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 score is calculated by TransUnion CIBIL, one of India's leading credit bureaus. Various factors such as repayment history, credit utilisation ratio, and the number of loan applications are considered by credit bureaus for calculating CIBIL score. 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. A high CIBIL score shows that you are financially disciplined and makes you more creditworthy. Likewise, a low CIBIL score shows that you are financially irresponsible.

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 from CIBIL and other bureaus usually range from 300 to 900, with 900 being the highest. For home loans, a score of 750 or above is ideal, as it improves your approval chances and helps secure better interest rates and terms.

Scores between 650 and 749 are considered good, though lenders may review other financial details; 650 is often the minimum required for a home loan. A score of 550–649 is average and needs improvement, while 300–549 is considered poor. NH or NA means you do not have a 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. A low credit score and a bad credit history implicate immediate rejection of 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's 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?

The initial step every bank follows when you submit a home loan application is that they obtain your credit score report and repayment history from CIBIL, Credit Information Bureau India Limited. CIBIL systematically collects and organizes your credit data from banks and other financial institutions. These banks and institutions provide CIBIL with updated information on a monthly basis.

CIBIL generates a comprehensive Credit Information Report (CIR) and a credit score for each individual using this updated data. This score and report is then utilized to evaluate an applicant's financial discipline and debt repayment capability based on which they decide whether to approve or reject the home loan application. Banks can make more informed lending decisions, identify and avoid approving home loans to high-risk customers.

A borrower's sound credit history is therefore a key factor for the bank in maintaining high-quality assets and managing its exposure to Non-Performing Assets (NPAs). NPAs are loans for which the borrower has failed to make interest or principal payments for a specified period.

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 applying: It 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 the bank. You can purchase your credit report yourself, online at the CIBIL site, by paying a nominal amount of fee.
2. Avoid repeated applications if rejected: 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. Visit the official CIBIL website.
2. Choose “Get free CIBIL score and 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 registered 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

1. Quick Loan Processing: A credit score of 750 and above signifies low risk to lenders and leads to faster processing and approval of your home loan application.

1. Higher Loan Amount: A good credit score demonstrates your creditworthiness and allows lenders to sanction a larger home loan amount compared to those with lower scores.

1. Lower Interest Rate: Lenders offer preferential, lower interest rates to borrowers who have a strong credit history, saving them money over the loan tenure.

1. Negotiable Interest Rate: A higher credit score gives you the leverage to negotiate more competitive interest rates and favorable loan terms with the bank.

You can check your CIBIL score online by visiting the official CIBIL website and filling out a form with basic personal and credit details. After submitting the form, you need to pay a nominal fee via card or net banking. Once the payment is completed, you will be asked to answer a few verification questions related to your loans or credit cards to access your score.

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. Timely payments: 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. Limit credit utilization: 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. Keep track of accounts: 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. Access credit reports: 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. Combine loans: 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 scores: You 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/scores: Skipping 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 Loan: The 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 Loan: When 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?