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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 approval or denial. The loan provider also looks at your past credit behaviour and repayment capability.
How much CIBIL Score is Required for a Home Loan Approval
- 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.
- A CIBIL score of 760 and above is generally considered to be very good for home loan approval, provided other criteria are met by the applicant.
- An applicant with a score below 760 can also get the loan approved, but the cost of credit may increase in such cases.
- If your score is low, for example, 550, your chances of loan approval are almost negligible.
- As the score starts getting lower, the chances of loan approval also start diminishing.
- 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.
- 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.
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 present you as a responsible borrower.
Keep your Credit Utilisation Ratio Low
- Put a check on your credit usage to utilise as little credit as possible.
- Lower utilisation of credit for long periods shows 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 utilisation 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 a regular track of your credit report
- Try to eliminate the chances of any incorrect information being recorded in the report relating to your payments.
- In case you find errors, get them rectified at the earliest.
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 you have managed your credit in the past.
- The longer the age of credit history, the better it is for your credit score.
Read in Detail: Tips to Improve your Credit Score
How to Check Your CIBIL Score Before Applying for a Home Loan?
Follow the steps mentioned below to check your free CIBIL score for home loan purposes:
Step 1: Click here to get the free CIBIL score
Step 2: Enter your basic details, such as gender, full name, email address and mobile number to verify using OTP authentication by clicking on the ‘Get Free Credit Score’ button.
Step 3: Now, you will get credit scores from multiple credit bureaus
Your Date of Birth (DDMMYYYY format) is the password of your CIBIL report.
Can I Get a Home Loan with a Low CIBIL Score?
- A low CIBIL score signifies a lower creditworthiness due to financial mistakes in the past.
- It will prevent you from availing the best home loan offers from most lenders.
- Some HFCs and lenders, however, may approve your loan application, but you will end up paying high home loan interest rates.
- You may have to adhere to stringent terms, such as lower amounts, shorter tenure, etc.
Can a CIBIL Defaulter Get a Home Loan?
- It is almost impossible for a loan defaulter to get a home loan approved.
- A default reduces your creditworthiness significantly, and no lender would want to risk their investment.
- If you have defaulted recently, no lender would approve your credit application.
- Borrowers who have defaulted years ago but have been following a disciplined credit behaviour since then may get an offer from an HFC.
- Defaulters are thus suggested to repay and close the loan account and build their score first before applying for credit again.
Simple Steps to Apply for a Home Loan
It is always recommended that one should not apply for any loan with multiple lenders simultaneously. Follow the steps to apply for a home loan:
Step 1: Click here to start the application process
Step 2: Provide your basic details and check the latest offers
Step 3: Select the most suitable offer and apply through Paisabazaar
The Paisabazaar team will guide you further to complete the application process and get the loan approved without much difficulty.
How to Avail a Home Loan without a CIBIL Score?
- Home loans are big-ticket purchases, and most lenders prefer borrowers having a previous record of their credit behaviour.
- Many lenders, however, 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.
- It is always recommended to build a credit score before availing of a home loan, as a good credit score can land you a great deal with some additional benefits.
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 760 and above, it is generally considered good for loan approval.
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 700 or above 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.
Q. Does my CIBIL score affect my home loan eligibility?
Ans. Your CIBIL score depicts your creditworthiness and your repayment behaviour. 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 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 a hassle-free housing loan at competitive interest rates.
Q. Can a low CIBIL score lead to the rejection of my home loan application?
Ans. Yes, there is a high probability that your home loan application may get rejected due to a low CIBIL score. Thus, try to rebuild your score before applying for such a loan.
Q. Do different lenders have different minimum CIBIL score requirements for home loans?
Ans. Yes, each lending institution has its own defined home loan eligibility criteria that also include your CIBIL score. A 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. Usually, it takes a few months to reflect any change in your CIBIL report, and it also depends on the credit information provided by the financial institutions monthly.
Also Read: What are the common reasons for a low CIBIL score?
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, renovation or home loan balance transfer.
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 can get 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 a long time after the default and have a low Fixed Income to Obligation Ratio (FOIR), but still, you will still have to borrow at higher rates of interest.
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 760 is usually considered good for availing a home loan.
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