CIBIL score, or credit score, represents an individual’s creditworthiness; it determines both the ability and willingness of a person to repay debt. Thus, knowing the CIBIL score helps financial institutions assess the risk of lending money to individuals. As with any other form of credit, having a good credit score is crucial for applying for a home loan.
Here is a detailed overview of the ideal CIBIL score for home loans and how to improve it.
What is the ideal CIBIL score required for a home loan?
When an individual applies for a home loan, financial organisations check the credit score of the individual to assess their creditworthiness. The ideal CIBIL score for a home loan is 750 or more. However, the actual figure of the required CIBIL score for home loans differs from one lender to another. In addition, it will enable individuals to qualify for a home loan with favourable terms and competitive interest rates.
What is the minimum CIBIL score required for a home loan?
The minimum CIBIL score may differ from one financial lender to another. However, having a minimum score of 650 is mandatory when applying for a home loan. Certain financial institutions may consider applicants to apply for home loan with slightly low credit scores but with less favourable terms and conditions.
How to check the CIBIL score?
An individual can check their CIBIL score online. To do a free CIBIL score check, they must follow these steps:
Step 1: Visit the official website of CIBIL and click on ‘Get Your Free CIBIL Score’.
Step 2: Enter personal details like name, email address, and contact number and click continue to proceed.
Step 3: Provide PAN number for CIBIL check and verify the identification.
Step 4: Answer all questions accurately related to the loans and credit cards, which will help to calculate the credit score.
Step 5: After calculation, the credit report will be generated.
How to improve the CIBIL score?
If an individual falls short of the ideal CIBIL score for a home loan, there are a few strategies to implement to improve their CIBIL score and creditworthiness over time. Here are a few effective tips individuals can employ to improve their CIBIL score:
- Timely due payments
Individuals must pay their bills and loan EMIs on time without any exceptions or delays. One should make timely payments of credit card bills, Equated Monthly Instalments (EMIs), utility bills and other financial dues. Delaying the payments will affect the credit score of an individual.
- Reducing outstanding debt
Reducing outstanding debt will help individuals improve their credit scores. Individuals must aim to maintain a Credit Utilisation Ratio (CUR) of 30% or less. In addition, having high credit card balances relative to the credit limit will adversely affect one’s CIBIL score.
- Monitoring credit utilisation
Individuals must monitor their credit utilisation across all loan accounts to maintain a good CIBIL score. One must keep a low CUR for each loan and credit card held in his/her name and use only a portion of their available credit limit. Furthermore, they must avoid maxing out their credit card as it can significantly affect their credit scores.
- Diversifying the credit
Having mixed credit types can positively affect an individual’s credit score. In addition to credit cards, individuals must consider diversifying their credit by availing home loans or personal loans. However, they must manage these accounts responsibly.
- Avoiding multiple loan applications
Applying for a loan from different financial lenders can temporarily affect an individual’s credit score. Individuals must properly research financial institutions before applying for a loan. It will help them choose the perfect lender according to their requirements.
Individuals must be aware of certain financial lenders offering pre-approved loans. These offers are available for loans against property, home loans, etc., and permit applicants to get quick approval. Individuals can check their eligibility for the pre-approved offer by entering their details at the financial organisation’s website.
Henceforth, having a good CIBIL score is crucial for obtaining a home loan with favourable terms. Maintaining an ideal CIBIL score for a home loan of around 750 makes it easy to apply for a loan with any lender. Therefore, individuals must seek ways to improve their credit scores and avail home loans seamlessly.
