What is the perfect CIBIL score for a home loan?
Having a good CIBIL TransUnion credit score is one of the basic requirements for a home loan. An acceptable CIBIL score for home loans would start somewhere around 700. Having a credit score of more than 700 is generally considered good. Read more at IIFL Finance Blog.
Having a good CIBIL TransUnion credit score is one of the basic requirements for a home loan. It is imperative that you monitor your credit history and have a good credit score in order to have a home loan approved.
An acceptable CIBIL score for home loans would start somewhere around 700. Having a credit score of more than 700 is generally considered good. However, as you start going towards 900, credit institutions start placing greater trust in you. If everything goes right, and you have all other requisite documents in place it is very much possible to secure financing of up to 85% of the total expenditure that you incur on acquisition or construction of the property.
CIBIL-101 for home loan applicants:
- A few items that your credit history includes are:
- 1. Any secured/unsecured loans you might have had, or do currently have.
- 2. Records of payments made towards credit card bills and other loans.
- 3. Delayed loan payments, credit card bills, etc.
- 4. All information about credit card and loan applications that you have submitted.
- CIBIL makes your credit information report on the basis of the information that is provided by the banks. All financial institutions are a member of CIBIL by default, and provide information to CIBIL on a monthly basis. CIBIL updates credit reports every month, for every individual and commercial organization. Banks refer to the credit score and the credit information reports to determine whether or not the loan should be processed.
- Banks do this to minimize risks for themselves and to optimize the use of their resources. Banks also look at your loan to income ratio, so as to determine how punctual and diligent you are in repaying the loans. Since home loans form a major part of the bank’s lending, it is only natural that banks are careful in their screening process for home loans, so as to maintain quality assets.
How does CIBIL score affect your home loan process?
One of the important criteria that is considered for deciding whether or not you get a home loan is your CIBIL score. It plays a major role in the processing of home loan applications. In fact, the first thing that banks check when processing your loan application is your CIBIL score. If you have a bad credit history or a low credit score, chances are your application won’t get processed. This is the basic check that all banks perform to weed out ineligible applicants.
Having a good credit history and even a decent credit score will help speed up the home loan process. Applications that have a good credit score are processed a lot faster than others. There is no universally accepted credit score for processing applications, but as a rough estimate of 750 and above is considered to be a good credit score. Anything between 350-750 is considered decent, while anything below 350 is considered to be a bad credit score.
A few common mistakes that could be hampering your chances of securing a home loan:
1. Not checking your CIBIL score before applying for a loan: Check your CIBIL score before you apply for a home loan to avoid rejection from the bank. Being turned down for a loan application drastically impacts your credit score.
2. Keep unsecured loans such as personal loans, credit card loans under control. These loans show outstanding debt balance. Banks take a look at the applicant’s debt to income ratio, to determine whether the applicant is too burdened to make regular payments, in which case the application is rejected.
3. Stop repeatedly applying for loans. If you have a bad credit score, don’t make it worse by continuously applying to various institutions for loans. Being rejected by banks shows on your credit information report and can be potentially deadly when applying for a new loan.