Home loans are normally hefty amounts and last for years, sometimes even decades. Therefore, when lenders consider loan applications, they need to be extra cautious. To ensure repayment, they determine your capacity using several parameters. CIBIL score is one such, in fact, the primary determiner of your home loan eligibility.
What is a CIBIL score?
CIBIL (Credit Information Bureau (India) Limited) is one of the four credit bureaus authorised by the Reserve Bank of India to keep a credit record of every Indian citizen. You can check your CIBIL score for home loan once a year for free and multiple times a year at a nominal fee. To get your CIBIL score, you need to visit the CIBIL website, fill in the form, make the payment (if you are subscribing to multiple credit scores a year) and your score will be sent on your registered email id within 24 hours.
A CIBIL score is a three-digit number between 300 and 900. CIBIL determines your score based on your credit history and other financial information provided by you while filling the form.
Additional Read: How Does Credit Score For Home Loan Works?
Minimum CIBIL score required for a home loan
The minimum CIBIL score required for home loans differs from lender to lender. Usually, a CIBIL score of 750 or higher is considered to be excellent; a score between 650 and 750 is considered to be good; the 550- 650 bracket is considered to be average and a score below 550 is considered bad.
A score of 650 and above gives you a good chance of getting your loan application approved. Typically, this is considered as a minimum CIBIL score required. However, having a lower CIBIL score does not nullify your chances. It just means you will have less room to negotiate, the lender will have to look at more financial documents, and you might have to do more in terms of convincing them that you will be able to repay the loan, such as including a creditworthy guarantor.
Benefits of a high CIBIL score
- You will have more options and can pick and choose as you will be eligible for loans from different lenders.
- You will be eligible for bigger loans since you have high credibility.
- Having a higher CIBIL score shortens the documentation process because the score itself is more or less enough to assure the lender of your repayment capabilities.
- You get to borrow money at lower home loan interest rates.
Additional Read: Common Myths About Home Loan
What can you do if your CIBIL score is low?
Your CIBIL score can be low for many reasons – delay in the repayment of your existing loans, using your credit card to its limit, late payment of credit card bills, etc. A low CIBIL score increases the chances of your loan application being rejected. If rejected, you should avoid applying repeatedly since that could further hurt your score. Instead, you should work towards improving your CIBIL score by paying your existing EMI dues promptly, keeping credit usage to a minimal, and decreasing other debts.
If you are unsure about your eligibility, head to Tata Capital. Use our home loan EMI calculator today and learn all about terms and repayment schedules.