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How a Mortgage Loan Affects Your CIBIL Score

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  • How Loan Against Property Affects Your CIBIL Score

  • CIBIL Score for Mortgage Loan

  • Mortgage Loan with Low CIBIL Score

When it comes to getting a mortgage loan, there are a lot of different factors that go into determining exactly what interest rate you will qualify for, but by far, the biggest factor always is what is your Credit Information Bureau India Limited (CIBIL) score.

Through mortgage loans, an individual receives a percentage of the market value of their property as a loan. These loan amounts can run very high, and that’s why mortgage loans have huge bearings on your CIBIL score. They can bolster your credit score or bring it to an all-time low. Your CIBIL score is the defining factor that helps get loans from lenders, therefore you in order to maximise your chances of getting for a loan of your preference, you must make sure that your CIBIL score is good.

A loan against property or mortgage loan is a secured loan that financial institutions provide against fully constructed, freehold residential, and commercial properties. Built like a personal loan, you can channel the funds you receive through to address any need you wish – with no restrictions on the end use, all without the high interest charges of a personal loan. And to be able to get the loan that suits your needs, you will need a CIBIL score that vouches for your eligibility.

The score is derived after taking into consideration your credit history and details found in your CIBIL report, which is maintained as a record by TransUnion CIBIL Limited, an Indian company that has access to your credit information. Your lender checks your CIBIL score to verify your ability to repay the loan before giving you approval. The closer you are to a credit score of 900, the better are your chances of getting easy approval on your loan. A score closer to 300 is considered poor.

In this article, you will learn how mortgage loans affect your CIBIL score. Read on.

How Loan Against Property Affects Your CIBIL Score

The following are ways how a loan against property affects your CIBIL score.

Paying back the loan on time makes you creditworthy

Do everything in your power to make timely repayments. Your payment history forms 30% of your CIBIL score. Not defaulting on EMIs (Equated Monthly Instalment) greatly improves your creditworthiness. 

Long tenor mortgage loan

A long tenor guarantees low EMIs also gives you a chance to repay your loan over a long-time frame. This, in turn, will help you firmly establish yourself as a reliable borrower and thereby bolster your CIBIL score. It also gives you enough time to plan out your payments, so you never stand the chance to miss a payment.

At Bajaj Housing Finance, we let you repay your loan against property for a period of up to 10 years. Paying your EMIs for this length of time will not only put your repayment history in good light but also add valuable points to the 25% reserved for credit type and duration.

Multiple mortgage loan applications

When it comes to your CIBIL score, numerous loan applications negatively impact the numbers. It shows that you are credit hungry and this causes your score to decline by 3 to 4 points. If this happens every time a lender makes a hard inquiry to your account, your score may decline substantially. You may then have to settle for a loan for a low CIBIL score, and that is usually more expensive.

To avoid this, we recommend you do your due diligence, and apply only to those lenders who are most likely to approve of your application in one go. You can also check your pre-approved loan offer from Bajaj Housing Finance. It gives you instant approval and a chance to apply via a customised deal.

A secured loan adds variety to your credit history

When calculating your credit score, CIBIL not only considers the loan amounts but also the types of loans as well. This means that CIBIL factors a mix of secured and unsecured loans you have in your name to update your score. That is why applying for a mortgage loan will balance the other unsecured debts like a personal loan or credit cards you may already have. Your credit type and repayment tenure form around 25% of your CIBIL score.

Obtain a mortgage loan to reduce your credit utilisation ratio

Your credit utilisation ratio is calculated upon the revolving credit you have based on your income. An example of revolving credit is a credit card, wherein your limit gets renewed when your debt is paid off. CIBIL devotes around 20% of your score to factors that include your credit utilisation ratio. Obtaining a loan against property loan for debt consolidation and to free up your credit utilisation is a smart way to improve your credit score quickly.

A high-value mortgage loan

This loan is covered by valuable security. A high-value mortgage loan amount can often run into crores. For example, you get financing of Rs.5 Crore on a property from Bajaj Housing Finance. Interestingly, the amount of credit you are exposed to contributes to around 25% of your CIBIL score. So, applying for a large loan and handling it well is a sure-fire way to boost your CIBIL score

CIBIL Score for Mortgage Loan

A mortgage loan or loan against property is a secured loan. This means that you need to mortgage an asset, such as a house, or a commercial space to avail of a loan against property. So, in the case of a default, the lender can liquidate the mortgaged asset to recover the outstanding dues. Thus, the lender has lower risks if a borrower fails to pay back such a loan.

This loan can be sanctioned even if the applicant has a CIBIL score close to 750. However, the score needs to be at a minimum of 750 or more when you apply for unsecured credits.

A good and high credit score will help you apply for a loan against property, get quick approval, and may also allow you to enjoy a lower loan against property interest rates.

Mortgage Loan with Low CIBIL Score

Expand your Search: Lenders use a cut-off system in credit scores to evaluate loan applications and such cut-offs can vary from lender to lender. Whereas some may set a high cut-off, others may approve loans to those with a lower credit score but at higher interest rates.

Experts suggest that loan applicants with lower credit scores broaden their hunt to find lenders offering loans to those with low credit scores.

Final Thoughts

It's expedient you take your CIBIL credit score and financial profile into consideration. At Bajaj Housing Finance, we bring you pre-approved offers for mortgage loans, personal loans, home loans, business loans, and a host of other financial products. Not only do we simplify the process of availing of financing, but we also help you save time through our speed and efficient services. All you have to do is share a few basic details and check out your pre-approved offer. Click here to begin now!

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