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CIBIL Score For Home Loan

CIBIL Score determines your eligibility for securing a loan. CIBIL (Credit Information Bureau India Ltd.), India’s first credit rating agency, assesses your creditworthiness basis your credit history, repayment habit of dues on loans/Credit Card, frequency of loan applications, number of ongoing loans, and various other factors.

Your score is the result of complex mathematical calculations based on the information about your credit history recorded in CIBIL’s database. This information also gets reflected in the Credit Information Report or CIR of every loan applicant. CIBIL has been authorised by the RBI (Reserve Bank of India) and is governed by Credit Information Companies (Regulation) Act, 2005.

CIBIL Scores are measured on a scale between 300 and 900, with 900 indicating the highest and 300 being the lowest. The minimum CIBIL Score that a borrower generally needs to maintain to be easily eligible for a loan is 750.

Significance of CIBIL Score For Home Loan

Let’s discuss how your CIBIL Score determines your home loan eligibility:

  • Defines your credit health : Assessing your credit health or creditworthiness gives lenders an idea about your ability to repay the debt on a home loan. A high CIBIL Score gives them some assurance that you will be able to repay the home loan within the stipulated time. A low score, on the other hand, is a proof of a poor credit history, making the lender sceptical of your ability to repay the loan. However, a low score reduces your chances of being eligible for a loan but does not negate the chances altogether. Such loans are offered on a lower amount and heavy rate of interest, along with several terms and conditions.

  • CIBIL Score Implications : A good score of 750 and above expedites the loan process, and makes you eligible for a higher loan amount and better rate of interest, and that too from a wider range of lenders. The loan is processed and the loan amount is disbursed into your account in a short span of time. The higher the score, the greater will be your eligibility for a home loan with a better loan amount and lower interest rate.

  • Determines the rate of interest on home loan : With a good CIBIL Score, you will be in a position where you can negotiate with lenders to bring down the rate of interest. Also, a larger number of lenders would show interest in offering you a home loan with a good credit history, enabling you to choose the one that is offering you the best deal. In contrast, a low score not only reduces your chances of being eligible for a home loan, it also takes away your chances of negotiating on the loan amount and interest rate. In fact, it doesn’t leave you with a choice but to accept the low loan amount and high interest rate being offered by the lender.

  • Determines the home loan amount : A good score will enable you to be eligible for a higher loan amount for the same reason that you can command a lower interest rate, which would not be possible if you have a low score. In fact, lenders would offer a lower loan amount if you have a low score in comparison to what they usually do.

What does your CIBIL Score indicate about your home loan eligibility?

Check what your CIBIL Score says about your chances of securing a home loan:

  • 300 – 599: A score below 600 vastly reduces the chances of securing a loan. It conveys to lenders about the borrower’s poor credit history. Therefore, there are high chances of loan applications getting rejected, unless a lender agrees to offer a low loan at a high rate of interest, or against collaterals like gold loan, assets, shares and FDs. In case a borrower is not able to secure a loan with this score, he/she has to improve his credit health to be eligible for a loan.

  • 600 – 749: The chances of being eligible for loans with these middling scores, but the chances are lower than those with a score of over 750. In this case, lenders consider other factors like monthly income, employment stability, other on-going loans, etc. to evaluate the prospects of receiving loan repayments from you, and decide on your loan eligibility accordingly.

  • 750 – 900: There are high chances of a borrower being eligible for a loan with scores in this bracket. Besides, the loan approval process will be quick and hassle-free. Not just that, he/she will also be in a position to negotiate on the loan amount and rate of interest with several lenders and avail the best available loan offer. With these scores, he can also negotiate for a higher loan amount and a lower rate of interest.

How to improve your home loan eligibility?

If you are planning to apply for a home loan, here’s what you should do to improve your eligibility for securing it:

  • Eliminate using Credit Cards with low balances by paying them off as soon as possible or transferring them to another existing card. This will help you prevent your CIBIL score from falling.

  • Pay your monthly dues on your Credit Card within the stipulated due date every month and keep away from paying just the minimum amount due. Carry forward of the remaining balance to the next month will not only attract a heavy interest, but also adversely affect your score.

  • If you feel you might miss out on the payment of dues inadvertently, opt for an auto-debit. This will give your lender the mandate to debit the monthly loan from your account on a fixed date every month. Remember to maintain the necessary balance in your account on the pre-determined date, so you are not charged a heavy interest due to the unsuccessful auto-debit process.

  • If you have an on-going loan, pay the dues well within time every month to improve your score and set a good credit history for future lenders.

  • Make sure you read the loan document thoroughly and clear your doubts before signing on the dotted line, so prevent yourself from getting caught unaware in the future.

  • Eliminate financial behaviour that indicates risks to a good credit history, like taking cash advances on your Credit Cards. This alerts lenders about you facing financial stress.

  • Check your credit report before applying for a loan to ensure there are no errors or omission of transactions. If you find inaccuracies or frauds, get it rectified by raising a CIBIL dispute before you apply for a home loan.

  • Don’t be a loan guarantor. If the borrower defaults in paying dues on time, it will not only affect your records but you might also have to pay the debt on his/her behalf.

How to check your CIBIL Score online?

If you are an individual wanting to view your credit score and report, here is the process that you have to follow:

  • Visit CIBIL’s official website and then click on the ‘CIBIL Score and Report’ button, or click here. Select the type of subscription you want to purchase, and then enter your personal details like name, date of birth, gender, address, contact number, email ID, PAN Card number, etc. Thoroughly read the terms and conditions and acknowledge it by ticking on the box, and then click on the ‘Proceed to Payment’ button.

  • Select one from the available methods of payment like Debit/Credit Cards, Net banking and Cash Cards to complete the payment.

  • Finally, answer the queries about your Credit Cards and loans. This will enable CIBIL to contact your credit organisations for necessary information required to prepare your CIBIL report.

  • CIBIL will notify you about your existing score through an email within 24 hours.

Documents Required for Verification of Home Loan Eligibility

Borrowers have to submit certain documents when they apply for home loans to support their eligibility for repayment of debts within a stipulated time. Though these documents may vary between lenders, the following are the standard documents required for verifying a borrower’s eligibility for a home loan:

  • CIBIL Score and CIR
  • Bank Statement of last 3-6 months
  • Self-attested KYC documents for proof of identity, address and signature
  • Salary slips of last 3 months
  • Property Papers
  • IT Return of last 3 years

How CIBIL evaluates home loan eligibility

CIBIL analyses your eligibility for a home loan basis the following factors:

  • Payment history – Lenders check for frequency of amount overdue cases and defaults in payments, which act against a borrower getting a loan approved

  • CIBIL Score and Report – It is one of the most essential factors that determines the chances of loan approval, since it defines the borrower’s credit health

  • Income and employment status – These details helps the lender assess the borrower’s ability to repay the debt, if the loan application is approved

  • EMI to Income Ratio – Borrowers have a higher chance of securing a loan with an EMI that is not more than about 50% of his/her monthly income. This will be lower if the borrower already has other loans to be repaid

  • Account Information – Lenders thoroughly analyse the number of suits and those written off, if any

  • House location – Some lenders may evaluate your eligibility for a home loan basis the location of the house for which you want the loan

  • Property papers – If you have property papers that do not have any record of disputes related to the land or home, you stand a higher chance of being eligible for a home loan for the same home/property.

FAQs on CIBIL Score for Home Loan

What should my CIBIL Score be for being eligible for a home loan?

CIBIL Scores are measured on a scale between 300 and 900, with 900 indicating the highest and 300 being the lowest. Borrowers generally need to maintain a score of about 750 for an easy and hassle-free processing of your home loan application. A middling score of 600 to 750 does not completely mar your chances of securing a loan, but lenders consider other factors like monthly income, employment stability, other on-going loans, etc. to evaluate your eligibility. With a low score between 300 and 599, a borrower may be offered a home loan against collateral like gold loan, assets, shares and FDs.

What are the factors that banks consider while deciding on home loan eligibility?

CIBIL analyses home loan eligibility basis the following factors:

  • **Payment history – Lenders check for frequency of amount overdue cases and defaults in payments, which acts against a borrower getting a loan approved.

  • CIBIL Score and Report – It is one of the most essential factors that determines the chances of loan approval, since it defines the borrower’s credit health.

  • Income and employment status – These details help the lender assess the borrower’s ability to repay the debt, if the loan application is approved.

  • EMI to Income Ratio – Borrowers have a higher chance of securing a loan with an EMI that is not more than about 50% of his/her monthly income. This will be lower if the borrower already has other loans to be repaid.

  • Account Information – Lenders thoroughly analyse the number of suits and those written off, if any.

  • House location – Some lenders may evaluate your eligibility for a home loan basis the location of the house for which you want the loan.

  • Property papers – If you have property papers that do not have any record of disputes related to the land or home, you stand a higher chance of being eligible for a home loan for the same home/property.

Is there any other way of knowing my CIBIL Score other than checking it online?

Yes, you can check your CIBIL Score offline as well. Download the application form from CIBIL’s official website or simply click here to access the form. Attach the following documents:

  • Bank Statement of last 3 months
  • Self-attested KYC documents for proof of identity, address and signature
  • Salary slips of last 3 months
  • IT Return of last 3 years
  • A Demand Draft of Rs.500

Send the above documents and the filled up form to CIBIL’s official address:

CIBIL Address: Tower 2A-2B, 1901-1905, 19th Floor One Indiabulls, Jupiter Mill Compound, Senapati Bapat Marg, Mumbai, Maharashtra 400013

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