Are you planning on taking a home loan? Well, then you should know that you need a good CIBIL score for home loan eligibility.
A home loan is an excellent way to finance your dream home. However, home loans are normally hefty amounts and last for years, sometimes even decades. Therefore, when lenders consider loan applications, they need to be extra cautious. To ensure repayment, they determine your capacity using several parameters. CIBIL score is one such, in fact, the primary determiner of your home loan eligibility.
So, what is a good CIBIL score for home loan? In this article, we will outline what CIBIL score means, what is the minimum CIBIL score for home loan, and how you can increase your CIBIL score. Let’s dive in!
What is a CIBIL score?
CIBIL (Credit Information Bureau (India) Limited) is one of the four credit bureaus authorised by the Reserve Bank of India to keep a credit record of every Indian citizen. You can check your CIBIL score for a home loan once a year for free and multiple times a year at a nominal fee.
So, how can you check your CIBIL score for a home loan? It is a simple process. To get your CIBIL score, you need to visit the CIBIL website, fill in the form, make the payment (if you are subscribing to multiple credit scores a year) and your score will be sent to your registered email id within 24 hours.
A CIBIL score is a three-digit number between 300 and 900. CIBIL determines your score based on your credit history and other financial information provided by you while filling out the form.
Let us now look at what is the minimum CIBIL score for home loan.
Minimum CIBIL score required for housing loan
The minimum CIBIL score required for home loans differs from lender to lender. Usually:
- A CIBIL score of 750 or higher is considered to be excellent
- A score between 650 and 750 is considered to be good CIBIL score for home loan
- The 550- 650 bracket is considered to be average
- A score below 550 is considered bad
A score of 650 and above gives you a good chance of getting your loan application approved. Typically, this is considered as a minimum CIBIL score required. However, having a lower CIBIL score does not nullify your chances. It just means you will have less room to negotiate, the lender will have to look at more financial documents, and you might have to do more in terms of convincing them that you will be able to repay the loan, such as including a creditworthy guarantor.
Benefits of a high CIBIL score
A high CIBIL score for home loan applications has several benefits. With a high CIBIL score:
- You will have more options and can pick and choose as you will be eligible for loans from different lenders.
- You will be eligible for bigger loans since you have high credibility.
- Having a higher CIBIL score shortens the documentation process because the score itself is more or less enough to assure the lender of your repayment capabilities.
- You get to borrow money at lower home loan interest rates.
What can you do if your CIBIL score is low?
What is you do not meet the criteria of the CIBIL score required for home loans? Well, the good news is that you can increase it over time.
Your CIBIL score can be low for many reasons. Here are some common ones:
- Delay in the repayment of your existing loans
- Using your credit card to its credit limit
- Frequently exceeding your credit limit
- Late or missed payment of credit card bills
- Having a high debt to income ratio. This means that you have more debt obligations than your net monthly income.
A low CIBIL score increases the chances of your loan application being rejected. If rejected, you should avoid applying repeatedly since that could further hurt your score. Instead, you should work towards improving your CIBIL score by paying your existing EMI dues promptly, keeping credit usage to a minimal, and decreasing other debts.
If you are unsure about your eligibility, head to Tata Capital. Use our home loan EMI calculator today and learn all about terms and repayment schedules.
FAQs
Yes, you can obtain a home loan with a low CIBIL score, but it might come with higher interest rates and stricter terms. To improve your chances, work on boosting your credit score by clearing existing debts and making timely payments.
Being on the CIBIL defaulter list makes it challenging to secure a home loan. However, you can improve your eligibility by settling outstanding dues, repairing your credit history, and demonstrating financial stability to lenders.
Yes, lenders in India have varying minimum CIBIL score requirements for home loans. Generally, scores between 650-750 are preferred, but some financial institutions may consider lower scores based on your financial profile and repayment capacity.
Yes, different types of home loans may have varying CIBIL score requirements. For instance, loans for new purchases might have stricter criteria compared to plot construction or renovation loans. This however depends on the lender's policies and the project's nature.
16 October 2024
4 mins read
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