30 Nov What Is a Good CIBIL Score For Home Loan?
We all know that the CIBIL score plays a significant role in processing home loan applications. Based on this value, financial institutions like bank decides whether to process your home loan request. Moreover, it also affects your home loan interest rate. Hence if you want to apply for a home loan without fearing the rejection, it is essential to know the implication of a CIBIL score in the loan-approval procedure.
Why do Lenders Check your Credit Score?
As home loans consume a more substantial portion of a bank’s loan book, an applicant’s creditworthiness is becoming a crucial factor in preserving quality assets. Earlier banks used to make background checks and internal assessments of a loan applicant to approve the request. But, with the help of credit scores and credit reports, banks can now quickly access the right data-based credit information of an individual.
Hence, whenever you submit a loan application, the first thing any lender checks is your credit score and credit history.
If you have a low credit score and a bad credit history, your application will most likely be rejected. Lenders will consider you as a high-risk customer owning the history of defaulting on a loan or credit bill payments.
If you have a high CIBIL score, lenders will process your loan request quickly and offer attractive terms. They see you as a low-risk customer with less probability of default.
Every bank has a cut-off for the CIBIL score, which serves as an indicator to accept or reject the home loan applications.
What is a good CIBIL score for Home Loan?
A healthy CIBIL score for a home loan is usually over 700. However, if your credit score is closer to 900, the credit institution will have more faith in you. A good credit score as specified here, along with the fulfilment of other credit terms helps you get funding up to 85% of the entire cost of the property.
Things to Remember before applying for a Home Loan:
- Know your CIBIL score: You should check your credit score before applying for a home loan. It helps you ensure your credit history and personal details are in order so that banks won’t reject your application. The procedure to purchase your credit report is mentioned in the below section.
- Do not apply repeatedly: If your home loan application is rejected by a bank because of a low credit score, do not attempt to apply at other banks. This will reduce your credit score further as different banks inquiring a person’s credit rating is seen adversely.
- Minimize unsecured loans: Limit or try to close your unsecured loans such as personal loans or credit cards with high credit limits. Such loans are treated as outstanding debt, and banks consider them before sanctioning a home loan.
How to Get Your CIBIL Report for Free?
- Visit CIBIL’s official website.
- Click on the link provided for free credit reports.
- Create your account with following details for identity verification with CIBIL:
- Date of birth
- Postal Address
- Identity Proof Number (Aadhaar, PAN, etc.)
- Accept terms and conditions
- Now CIBIL will show your Credit Information Report (CIR).
You are eligible to get your full credit report for free only once in a year. So, if you want to get your CIBIL report again in the same year, you are required to make a payment of Rupees 550.
How to Improve Your CIBIL Score for a House Loan?
Now you know the importance of a good CIBIL score for a house loan. Worry not, if your credit score is not up to the mark. With a little financial discipline, you can easily improve your credit score and rebuild the credit record.
Tips to improve your CIBIL score:
- Make your loan and credit bill payments on time and also pay the entire amount due. If you make part-payments, it will still be recorded as overdue in your credit report, and such things are not appreciated by credit institutions.
- Stop having many unsecured loans. Instead, keep a balanced combination of both secured and unsecured loans.
- Keep track of your accounts regularly so you don’t miss any payment at the end of the month.
- Don’t use your credit limit entirely. Always keep a check on your credit usage and try to maintain a low outstanding balance to own a healthy credit report.
- Monitor your CIBIL score and credit history regularly and rectify the issues, if any.