CIBIL Score for Home Loan

Credit score is one of the most important factors for availing credit products such as loans or credit cards. When you apply for a home loan, financial institutions check your credit score before loan application approval or denial. The loan provider also looks at your past credit behaviour and repayment capability.

Housing Finance Companies (HFCs), Banks, or NBFCs do not define a specific credit score requirement for availing a home loan and it varies from one case to another. However, you should still try to maintain a good credit score to avail hassle-free home loans at relatively lower interest rates from leading financial institutions.

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Does CIBIL Score Affect Home Loan Eligibility?

Yes, your CIBIL Score affects your home loan eligibility as the lenders use your CIBIL score to determine whether you are eligible for a home loan or not.

If your score is above 750, you have a pretty high chance of getting your loan application approved but if it is low, for example 550, then your chances of loan approval is almost negligible.

Role of Good Credit Score in availing Home Loan at Low Interest Rates

Credit score plays a vital role if you want to avail any kind of loan. The credit score calculation is based on your past credit behaviour such as repayment track record, dependence on credit, etc. Therefore, it becomes easy for the lender to decide whether to offer a loan or not.

So, if you are applying for a home loan, it is most important that you have a good credit score. If you have a low credit score, the chances of denial of your home loan become much higher.

Every lender would want to give credit to a person with a high credit score as the chances of repayment are higher. Below-mentioned are the steps to improve your credit score and avail home loan at competitive interest rates: 

• Always try paying your dues on time: An individual who is using a credit card or has any loan to repay is always recommended to pay all monthly installments on time to avoid late payment charges and to get an easy home loan at best interest rates
• Review your credit history: Reviewing your credit history at regular intervals is important to avoid loan rejection from banks. Credit bureaus charge some amount to provide credit reports at request, but at Paisabazaar.com you get credit report free of cost with regular updates
• Avoid closing the oldest credit card and carrying too much debt: The length of your credit history is the age of your oldest active credit account. The older your account, the more it will help you in getting a home loan; therefore avoid closing old credit cards.

Therefore, to fulfill your lifegoal of owning a home, it’s always better to keep improving your credit history that shall eventually result in offering the best home loan for you.

Tips to Improve CIBIL Score Before Applying for Home Loan

Pay your Dues on Time

Do not miss your current EMI or delay your credit card payment. Set monthly reminders for your payments. With timely payments, your CIBIL Score will improve and will present you as a responsible borrower.

Keep your Credit Utilization Ratio Low

Put a check on your credit usage to utilize as little credit as possible. Lower utilization of credit for long periods show that you are capable of handling extra credit. You can also request your bank to increase your credit card’s limit which will help you in keeping your credit utilization ratio low.

Maintain a Healthy Credit Mix

To improve your CIBIL Score for a home loan you should maintain a healthy credit mix i.e. having the right combination of secured and unsecured loans. Having too many unsecured loans can negatively impact your CIBIL score.

Check your Credit Report Frequently

One of the important ways to improve your CIBIL score is to keep regular track of your credit report as it will eliminate the chances of any incorrect information being recorded in the report relating to your payments and other details that may otherwise reduce your score.

Keep your Oldest Active Account Opened

You must not close the oldest active credit card as it helps lenders ascertain your credit behaviour and how wisely have you managed your credits in the past.

What is a CIBIL Report and Credit Score?

A credit report is provided by four leading credit bureaus — TransUnion CIBIL, Experian, Equifax and CRIF High Mark. The most popular among these four credit bureaus in India is TransUnion CIBIL. A CIBIL score is a 3-digit number that ranges between 300 and 900. The closer the score is to 900, the better it is.

The bank checks your credit score to determine your creditworthiness whenever you apply for a home loan. If you maintain a minimum CIBIL Score of 750 and above, it is generally considered good for loan approval.

Avoid applying for multiple loans simultaneously, as every application sent to lenders may affect your credit score. Your credit report provides all the necessary information for financial institutions to analyze and offer home loans. You can check your free CIBIL score here and get monthly updates.

Your current income and employment history are also important for banks. Banks just want to know you have steady employment and the monthly cash flow necessary to make your mortgage payments. 

Steps to Check Your CIBIL Score for Free

Follow the steps mentioned below to check your free CIBIL score for home loan purposes:

Simple Steps to Apply for Home Loan

• Check your credit score: Check your credit score before applying for a home loan. If you have a low credit score, the chances of your loan application rejection are high.
• Keep a check on errors: In some scenarios, there can be errors, such as your name or other details printed incorrectly. Therefore, keep a check on all the details sent to you via credit report. So, if you check your credit report before applying for a home loan, your loan approval will not be delayed unnecessarily.
•  Avoid applying for home loans with multiple lenders: It is always recommended that one should not apply for any loan with multiple lenders simultaneously. Every such application is considered a hard enquiry and every hard enquiry has potential to reduce the credit score. Thus, multiple applications to lenders for the same loan would impact your credit score severely.

For an individual who gets a house loan, his or her property is mortgaged with the lender until the tenure of the loan or till the home loan is paid whichever is earlier. Therefore, a home loan is a secured loan and the lender has the authority to forfeit the property in case one fails to pay the loan amount in time.

Note: Remember that the credit bureau can’t make any changes to your credit report. In case of discrepancy, you will have to raise a dispute with your credit bureau, and the bureau in return will take up the issue with the bank or non-banking institution which will verify if the dispute is right or not.

FAQs on CIBIL Score for Home Loan

Q. Can I get a home loan for a CIBIL score of 550?

Ans. Usually, lenders consider a CIBIL score of at least 650 or between the range of 650 to 750 to be eligible to apply for a home loan. To avail a home loan with a low CIBIL score you can approach a few selected NBFCs or small finance banks that offer loans without considering your CIBIL score, as they offer home loans based on your salary, investments, and assets.

The home loan interest rates charged are high, if you have a low or poor credit score, as well as the loan approval chances are also less.

Q. Does my CIBIL score affect my home loan eligibility?

Ans. Your CIBIL score depicts your creditworthiness and your repayment capacity. Therefore, a good CIBIL score enhances the chances of your loan approval and makes you eligible to apply for a home loan offered by various lenders.

Q. How often should I check my CIBIL score when applying for a home loan?

Ans. Before applying for a home loan, you should check your CIBIL score at least once in a month to remain updated with the latest changes in your CIBIL report. You’ll need to check for errors and resolve them as soon as possible to avail hassle-free housing loan at competitive interest rates.

Q. Can a low CIBIL score lead to the rejection of my home loan application?

Ans. Not always and there are few selected banking and financial institutions offering home loans based on your assets, salary, and investments. However, if you do not improve your CIBIL score gradually then you might face outright rejection of your loan application from leading private and public sector banks.

Q. Do different lenders have different minimum CIBIL score requirements for home loans?

Ans. Yes, each lending institutions have its own defined home loan eligibility criteria that also include your CIBIL score. Few selected institutions offer home loans to borrowers with CIBIL scores of at least 650 or above.

Q. How long does it take to build a good CIBIL score suitable for a home loan application?

Ans. Building or improving your CIBIL score is not an overnight process, as it takes time. Usually, it takes around 2-3 months to reflect any change in your CIBIL report and it also depends on the credit information provided by the financial institutions monthly.

Q. Is there a difference in CIBIL score requirements for different types of home loans (e.g., new purchase, plot construction, renovation)?

Ans. The respective lending institutions, such as banks and NBFCs shall define the minimum CIBIL score criteria to clear home loan eligibility. After home loan approval from the respective lending institutions, borrowers can use the available funds for various purposes, such as a new purchase of a home, plot construction, or renovation.

Q. Can I get a home loan with a low CIBIL Score?

Ans. Yes, you can get a home loan with a low CIBIL Score, but you must know that opting for a home loan with a low CIBIL score can result in you receiving a higher rate of interest on the loan. 

Q. Can I get a home loan if I am on the CIBIL defaulter’s list?

Ans. If you have defaulted in the past, then it is very tough for you to get your home loan application approved. However, some lenders may approve your loan application if you have acted responsibly for long after the default and have a low Fixed Income to Obligation Ration (FOIR), but still, you will have to borrow at higher rates of interest.

Q. How to avail Home Loan without a CIBIL Score?

Ans. Home loans are big-ticket purchases and most lenders prefer borrowers having a previous record of their credit behaviour. However, many lenders provide home loans to new-to-credit applicants as well based on some additional factors such as their EMI/NMI ratio, job stability, employer category, etc.

However, it is always recommended to build a credit score before availing of a home loan as a good credit score can land you in a great deal with some additional benefits.

Q. What is the minimum CIBIL Score for a home loan?

Ans. There is no minimum CIBIL score mentioned by lenders for approving the home loan application. However, a Credit Score above 750 is usually considered good for availing a home loan. 

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