What is the Role of CIBIL Score in Getting Housing Loan

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Role of CIBIL Score in Getting A Home Loan_WC

5 min 08 May 2024

Highlights:

Importance of Having a Good CIBIL Score
Tips on How to Improve Your CIBIL Score

Borrowers planning to apply for a Home Loan are advised to do a credit score check before beginning their loan application. The credit score or CIBIL score is an important factor that affects a borrower’s eligibility for a Home Loan. Before we go ahead any further, let us understand what a CIBIL score is.

A credit score is a three-digit number between 300 and 900 that indicates a borrower’s ability to avail of a loan and repay it within a given tenor. The CIBIL score is calculated based on the credit report. It is an elaborate report consisting of a borrower’s past and present loans as well as their credit repayment history. In other words, the CIBIL score is a numerical representation of one’s creditworthiness as a borrower. A good CIBIL for Home Loans is 750 or above. The table given below shows the CIBIL score ranges for a Home Loan and what they signify:

CIBIL Score	What it Means?	Ease of Loan Process
800 to 900	Excellent CIBIL score	Approval will come easy
750 to 800	Very Good	Quick approval but high rates of interest
625 to 750	Fair or Average	Getting approved for a loan will be difficult, adding a financial co-borrower can help
300 to 625	Low	It’s highly unlikely that you will get approved for a loan

Lenders determine whether to approve or reject a borrower's loan application based on their CIBIL score. Borrowers can check their credit score and then apply for a Home Loan with an ideal credit score of 750 or above. Let us now look at the role of the CIBIL score in Home Loans.

How Does Having a Good CIBIL Score Help?

Here’s how a good CIBIL score can be helpful when applying for a Home Loan:

If your CIBIL score is 750 or higher, you are viewed as a dependable borrower with minimal risk of defaulting on loan repayments. Therefore, lenders can approve your loan application quickly, ensuring a hassle-free loan application process.
A good CIBIL score not only guarantees approval but also leads to lenders extending loan offers at favourable terms such as low interest rates. A low interest rate can help borrowers keep their EMIs manageable and save funds in the long run.

Borrowers can leverage high CIBIL score to negotiate for competitive interest rates, a flexible loan tenor to make repayment easy, a higher loan sanction, etc.

Tips on How to Increase Your CIBIL Score

If your CIBIL score is low, here's how you can improve it:

Start paying credit card bills and EMIs on time. This will help you build a clean payment history, which will improve your CIBIL score.
Avoid exhausting your credit limit and maintain a low credit utilisation ratio. A low credit utilisation ratio demonstrates responsible financial behaviour.
Borrowers should also refrain from applying for unnecessary credit. Too many unnecessary credit applications lead to several hard enquiries, which can negatively affect a borrower’s CIBIL score.

You should also keep old credit accounts. Closing them will wipe out your credit history, making it difficult for credit information agencies to assign you a credit score.
Lastly, check your CIBIL report regularly for any errors that may be hampering your CIBIL score. If you see any such errors, report them immediately.

In conclusion, a good CIBIL score can help you get approved for a Home Loan easily. You can visit CIBIL’s official website and check your CIBIL score by paying a nominal fee.

Also Read: Tips to Help You Improve Your CIBIL Score

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