Is a Good CIBIL Score Mandatory for Home Loan Approval?

Over the past few years, the number of people opting for a Home Loan to fund the purchase of their home has increased considerably. However, with this, have also increased cases of Home Loan default. Lenders, therefore, have become quite cautious about choosing the right borrowers. Lenders screen candidate for Home Loans based on several factors, such as income profile, age, etc. However, the most important of all the factors that affect a borrower's Home Loan eligibility for a Home Loan is their credit score. 

What is Credit Score?

In India, there are four credit information bureaus - Equifax, Experian, CRIF Highmark and TransUnion CIBIL - that collect information indicating a borrower's attitude towards credit. The most well-recognized of these credit information bureaus is TransUnion CIBIL. TransUnion collects information about borrowers from various lending institutions and based on the information gathered, they assign everyone a credit score known as CIBIL score. The CIBIL score is a three-digit number ranging between 300 and 900. The closer one's CIBIL score is to 900, the higher their creditworthiness and loan repayment capacity. 

Is a good CIBIL score mandatory for Home Loan approval? The answer is yes. Let us see how CIBIL score affects one's chances of Home Loan approval.

How Does One's CIBIL Score Impact One's Chances of Home Loan Approval? 

Let us look at how lenders treat applications from people with credit scores belonging to different ranges. 

Credit Score Between the Range of 750 and 900 

If your credit score lies between this range, it means you are someone who pays all credit card bills and EMIs on time. Further, you are also someone who keeps their credit utilization ratio low. You are an ideal borrower for a lender considering your high creditworthiness and excellent repayment capacity.  

If your credit score lies in this range, lenders will vie to have you as their client. You will get the best Home Loan deals with low interest rates and high loan amounts. You will have high negotiating power with your lender and your loan application will also get instant approval.  

CIBIL Score in the Range of 650 and 750 

If your CIBIL score lies in this range, the lender will perceive your creditworthiness and repayment capacity as average. Within this category falls individuals who have not been bad borrowers but have also not been ideal. 

Thus, if you belong to this category, your Home Loan application will get approved. However, your lender will see some risk in lending you the money. They will make up for this risk by charging you a high interest rate or offering you a lower Home Loan amount than you are eligible for.

Credit Score in the Range 600 and 650

This is a below average credit score. This means you are someone who has paid most bills and EMIs on time but have also missed a few every now and then. For the lender, there is risk involved in lending you money for chances of default are high. Thus, if you fall in this category, your loan application will receive approval only if you add a co-applicant or guarantor who vouches to cover up for you should you ever default. This co-applicant or guarantor must be someone with an excellent credit score and stable income. 

Credit Score Under 600 

If your credit score is below 600, no lender will approve your Home Loan application, even if you add a co-applicant or guarantor. This is a bad credit score that says lending money to the concerned borrower is risky business and must be avoided.

So, before you apply for a home finance or any other loan product, check your credit score before beginning the application process. Here's how you can check your credit score online.  

How to Check Your CIBIL Score Online

To check your CIBIL score online, simply go to CIBIL's official website and look for the 'Get Your CIBIL Score' option. You will then be asked to provide certain details about you, such as name, registered mobile number, PAN details. Enter these details and click on 'Accept and Continue.' Thereafter, you will get an OTP on your registered number. Enter this OTP and enter your dashboard. There, you will find the option to check your CIBIL score. Once you click on this option, you will be redirected to myscore.cibil.com. Once there, simply login and you will be able to see your CIBIL score. 

Final Words 

Whether you are applying for a Home Loan or a Loan Against Property, check your CIBIL score before beginning the Home Loan process. If your CIBIL score is below 750, work on bettering your credit report first and then apply for a loan.