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  • CIBIL Score for Home Loan

    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.

    On 1 August 2018, Reserve Bank of India (RBI) announced an increase in repo rates during the third bi-monthly monetary policy review. The current repo rate stands at 6.50%. The Monetary Policy Committee (MPC) declared an increase of rates by 25 basis points. A repo rates is a rate at which banks in India borrow funds from the Central Bank. As a result of the change in the repo rate, the home loan interest rates have increased.

    If you are planning to take a home loan, you should follow the following simple tips that will help you get a better deal in terms of interest rates.

    1. A healthy credit score is the key:
    2. It is important to maintain a high credit score if you are planning to apply for a home loan. One of the first things the banks will check after receiving your home loan application is your credit score. A credit score acts as a measure of your creditworthiness. It gives lenders a peek at your ability to pay back the debt. If you have a high credit score, you can be eligible to get preferential pricing for interest rates. With a high credit score, you are in a position to negotiate for better rates. You should first check your credit score before applying for a home loan. Checking your credit score will give you an idea of your current state of credit. Generally, a credit score of 750 and above is considered as ultimate by banks. If your score is lower than this, you can take simple measure like pay off all the debt, make timely bill payments and maintain a low credit utilization ratio to boost your credit score immediately.

    3. Scout for better interest rates:
    4. Along with banks, you can avail loans from non-banking finance companies (NBFCs) as well. With an increase in the number of NBFCs, you have an array of options to receive a home loan. In addition, there are an array of loan aggregator websites, that will offer your loan at competitive interest rates. Doing a through research for the right interest rate for your home loan will help you get a better deal. You should always look out for a home plan that suits all your requirements.

    5. Go fo floating interest rates:
    6. Home loans are available on floating and fixed rates. As the name suggests, in case of fixed rates, the rate of interest remains fixed throughout the loan tenor. Meanwhile, in case of floating rates, the interest rates rates change in respect to the market dynamics. Moreover, floating rate basis are generally a bit lower than fixed rates. Also, even if they go higher than fixed rates, it’s not for the entire loan tenor, but for a limited period of time.

    7. Choose the right repayment tenure:
    8. Along with the interest rate, the repayment tenure plays an important role when it comes to home loans. You should choose a lender who is offering a flexible repayment tenure. A long tenure reduces the EMI amount and increases the interest rate. Meanwhile, in case of a short tenor, your EMI are high but in turn, you get good interest outgo.

    9. Look out for additional benefits:
    10. In addition to a flexible repayment tenure and competitive interest rate, you should look out for additional benefits at the time of availing a home loan. Some of the lenders offer benefits like principal holiday period, top up loan, easy balance transfer facility, and many more. If you get your hands on some of these added benefits, it will help you save some additional money in the long-run.

    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

    • Here’s How You Can Check Your CIBIL for Free through SBI

      TransUnion CIBIL, which is one the oldest credit bureaus in India offers a CIBIL score. It is a numerical representation of an individual’s creditworthiness. It measures your ability to handle credit. A CIBIL score ranges anywhere between 300-900 and is calculated on the basis of your credit record and repayment behaviour. If you have a high CIBIL score, you have better chances of getting credit cards with higher limits, quicker loan approvals, home loans and car loans as well as a credit card with better rewards and benefits. Normally, banks and non-banking finance companies (NBFC) review a CIBIL score of 750 and above as ideal.

      All the four credit bureaus in the country are licenced by the Reserve Bank of India (RBI). Since last year, the RBI has made it mandatory for all the credit bureaus in the country to offer 1 credit report for free for consumers in a calendar year. In addition to CIBIL’s own website, you can also check your CIBIL score for free by filling an application form on the State Bank of India’s website. Let’s see the steps for checking your CIBIL score:

        • Step 1 - Head to SBI’s website. You will come across an application form.

        • Step 2 - You will have to fill up the application form with your personal details like name, address, mobile number, email ID and so on.

        • Step 3 - If you are giving your PAN details, select the ‘Yes’ option under the 'Identity Details' section. If you do not have your PAN details, select the 'No' option. In this case, you can choose other identity proofs like passport, voter id, ration card, driving license etc. and enter the identity proof number.

        • Step 4 - Once you check the box and accept the terms and conditions, you will give SBI the authority to run a CIBIL check for your profile.

        • Step 5 - After clicking on the ‘Submit’ button, you will be directed to another page.

        • You will now get an OTP on the same number that you have filled in the form. Enter the OTP and proceed.

        • You can now see your credit score for free. You can even download your Credit score by clicking on 'Download CIBIL Report as PDF'. The CIBIL score will be saved.

      You should always check your credit report from time-to-time as it gives you an idea of your current credit status. Also, if there are any errors in your report with respect to your personal information or credit account information, you can raise a dispute with the bureau and get them fixed at the earliest. Lastly, checking your credit report periodically also helps you spot frauds such as identity thefts.

      21 September, 2018

    • 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.

      11 August, 2015

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