In case you are looking for affordable home loans, you must know by now that your credit score or CIBIL score will play an important role in determining the interest rate. CIBIL score for home loan is one of the first things that banks and financial institutions consider before sanctioning the loan application. Read on to know what is credit score and how it affects home loan interest rates.
What Is CIBIL Score for Home Loan?
Credit score or CIBIL score for home loan represents one’s creditworthiness. It depends on the credit history, repayment history implying outstanding credit card bills, existing debts and other liabilities. In simple words, the credit score determines whether or not the individual is likely to repay the loan amount in due time. The CIBIL score ranges from 300 to 900. The higher the score, the lower will be the home loan interest rates. This is because the lender sees them as low-risk borrowers and is thus, willing to offer affordable rates. Any score over and above 750 is considered ideal by lending institutions.
CIBIL Score Range and Implications
A high CIBIL score implies that you, as a borrower, are capable of repaying the entire loan amount on time. As a result, the lender sees you as low-risk and offers much more attractive, competitive home loan interest rates. The best lending institutions offer home loan interest rates starting at just 8.65% to individuals with a credit score between the range of 750-900.
On the contrary, a low credit score gives the lender the impression that you are likely to default on payments and have a poor history of managing loans and debts. This compels the lender to charge high interest rates on housing loans. This range may go up to a whopping 14% depending on other eligibility criteria. The table below shows the different ranges of CIBIL scores and what they imply for a better understanding –
| Credit Score (Range) | Remark |
| 750-900 | Excellent |
| 650-750 | Good |
| 550-650 | Average |
| 300-500 | Poor |
Before opting for a loan, borrowers must analyze their credit report to know which among the above categories they belong to. If you have a high CIBIL score, you may well be eligible for a high loan amount and the various perks and benefits that come along. However, if your credit score is below the 650-750 range, getting a home loan could be challenging. The best alternative is to regularly assess your credit report and work on the factors adversely affecting your CIBIL score for home loan.
6 Ways to Improve CIBIL Score for Home Loan
To get your credit score on track and enjoy cheaper home loan interest rates, here are a few simple tips you must follow.
- Set Reminders for Regular Payments
To avoid any outstanding debts, be sure to set reminders for credit card bills and existing debts so you can pay them off on time. If you already have an EMI to pay off, make sure you do not delay it as in this case, your lender will charge you a penalty and automatically lower your credit score by a great margin.
- Build a Strong Credit History
If you have been using a credit card, try to pay your bills on time and maintain this habit for as long as you can. This will help solidify and lengthen your credit history, resulting in an improved and impressive CIBIL score for home loan.
- Customize Your Credit Limit
Your credit score is largely affected by the credit utilization ratio. You can up your credit score by restricting credit usage as per the allotted time. Your CIBIL score will drop once you reach or exceed the limit. Therefore, it is a good idea to customize credit limit as per expenditures.
- Avoid Taking Multiple Loans and Debts
If you are aiming for a better CIBIL score for home loan, you must avoid taking too much debt at a time. Having an outstanding debt or multiple loans at once will indicate you are incompetent and unable to pay your dues due to the lack of funds.
- Review and Rectify Your Credit Report
Incorrect information, errors while updating the record or delay in recording details can also lower your credit score. That is reviewing your credit report occasionally and rectifying the discrepancies is important. This will help boost CIBIL score for home loan.
- Choose a Mix of Credit
If you are a first-time borrower, your credit history will not have anything to show and your CIBIL score will be very low. Therefore, you should aim for a healthy variety of credit that includes both secured and unsecured loans. This will help build a decent score enough to get you affordable home loan interest rates and a higher loan amount.
How to Check CIBIL Score for Home Loan
You can obtain your credit score for free by accessing the CIBIL score calculator online. The top lenders in the market offer this feature on their websites. All you have to do is follow these simple steps –
- Visit the chosen lender’s website
- Go to the ‘Check Your CIBIL Score’ option on the homepage and subscribe to a plan
- Enter some basic details, such as email address, mobile number, and DOB to create a Login Password
- Choose your ID type and enter the details
- Get your identity verified and proceed to answer a few questions accurately
- Complete the whole process and make the payment
- Sign in with an OTP (One-Time Password) or via email
- Key in the details in the form
- Submit and check your CIBIL score for home loan on the dashboard.
Summary
Having a high CIBIL score is one of the first requisites of applying for a housing loan as it translates to faster loan approvals. While a score of 750+ is desirable, individuals with a score between 650 and 750 can also qualify for affordable home loan interest rates. However, if your score falls below the average, you must follow the tips listed above to improve your CIBIL score for home loan over time. Also, do not forget to check your credit score with the lender to stay informed before applying for a loan.
