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  • CIBIL Score for Home Loan

    Maintaining a good credit history is very important to get your home loan approved.

    What is a good CIBIL score for Home Loan?

    A good CIBIL score for home loan normally starts from 700 upwards. However, the closer you are to 900, the more faith the credit institution will have in your capacity to repay the home loan. With a good credit score along with fulfilment of other criteria as decided by the bank, you can get financing up to 85% of the total cost of the property.

    CIBIL Score for Home Loan

    CIBIL scores play a major role in processing home loan applications. In fact, it is a major criterion based on which a bank decides whether to process a home loan application or not. When you submit your filled home loan application, the bank will first check your credit score and credit history. If your credit score is low and you have a bad credit history, it will most likely reject your application. However, if you have a good CIBIL score, your home loan application will be processed quicker. While there is no universal score, every bank has a minimum CIBIL score which acts as a cut-off or indicator to accept or reject applications. In general, 750 and above is considered a good score, 350 -750 an average score or maybe unacceptable and below 350 would be considered poor.

    What is a CIBIL/Credit Score?

    A credit score is a three digit numeric summary of your entire credit history. The value of a credit score normally ranges between 300 to 900. Your credit score is prepared based on your credit history. This includes all secured and/or unsecured loans and any other debts that you may have or had.

    You can obtain your credit report from CIBIL for a nominal fee and know your credit score before you apply for a home loan. A credit report will include the following information.

    • Record of credit availed by you.
    • Record of repaying loans and credit card bills.
    • Late payments and/or defaults on past credit held by you.
    • Loans and credit cards that you presently hold.
    • Recent information about loan and credit card applications submitted by you.

    This is not an exhaustive list. The report should be studied carefully in relation to your score.

    How is my CIBIL score used for home loans?

    Before processing your home loan application, a bank will obtain your credit score and repayment history from CIBIL.

    CIBIL collects and organizes all your data and provides the same to all banks and financial institutions when required. It gets hold of this information with the help of banks and credit institutions which are members of CIBIL by default. Information is provided to CIBIL on a monthly basis based on which CIBIL prepares a credit information report (CIR) and credit score for each individual and commercial organization. Banks refer an applicant’s history to determine whether a home loan should be approved or not. Credit scores help banks disburse loans more efficiently by avoiding taking on risky customers thereby reducing defaults.

    NPAs or Non-Performing Assets form a portion of many lenders portfolios. With home loans accounting for a large part of a bank’s loan book, an applicant’s creditworthiness becomes an important factor in maintaining quality assets.

    Steps to follow when applying for a Home Loan

    Here are a few important steps to leverage credit scores to your advantage when availing a housing loan.

    • Check your CIBIL score before applying

      Know your credit score before applying for a home loan so as to ensure that your credit history and personal details are in order to avoid rejection from bank. You can purchase your credit report yourself, online at the CIBIL site, by paying a nominal amount of Rs.470.

    • Stop applying repeatedly:

      If your credit score is lower than required and your home loan application is rejected by a particular bank, stop applying repeatedly at other banks. This will further reduce your credit score as different banks making enquiries on one person’s credit rating is viewed negatively.

    • Limit your unsecured loans:

      Try to close or limit you unsecured loans such as personals loans and credit cards with high credit limits. This is because they are indicators of outstanding debt. Banks consider your debt to income (DTI) ratio before sanctioning a home loan. A higher debt to income ratio indicates that you are overburdened and will not be able to bear additional EMI payments.

    How to check your CIBIL score online

    You can access your CIBIL score online by visiting the official website of CIBIL. On the website, you will find an application form which you will have to fill in with identifying details such as your name, date of birth, address, phone number, income, identity proof and address proof, and loans you have taken.

    Once, you fill all these details and submit the form, you will be directed to the payment page where you will have the option to pay the required charge of Rs. 470 either by using your credit card, debit card or through net banking.

    After the payment is made, you will be directed to the authentication page where you will have to answer 3-5 questions about your loans and credit cards to proceed further.

    Once you’ve identified yourself and authentication is successful, CIBIL will send you your score through e-mail within 24 hours.

    Knowing your CIBIL score before applying for a home loan will certainly reduce your risk of being rejected by bank. If you find out that your score is low, you can take steps to improve it.

    How to improve your CIBIL score for a housing loan?

    If you know your CIBIL score is not up to the mark for the housing loan schemes you wish to avail, don’t worry. It is possible, with a little financial discipline, to rebuild your credit record and improve your credit score to eventually become eligible for a housing loan.

    Mentioned below are a few tips that you can follow to improve your CIBIL score.

    • Make all your payments on time and pay the entire amount due. Part-payments will still be recorded as overdue in your report and late payments are not appreciated by banks.
    • Don’t use your entire credit limit. Keep a check on your credit utilization and keep your outstanding balances low to get a good credit score.
    • Monitor your accounts (both single and joint accounts) regularly so that no payment is missed at the end of the month either by you or the joint account holder.
    • Keep a track of your credit score and history by accessing your credit information reports from time to time and rectifying errors, if any.
    • Rather than having too many unsecured loans, try to maintain a balanced combination of secured and unsecured loans. It will help you improve your credit score.

    Know More in CIBIL:

    FAQs on CIBIL Score for Home Loan

    Q. What is the minimum CIBIL score required for home loan sanction?

    As for credit cards, same is the case for home loan sanctioning. Different banks have different criteria when it comes to the exact value of CIBIL score required for home loan processing. However, 700 and above is considered to be a good credit score for banks to consider your home loan request. A good credit history too is important in this respect.

    News About CIBIL Score for Home Loan

    • How to ‘close’ a loan settlement

      Loan settlement is offered to those who are unable to pay the debt incurred on their credit cards or loans. The lender and the customer agree to pay a certain amount and decide to settle the account. This does not help the customer in the long run. As the ‘settled’ status stays on his credit report for 36 a long time. Credit report shows credit history of the past 36 months but the score depends on the past 24 months credit history. Even if the score is higher, the history will have the settled account reported and it will be a major reason for a lender to reject a loan application in the future.

      The status can be changed only when the customer pays off all the dues and urges the bank to close the account. When all the accrued dues are paid, the lender will close the account and will report the updated status to the CIBIL. Your CIBIL report will show the account as ‘closed’ only after the lender has reported the status. The customer will have to follow-up with the bank and the credit bureau to check if the status has been updated.

      11th August, 2015

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