The CIBIL score is a three-digit number assigned to credit users by TransUnion CIBIL, the oldest and most popular credit information agency in India. In the approval of any type of loan, the loan applicant’s CIBIL score plays a key role in helping the lender determine the risk involved in doing business with them. Since home loans are long-term loans and involve a substantial amount of money, all lenders check a loan applicant’s CIBIL score without fail to ascertain their repayment capacity and creditworthiness.
This brief guide on CIBIL score for home loans discusses everything you must know about CIBIL for home loans. So, read on, especially if you are planning to apply for a home loan.
What is the CIBIL Score?
TransUnion CIBIL is one of the four credit information agencies that assign credit scores to borrowers. TransUnion CIBIL calls the credit scores it assigns the CIBIL score. The CIBIL score is a three-digit number and varies between 300 and 900. 900 is the best CIBIL score an individual can have and 300 is the worst. The ideal CIBIL score range for home loans is 750 to 900.
TransUnion CIBIL takes several factors into account while deciding an individual’s repayment capacity and creditworthiness and therefore, their CIBIL score. One of the most important factors that affect CIBIL score is the repayment history. Those who have always paid loan EMIs and credit card bills on time invariably have a high CIBIL score. On the other hand, individuals with several instances of missed EMI payments and credit card bill due dates invariably have a low CIBIL score. Individuals who have defaulted on loan repayment in the past have a very low CIBIL score and more often than not, find their loan applications getting rejected.
Other than their repayment history, credit users’ credit utilization ratio, the number of hard enquiries under their name, the age of their credit history and the credit mix they have also impact their CIBIL scores. Maintaining a healthy mix of secured and unsecured loans along with a limited number of hard enquiries under one’s name helps borrowers maintain a high CIBIL score and establish eligibility for the most beneficial loan terms and conditions. Similarly, maintaining all of one’s old credit cards and loan accounts and having a long credit history also helps borrowers maintain a high CIBIL score for home loans.
These are the factors that an individual’s CIBIL score and some of the simple things borrowers can do to maintain their score in the good CIBIL score range
Let us now look at what different CIBIL score ranges mean for home loan approval.
Different CIBIL Score Ranges and What They Mean for Home Loan Approval
- 750 to 900: Credit users with CIBIL scores in this range are considered highly creditworthy and reliable. Not only does approval come easy for these borrowers but they are also able to demand the best terms and conditions on their housing loan.
- 700 to 749: Such a CIBIL score is considered quite exemplary. However, since such a score is not the ideal CIBIL for home loans, while it guarantees quick loan approval, it does not necessarily guarantee the most beneficial loan terms and conditions.
- 600 to 699: A CIBIL score in this range is considered average. With such a CIBIL score, not many lenders will show great keenness to sanction you a loan on the most beneficial loan terms and conditions. However, loan approval will not be impossible. Further, pushing one’s score from 650 to 750 is easy and can be done by practising financial discipline for a few months.
- 500 to 599: Such a CIBIL score is considered far from ideal. With such a CIBIL score, getting approved for a home loan becomes quite challenging. Adding a loan guarantor or buying loan insurance may help you convince a lender to sanction you a home loan.
- Below 499: If your CIBIL score is below 499, you have made some major credit-related mistakes in the past and therefore, availing of a housing loan will be impossible for you.
Final Words
The ideal CIBIL score for home loans is 750 or above. If a home loan application is on the cards, make sure to maintain your score in the ideal CIBIL score range to ensure approval along with lucrative terms and conditions, such as low interest rates and a long repayment tenor and ease of loan repayment.
