Understanding CIBIL Score Requirements for Home Loans: What You Need to Know

Home loans are long-term loans involving substantial amounts. Home loan defaults therefore dent the lenders’ coffers significantly. While home loans are secured by nature, selling the pledged collateral to recover losses is no easy task. Banks and financial institutions are therefore quite wary while screening home loan applications, checking each candidate against the set home loan eligibility criteria and ensuring that only those applicants get approved who meet all the qualifying criteria. CIBIL Score for home loans is an important facet of home loan eligibility. 

TransUnion CIBIL is the oldest credit information bureau in India. It collects information on various credit users and uses it to analyze how they use credit, how they are dependent on it, and how likely it is that they will be able to repay it on time. This analysis is represented through the CIBIL score for home loan. The CIBIL score is a three-digit number between 300 and 900 that indicates a loan applicant’s creditworthiness and repayment capacity. 300 is the lowest or the worst CIBIL score a credit user can have while 900 is the best. So, what is the ideal CIBIL score range for home loans? 

What is the Ideal CIBIL Score for Home Loans? 

If you want to secure a home loan, you must ensure you have a CIBIL score in the range of 750 to 900. 

Your CIBIL score has a direct impact on your ability to secure loans and the terms on which you get the loan. Credit users who have a CIBIL score in the range of 750 to 900 are people who use credit smartly and cautiously, are not excessively dependent on it, and have a habit and history of clearing debt without defaulting on repayment.

Therefore, a CIBIL score in the range of 750 to 900 almost guarantees home loan approval. It also empowers the loan applicant with excellent negotiating power, allowing them to secure the loan on profitable loan terms, such as low home loan interest rates, suitable loan repayment tenor, low loan processing fee, and other charges, to ensure ease of loan repayment. 

A CIBIL score in the range of 700 to 749 is considered a good score for home loans. Such a score almost guarantees loan approval, even if it may not be able to allow you to negotiate for the lowest interest rates possible. A CIBIL score in the range of 650 to 699 is considered average. While such a score does not often leave banks and financial institutions impressed, the loan applicant can easily get approved for a loan and even secure it on the most lucrative loan terms and conditions, including low interest rates, by adding a loan applicant with an excellent score.

However, if your CIBIL score is below 599, securing a loan will be difficult for you, even if you add a co-borrower or buy loan insurance to convince your bank or lender of your intent to repay the loan funds on time. In this case, your only option is to first increase your CIBIL score and then apply for a home loan.

CIBIL Score for Home Loans: How to Increase Your CIBIL Score and Secure the Best Home Loan Deal 

To increase your CIBIL score, simply follow these simple-to-follow tricks. 

1. Your repayment history is important and makes up 35% of your credit score. So, having a clean repayment history will certainly help you increase CIBIL score. In other words, you must always pay your loan EMIs and credit card bills on time. Further, loan applicants must try and clear their pending EMIs as soon as possible to reduce the damage. 
2. Your credit utilization ratio is important too. Having a credit utilization ratio below 30% will convince your lender that you are not excessively dependent on credit, encouraging them to offer you a loan on the most beneficial loan terms. What does a 30% credit utilization ratio mean? It simply means that no more than 30% of the total credit available to you must be used by you at any given time. You can exhaust the entire limit on your credit card, but make sure to repay the entire bill before the due date. 
3. The age of your credit history and the credit mix you have account for 10% and 15% of your CIBIL score, respectively. The older your credit history, the better it is for you. So, instead of closing old credit cards and loan accounts, turn them into lifetime things. 
4. Lastly, never have too many hard inquiries under your name. Be smart and spread over loan applications over a few years. If your application gets rejected, stay away from applying for another additional loan or credit card immediately. Wait a few months and then apply for a loan.