. 25,000 |
Rs. 25,000 |
Car Loan EMI – B |
Rs. 10,000 |
NIL |
EMI available for Home Loan – (A-B) |
Rs. 15,000 |
Rs. 25,000 |
Maximum Home Loan Amount |
Rs. 17 Lakhs |
Rs. 30 Lakhs |
Clearly, your home loan eligibility is greatly reduced due to an existing loan on your account.
Tip: You can improve your home loan eligibility by repaying your existing loans before making an application.
Impact Created by Your Credit Score
From the lender's perspective, identifying a responsible borrower is important to reduce bad loans. How can they check the credit behaviour of a borrower?
Here comes the role of a credit rating agency. A rating agency provides credit scores to individuals based on their credit history and repayment behaviour. Typically, a credit report tracks the history of the last 7 years.
You can get a maximum score of 900. Usually, lenders accept 750 or above as a benchmark score. On the contrary, a low credit score represents irresponsible credit handling and uneven repayment patterns. Hence, lenders avoid giving loans to people who have an unstable credit history.
Credit Score can also play a big role in deciding your home loan interest rate . The lower your credit score, the higher is the interest rate charged. Hence, it is important to regularly monitor your credit score.
Measures to Improve Your Credit Score
Looking at the impact of credit score, it is certain that your success in getting a home loan depends on a good credit report. So, here is how you can improve your credit score and ensure that your home loan application is accepted.
-
Do Not Make Too Many Loan Applications
When you apply for a loan, by default, the lender checks your credit report. Frequent enquiries reduce the credibility of your report, and hence the score also gets reduced.
-
Make Regular Loan Repayments
It is the primary factor hampering your CIBIL. Usually, there can be 2 scenarios.
-
Scenario – 1: If an EMI becomes overdue, your credit score starts to fall. In case it remains unpaid for 90 days or more, it slips into the category of an NPA.
Once this happens, your credit score reduces at a faster rate. The day when you start repaying consistently, your credit score starts moving upwards.
-
Scenario – 2: When you are financially unable to repay the loan, your lender might write off the debt or agree to settle the account for a reduced payment.
The loans written off or settled are separately marked on the credit report. If your report contains this indication, your loan application most probably gets rejected.
-
Limit Credit Card Usage to 30% and Repay Within the Due Date
Ideally, rating agencies consider a Credit Utilisation Ratio (CUR) of 30% or less to be favourable. Thus, if you hold a credit card and your limit is Rs. 1 Lakhs, you should not use more than Rs. 30,000. Using more credit implies that you are credit hungry. At the same time, you can also repay all your credit card bills on time to ensure a better credit report.
-
Check Your Credit Reports Once in a Year
One free credit enquiry is provided by each rating agency every year. Hence, you can easily check your credit report occasionally and improve your overall score. When individuals consider their own credit score, it is considered a soft inquiry and doesn't impact the credit score negatively. However, repeated enquiries made by lenders or creditors, which are considered hard enquiries, can impact your score negatively.
Several rejected home loan applications either have a low credit score or the loan amount requested is less than the eligible amount. In either case, being proactive and keeping a clean track record can brighten your chances. So, follow the above steps before making the first move towards your new house.
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Key Factors Affecting Your Home Loan Amount Eligibility
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IIFL Home Loans | May 12 11:58 AM
Home Loans
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Key Factors Affecting Your Home Loan Amount Eligibility
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IIFL Home Loans | May 12 11:58 AM
Home Loans
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Key Factors Affecting Your Home Loan Amount Eligibility
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IIFL Home Loans | May 12 11:58 AM
Home Loans
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Key Factors Affecting Your Home Loan Amount Eligibility
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IIFL Home Loans | May 12 11:58 AM
Home Loans
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Key Factors Affecting Your Home Loan Amount Eligibility
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IIFL Home Loans | May 12 11:58 AM
Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Affordable Home Loans In India And IIFL Home Loans
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IIFL Home Loans | Nov 23 4:12 AM
Home Loans
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Affordable Home Loans In India And IIFL Home Loans
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IIFL Home Loans | Nov 23 4:12 AM
Home Loans
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Affordable Home Loans In India And IIFL Home Loans
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IIFL Home Loans | Nov 23 4:12 AM
Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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NCD Vs FD: What Is The Difference Between The Two?
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IIFL Home Loans | Nov 23 4:12 AM
Home Loans
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NCD Vs FD: What Is The Difference Between The Two?
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IIFL Home Loans | Nov 23 4:12 AM
Home Loans
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NCD Vs FD: What Is The Difference Between The Two?
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IIFL Home Loans | Nov 23 4:12 AM
Home Loans
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Home Loans
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Home Loans
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7 Expert Tips For First-Time Home Loan borrowers
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IIFL Home Loans | Nov 02 9:30 AM
Home Loans
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Home Loans
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Home Loan Balance Transfer - Step By Step Guide
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IIFL Home Loans | Nov 02 9:30 AM
Home Loans
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Home Loans
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Home Loans
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Steps To Close A Home Loan Without Complications
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IIFL Home Loans | Aug 24 9:48 AM
Home Loans
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Frequently Asked Questions: Post RBIs Moratorium On Loan
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IIFL Home Loans | Sep 05 12:15 PM
Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Best Tips To Get Lowest Home Loan Interest Rates
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IIFL Home Loans | Oct 03 12:15 PM
Home Loans
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Best Tips To Get Lowest Home Loan Interest Rates
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IIFL Home Loans | Oct 03 12:15 PM
Home Loans
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Best Tips To Get Lowest Home Loan Interest Rates
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IIFL Home Loans | Oct 03 12:15 PM
Home Loans
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Best Tips To Get Lowest Home Loan Interest Rates
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IIFL Home Loans | Oct 03 12:15 PM
Home Loans
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Best Tips To Get Lowest Home Loan Interest Rates
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IIFL Home Loans | Oct 03 12:15 PM
Home Loans
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Best Tips To Get Lowest Home Loan Interest Rates
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IIFL Home Loans | Oct 03 12:15 PM
Home Loans
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Success Tips For Young First-Time Home Buyers
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IIFL Home Loans | Oct 03 11:45 AM
Home Loans
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Success Tips For Young First-Time Home Buyers
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IIFL Home Loans | Oct 03 11:45 AM
Home Loans
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Success Tips For Young First-Time Home Buyers
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IIFL Home Loans | Oct 03 11:45 AM
Home Loans
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Success Tips For Young First-Time Home Buyers
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IIFL Home Loans | Oct 03 11:45 AM
Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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How To Claim Tax Benefits On Joint Home Loans?
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IIFL Home Loans | May 21 2:45 PM
Home Loans
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How To Claim Tax Benefits On Joint Home Loans?
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IIFL Home Loans | May 21 2:45 PM
Home Loans
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How To Claim Tax Benefits On Joint Home Loans?
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IIFL Home Loans | May 21 2:45 PM
Home Loans
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How To Claim Tax Benefits On Joint Home Loans?
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IIFL Home Loans | May 21 2:45 PM
Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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5 Things to Consider Before Refinancing a Home Loan
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IIFL Home Loans | Feb 21 3:30 PM
Home Loans
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5 Things to Consider Before Refinancing a Home Loan
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IIFL Home Loans | Feb 21 3:30 PM
Home Loans
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5 Things to Consider Before Refinancing a Home Loan
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IIFL Home Loans | Feb 21 3:30 PM
Home Loans
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5 Things to Consider Before Refinancing a Home Loan
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IIFL Home Loans | Feb 21 3:30 PM
Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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SIPs Can Help You to Pay Your Home Loan Interest
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IIFL Home Loans | Nov 15 1:00 PM
Home Loans
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SIPs Can Help You to Pay Your Home Loan Interest
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IIFL Home Loans | Nov 15 1:00 PM
Home Loans
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SIPs Can Help You to Pay Your Home Loan Interest
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IIFL Home Loans | Nov 15 1:00 PM
Home Loans
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SIPs Can Help You to Pay Your Home Loan Interest
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IIFL Home Loans | Nov 15 1:00 PM
Home Loans
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SIPs Can Help You to Pay Your Home Loan Interest
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IIFL Home Loans | Nov 15 1:00 PM
Home Loans
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SIPs Can Help You to Pay Your Home Loan Interest
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IIFL Home Loans | Nov 15 1:00 PM
Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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What are the Best Real Estate Areas in Bangalore?
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Policies Increase the Efficiency of the Work Process!
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Home Loans
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Policies Increase the Efficiency of the Work Process!
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Home Loans
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Policies Increase the Efficiency of the Work Process!
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Home Loans
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Home Loans
Tax Planning
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Home Loans
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What Are The Benefits Of Buying A House in 20s
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Home Loans
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What Are The Benefits Of Buying A House in 20s
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Home Loans
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What Are The Benefits Of Buying A House in 20s
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Home Loans
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What Are The Benefits Of Buying A House in 20s
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Home Loans
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Home Loans
Tax Planning
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Home Loans
Tax Planning
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Calculate Your Eligibility With Home Loan Calculator
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IIFL Home Loans | Feb 07 11:00 AM
Home Loans
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Calculate Your Eligibility With Home Loan Calculator
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Home Loans
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Calculate Your Eligibility With Home Loan Calculator
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Home Loans
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Calculate Your Eligibility With Home Loan Calculator
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Hacked!!! Why Indian Sailors Get a Loan Rejection?
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Home Loans
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Hacked!!! Why Indian Sailors Get a Loan Rejection?
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Home Loans
Pradhan Mantri Yojana
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Home Loans
Pradhan Mantri Yojana
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Home Loans
Pradhan Mantri Yojana
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Home Loans
Pradhan Mantri Yojana
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Home Loans
Pradhan Mantri Yojana
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Home Loans
Pradhan Mantri Yojana
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Home Loans
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10 Things You Must Know About Home Loan EMI Calculator
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Home Loans
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10 Things You Must Know About Home Loan EMI Calculator
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Home Loans
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6 Things To Consider While Choosing Your Home
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IIFL Home Loans | Oct 01 11:45 AM
Home Loans
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6 Things To Consider While Choosing Your Home
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IIFL Home Loans | Oct 01 11:45 AM
Home Loans
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6 Things To Consider While Choosing Your Home
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Home Loans
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6 Things To Consider While Choosing Your Home
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Home Loans
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6 Things To Consider While Choosing Your Home
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Home Loans
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6 Things To Consider While Choosing Your Home
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Home Loans
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6 Things To Consider While Choosing Your Home
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Home Loans
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6 Things To Consider While Choosing Your Home
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Here are 6 ways to Save Money on Your Home Loan
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IIFL Home Loans | Aug 05 12:15 PM
Home Loans
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Here are 6 ways to Save Money on Your Home Loan
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Home Loans
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5 Hacks for Improving the Home Loan Eligibility
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Home Loans
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5 Hacks for Improving the Home Loan Eligibility
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Home Loans
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Disclaimer: The information contained in this post is for general information purposes only. IIFL Home Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment, etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness, or of the results, etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability, and fitness for a particular purpose. Given the changing nature of laws, rules, and regulations, there may be delays, omissions, or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Home/ Loan Against Property/ Secured Business Loan/ Balance Transfer/ Home Improvement Loan/ NRI Home Loan/ Home Loan for Uniformed Services) loan product specifications and information that may be stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Home/ Loan Against Property/ Secured Business Loan/ Balance Transfer/ Home Improvement Loan/ NRI Home Loan/ Home Loan for Uniformed Services) loan.