Why an individual should get a credit report before purchasing a property?

By Abhay Shah, Realty Quarter

It is essential for you to have enough funds available when you purchase a property or book property. These liquid assets may be held in the form of Bank Balance or Investments in Stocks or Mutual Funds. If you don’t have liquidity when you purchase the property, you should be sure to borrow the money from friends, families or the loan scheme. The main source of financing for a property purchase is a housing loan in India. It is therefore important that you evaluate your capacity to obtain a house loan in advance.

Lenders, also check the credit history of the applicant from the credit information bureau (CIB) before granting the home loan. There are currently four CIBs authorized in India to function. CIBIL (Credit Information Bureau of India) was the first CIB and these CIB reports have thus also been known as CIBIL reports.

How is a Credit report generated?

The financial institutions monitor data and are obtained by the CIB and published in the form of a report and a score. These financial institutions publish details on all your loan operations, including credit card transactions, loans and credit enquiries, and are expressed in a single credit report from these bureaus.

Before sanctioning a home loan, the lender verifies your credentials and creditworthiness from the CIBs. In order to evaluate the likelihood of an individual defaulting on a housing loan and to minimize the risk of housing loan being negative, the creditworthiness is evaluated from the ‘credit score’ and ‘credit reports’ published by the CIBs.

Importance of acquiring a credit report prior to buying a house:

Since the lender is invariably going to receive your CIB credit profile details, it is in your interest to know due course, the details about you which are available to the prospective lender. This will assist you to determine whether or not you can obtain a home loan. For instance, individuals with a score of over 750 from CIBIL have a stronger opportunity to get a home loan than those with a lower score.