CIBIL Score for Home Loan

A credit score is a three-digit numeric summary of your entire credit history. The value of a credit score normally ranges between 300 to 900. Your credit score is prepared based on your credit history. This includes all secured and/or unsecured loans and any other debts that you may have or had.

You can obtain your credit report from CIBIL for a nominal fee and know your credit score before you apply for a home loan. A credit report will include the following information.

1. Record of credit availed by you.
2. Record of repaying loans and credit card bills.
3. Late payments and/or defaults on past credit held by you.
4. Loans and credit cards that you presently hold.
5. Recent information about loan and credit card applications submitted by you.

This is not an exhaustive list. The report should be studied carefully in relation to your score.

Minimum CIBIL Score for a Home Loan Approval

The minimum CIBIL score required to obtain a home loan in India differs from one lender to another. For instance, one lender might require a minimum score of 700, while another may accept a score of 650.

A CIBIL score between 650 and 749 is generally considered 'good', whereas a score of 750 or above is deemed 'excellent'. Therefore, having a higher CIBIL score increases your chances of securing a home loan.

Credit Score Ranges and What?s Considered Good

Credit scores, whether provided by CIBIL or another credit reporting agency, typically range from 300 to 900. A score of 900 is the highest attainable score. For home loans, a credit score of 750 or above is considered ideal as it increases your chances of obtaining a loan quickly and gives you the leverage to negotiate a competitive interest rate and favourable loan terms.

A credit score ranging between 650 and 749 is deemed good, and lenders may approve your home loan application after scrutinizing your other financial details. However, 650 is often considered the minimum CIBIL score required for obtaining a home loan.

Scores falling between 550 and 649 are average and require improvement, while scores ranging from 300 to 549 are classified as bad. Finally, NH or NA indicates that you have no credit history yet.

What is a good CIBIL score for Home Loan?

CIBIL scores play a major role in processing home loan applications. In fact, it is a major criterion based on which a bank decides whether to process a home loan application or not.

When you submit your filled home loan application, the bank will first check your credit score and credit history. If your credit score is low and you have a bad credit history, it will most likely reject your application.

However, if you have a good Credit score, your home loan application will be processed quicker. While there is no universal score, every bank consider 650 as minimum CIBIL score which acts as a cut-off or indicator to accept or reject applications. In general, 750 and above is considered a good score, 350 -750 an average score and below 350 would be considered poor.

How is my CIBIL score used for home loans?

Before processing your home loan application, a bank will obtain your credit score and repayment history from CIBIL.

CIBIL collects and organizes all your data and provides the same to all banks and financial institutions when required. It gets hold of this information with the help of banks and credit institutions which are members of CIBIL by default.

Information is provided to CIBIL on a monthly basis based on which CIBIL prepares a credit information report (CIR) and credit score for each individual and commercial organization. Banks refer an applicant?s history to determine whether a home loan should be approved or not. Credit scores help banks disburse loans more efficiently by avoiding taking on risky customers thereby reducing defaults.

NPAs or Non-Performing Assets form a portion of many lenders portfolios. With home loans accounting for a large part of a bank?s loan book, an applicant?s creditworthiness becomes an important factor in maintaining quality assets.

Steps to follow when applying for a Home Loan

Here are a few important steps to leverage credit scores to your advantage when availing a housing loan.

1. Check your CIBIL score before applyingIt is better to check your CIBIL score before applying for a home loan so as to ensure that your credit history and personal details are in order to avoid rejection from bank. You can purchase your credit report yourself, online at the CIBIL site, by paying a nominal amount of Rs.470.
2. Stop applying repeatedly:If your credit score is lower than required and your home loan application is rejected by a particular bank, stop applying repeatedly at other banks. This will further reduce your credit score as different banks making enquiries on one person?s credit rating is viewed negatively.
3. Limit your unsecured loans:Try to close or limit you unsecured loans such as personals loans and credit cards with high credit limits. This is because they are indicators of outstanding debt. Banks consider your debt to income (DTI) ratio before sanctioning a home loan. A higher debt to income ratio indicates that you are overburdened and will not be able to bear additional EMI payments.

How to check your CIBIL score online

The process that must be followed to check the CIBIL score online is mentioned below:

1. Go to the official CIBIL website.
2. Select 'Get Free CIBIL Score & Report?.
3. Type in your name, email ID, and password. Attach an ID proof (passport number, PAN card, Aadhaar or Voter ID). Then enter your PIN code, date of birth, and also your phone number.
4. Click on 'Accept and Continue'.
5. You will receive an OTP on your mobile number. Type in the OTP and select 'Continue'.
6. Select 'Go to Dashboard' and login and check your credit score.
7. You will be redirected to the website, myscore.cibil.com.
8. Click on 'Member Login' and once you log in, you can see your CIBIL score.

Advantages of Having a Good Credit Score

Some of the main advantages of having a good credit score are mentioned below:

1. The loan will be processed quickly.
2. A higher home loan amount can be availed.
3. The interest rate will be low.
4. The interest rate can be negotiated.

You can access your CIBIL score online by visiting the official website of CIBIL. On the website, you will find an application form which you will have to fill in with identifying details such as your name, date of birth, address, phone number, income, identity proof and address proof, and loans you have taken.

Once, you fill all these details and submit the form, you will be directed to the payment page where you will have the option to pay the required charge of Rs. 470 either by using your credit card, debit card or through net banking.

After the payment is made, you will be directed to the authentication page where you will have to answer 3-5 questions about your loans and credit cards to proceed further.

Once you?ve identified yourself and authentication is successful, CIBIL will send you your score through e-mail within 24 hours.

Knowing your CIBIL score before applying for a home loan will certainly reduce your risk of being rejected by bank. If you find out that your score is low, you can take steps to improve it.

How to improve your CIBIL score for a home loan?

If you know your CIBIL score is not up to the mark for the home loan schemes you wish to avail, don?t worry. It is possible, with a little financial discipline, to rebuild your credit record and improve your credit score to eventually become eligible for a housing loan.

Mentioned below are a few tips that you can follow to improve your CIBIL score.

1. Make all your payments on time and pay the entire amount due. Part-payments will still be recorded as overdue in your report and late payments are not appreciated by banks.
2. Don?t use your entire credit limit. Keep a check on your credit utilization and keep your outstanding balances low to get a good credit score.
3. Monitor your accounts (both single and joint accounts) regularly so that no payment is missed at the end of the month either by you or the joint account holder.
4. Keep a track of your credit score and history by accessing your credit information reports from time to time and rectifying errors, if any.
5. Rather than having too many unsecured loans, try to maintain a balanced combination of secured and unsecured loans. It will help you improve your credit score.

Know More about CIBIL:

1. Reasons for loan rejection other than CIBIL scoresYou have an impressive 800 point CIBIL score after years of diligent credit management. But it wasn?t enough to get your loan application approved. What went wrong? Quit scratching your head and get to the point with our list of reasons why your loan was rejected.
2. How Skipping payments affect CIBIL ratings/scoresSkipping is great exercise to keep you healthy; so long as you don?t apply it to your credit payments. CIBIL knows when you miss a payment and puts it on your record. Know how payment irregularities bring your credit ratings down.
3. CIBIL score for SBI Home LoanThe largest public bank in India, don?t miss out on SBI?s low home loan interest rates. Do you know how high your credit score for a home loan from State Bank of India should be?
4. CIBIL score for HDFC Home LoanWhen it comes to housing finance, HDFC knows all your needs. It also knows your CIBIL score. Do you? Will your HDFC Home loan application be accepted or rejected because of your credit score?

A good credit score can help you secure lower interest rates on loans and credit cards.

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