Role of CIBIL Score in Getting A Home Loan_Banner_WC

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Role of CIBIL Score in Getting A Home Loan_WC

5 min 22 Mar 2023
Highlights:
  • How Does Having a Good CIBIL Score Help?
  • Tips on How to Increase 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 explain what a CIBIL score is. It is a three-digit number between 300 and 900 that indicates a borrower’s creditworthiness and ability to repay any loan on time. The CIBIL score is calculated based on the credit report, which is an elaborate electronic report that contains details 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 trustworthiness as a borrower. A good CIBIL for Home Loans is 750 or above. Here’s what various CIBIL score for Home Loan ranges means.

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 co-borrower might help  

300 to 625 

Low  

It’s highly unlikely that you will get approved for a loan  

One look at the table and one can understand that lenders decide whether to approve a borrower’s loan application based on a borrower’s CIBIL score. Borrowers can perform a FREE CIBIL score check and then apply for a Home Loan if their credit score is 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 is helpful when applying for a Home Loan.  

  • If your CIBIL score is 750 or above, you are a highly reliable borrower and it is highly unlikely that you will default on loan repayment. Therefore, lenders will approve your loan application quickly and you will experience a hassle-free loan application process.  

  • A good CIBIL score not only guarantees approval but also leads to lenders extending loan offers at low-interest rates to attract a borrower. Low-interest rates help borrowers keep their EMIs affordable and save a lot of money in the long run.  

  • A high CIBIL score also gives borrowers high negotiating power. In other words, if you are not happy with the terms and conditions of the loan, you can negotiate with your lender and ask for lower interest rates, a longer loan tenor to make repayment easy, a higher loan sanction, no prepayment or foreclosure charges, etc. 

Now if you are asking yourself, how can I increase my CIBIL score or you are wondering how to get a Home Loan if your CIBIL score is low, read on.  

Tips on How to Increase Your CIBIL Score

  • If your CIBIL score is below 750, you may be able to avail of a loan by adding a co-borrower or guarantor. However, if you do not want to add a guarantor or co-borrower, here’s what you can do to improve your CIBIL score and get approved for a Home Loan quickly.  

  • Start paying credit card bills and EMIs on time. This will help you build a clean payment history, which in turn, will improve your CIBIL score.  

  • Never exhaust your credit limit and maintain a low credit utilization ratio. A high credit utilization ratio is a sign of an unreliable borrower. Borrowers trying to improve their credit score must keep their credit utilization ratio below 30%.  

  • Borrowers must also refrain from applying for credit often. Too many credit applications lead to too many hard enquiries, which negatively affect a borrower’s CIBIL score.  

  • You must also maintain 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 from time to time for errors that may be hampering your CIBIL score. If you see any such errors, report them immediately.  

In conclusion, a good CIBIL score makes life easier in general. How to check CIBIL score? Many websites allow borrowers to check their CIBIL score for free. You can use any such website or go to CIBIL’s official website and check your CIBIL score by paying a small fee.  

Also Read: Tips to Help You Improve Your CIBIL Score

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