Minimum CIBIL Score Required for Home Loan

Home loans are the simplest and most common way to finance your dream of owning a house in India. Nonetheless, to approve a loan, any bank or lender will need credit reports from CIBIL; this is where it gets tricky. Understanding the minimum CIBIL score for a home loan when you have a low rating can help simplify things. Let’s get into the details.

What is a CIBIL Score?

A CIBIL score is a three-digit number that stands for the creditworthiness of an individual; it ranges between 300 and 900 points. This figure is derived based on repayment history, the number of loan accounts held by an individual, and credit usage patterns or behaviours concerning borrowing money from various sources such as banks or financial institutions/ market players.

From a lender’s perspective, the score helps decide if you will be a reliable borrower who can pay back the money borrowed from him/her.

Also Read: Why is Credit Score Important for Loans?

Minimum CIBIL Score for Home Loan

Most banks and other financial firms within India prefer approving a home loan based on an individual’s CIBIL score for home loans, which should not be less than 700 to 750. Below is a general guide to CIBIL scores:

• Over 750 — An outstanding credit score; use this chance to bargain for lower interest rates.
• Between 700-750 — This range is seen as a good score by most banks when asking for loans gets easier.
• Between 600-700 — The credit rating is fair enough where there could be approvals but then at comparatively higher prices than usual.
• Less than 600 — You have a low score. Therefore, your borrowing may either be rejected, or you shall have to pledge extra security against the loan.

Factors That Affect Your CIBIL Score

Numerous factors contribute to making up someone’s CIBIL score. Arm yourself with this information today:

• Inadequate payment record — Defaulting on EMIs or not paying your credit card bills in time will lower it.
• High credit utilisation ratio — Having more than 30-40 per cent spending from what you can borrow may signal possible overdependence on debt. Diverse amounts of loans may decrease attractiveness.
• Credit mix — Preferably, select a blend that consists of both secured ones (e.g., car/home loans) and unsecured ones, such as those represented by credit cards, as it is usually healthy for improving ranking.

Can You Get a Home Loan for a Low CIBIL Score?

The answer is YES! Obtaining a mortgage from traditional credit institutions could prove hard because, most probably, they will not be able or willing to consider your case unless you provide some collateral. However, some banks or NBFCs may agree to take your loan application into account but under certain terms –

• Use collateral — An increased chance is provided as soon as you give any kind of property as well as assets as security to the relevant lender.
• Opt for a guarantor — Encourage someone else with stronger CIBIL scores than yours so that he becomes your joint applicant throughout this process.
• Have higher down payments — If an individual pays at least 20-30% of the property’s worth upfront, it shows responsibility and reduces their borrowing cost burden.

Try going to NBFCs, because they are less strict when it comes to scores than banks. Nevertheless, a firm repayment schedule and very high interest rates could follow upon getting such a financing facility.

Also Read: Know the Difference Between Credit Score and CIBIL score

Can You Get a Home Loan Without CIBIL Score?

If you don't have a CIBIL score and you want to get a loan, then you can ask one of your family members to be a guarantor. A home loan without a CIBIL score is also possible, especially for first-time borrowers or those with no credit history, but it can be challenging. The following options can assist you in India:

• Income-based approval — Lenders assess an individual’s monthly salary, job stability, as well as financial statements if they meet their standards.
• Government schemes — For instance, there are some schemes like Pradhan Mantri Awas Yojana (PMAY) that support people who have never borrowed before due to poor ratings.
• Banks for first-time borrowers — Some banks create packages specially designed for individuals new to credit.

Tips to Improve Your CIBIL Score for Home Loan

By enhancing your CIBIL score for home loans, you could have access to better deals on home loan products. Here are some suggestions:

• Paying your EMIs on time and clearing your bills – A single missed payment incurs a penalty.
• Reducing how much credit card balance you utilize – Keeping below 30% of the credit limit will keep you out of any trouble with your card issuer in the future.
• Applying for several loans concurrently – It shows how desperate one can get when in need of money from different sources, which might lead to default due to over-indebtedness.
• Regularly check your CIBIL report so that errors present in the report can be rectified, leading to an increase in score.
• Settle outstanding debts – the quickest way to improve your score is by repaying all overdue loans or credit card bills.

Final Thoughts

One of the most important factors that influence whether you qualify for a home loan is your CIBIL score. It is better to have a credit score higher than 700 when it comes to securing a home loan. So, without wasting more time in delaying your dreams of owning a humble abode, apply for a home loan today!

Improve your credit report and get the best deal on a housing loan by following good financial practices. If you want to calculate your monthly EMIs easily, then use an online EMI calculator to make calculating EMIs super easy for you.

So why wait? Take this first leap towards building your dream house – apply today and realize your home ownership dream right away!

Also Read: Home Loan: All You Need to Know – Godrej Capital

FAQs

Q.1. What is a CIBIL score, and why is it important for a home loan?

A. A CIBIL score is a three-digit numeric summary of your credit history, ranging from 300 to 900. It reflects your creditworthiness based on your past credit behavior. Lenders use this score to assess the risk of lending to you. A higher CIBIL score increases the likelihood of your home loan application being approved and may also help you secure more favorable interest rates.

Q.2. What is the minimum CIBIL score required to get a home loan?

A. While the minimum CIBIL score requirement can vary among lenders, a score of 750 or above is generally considered good for home loan approvals. Some lenders may consider applicants with lower scores, but this could result in less favorable loan terms or higher interest rates.

Q.3. How can I improve my CIBIL score to increase my chances of getting a home loan?

A. To enhance your CIBIL score, consider the following steps:

1. Pay dues on time: Late payments are viewed negatively by lenders.
2. Keep balances low: Avoid using too much credit; control your utilization.
3. Maintain a healthy credit mix: Having a mix of secured (e.g., home loan, auto loan) and unsecured loans (e.g., personal loan, credit cards) is beneficial.
4. Apply for new credit in moderation: Avoid appearing as if you're continuously seeking excessive credit.
5. Monitor co-signed, guaranteed, and joint accounts: You're equally liable for missed payments in these accounts.
6. Review your credit history regularly: Monitor your CIBIL Score and Report to avoid unpleasant surprises.

Q.4. Does having no credit history affect my CIBIL score and home loan eligibility?

A. If you have no credit history, your CIBIL score may be marked as "NA" or "NH," indicating that there isn't enough information to generate a score. While this isn't inherently negative, some lenders may be hesitant to approve a home loan without a credit track record. Building a credit history through responsible use of credit products can improve your eligibility.

Q.5. How does my CIBIL score affect the interest rate on my home loan?

A. A higher CIBIL score not only increases the chances of loan approval but can also help you secure more favorable interest rates. Lenders view applicants with high scores as low-risk borrowers and may offer them lower interest rates compared to those with lower scores.

Disclaimer:

The contents of this article are for information purposes only and not a financial advisory. The information is subject to update, revision, and amendment and may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its Affiliates to any requirements. Godrej Capital or its Affiliates shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any decisions, financial or otherwise based on the contents and information mentioned. For more information, please visit www.godrejcapital.com