CIBIL Score for Mortgage Loans | Credit score for home loans (2023)

Buying and owning a home is almost everyone's dream. But not everyone has the means to bring that dream to life and make it happen. Buying a home requires a lot of financing, plus all the other planning and research that goes with it. In modern times, however, it is possible to realize this dream with outside help, for example. B. a home loan. But can anyone get a home loan for the amount they want and at the interest rate they prefer? Well, the short answer is no. It is not easy and at the same time it is not the most unattainable goal. In this blog, we are going to discuss what is the required CIBIL score for home loans and how to apply for a home loan with a low CIBIL score.

Documents required for a home loan application

Before starting the housing loan application process, it is important to first have some documents ready so that the process can begin. The required documents are:

1. CIBIL or Creditworthiness and CIR (Credit Information Report).
2. Bank statement for the last 3 to 6 months.
3. Income receipts for the last 3 months.
4. TI returns in the last 3 years.
5. title papers.
6. Self-certified KYC documents to prove identity, address and signature.

Ensuring and having all the necessary documents at hand avoids delays in applying for a home loan. The process starts without any hurdles, so this essential document gathering step should not be skipped.

Ideal CIBIL/Credit Score for a Home Loan

CIBIL score (Credit Information Bureau of India Ltd.).or Credit Score is a three-digit numerical representation of an individual's creditworthiness, as issued by TransUnion CIBIL, the most popular and recognized credit rating agency in India, and approved by RBI (Reserve Bank Of India). It is the most used credit score company besides the other three companies present in the country, Experian, Equifax and High Mark. The CIBIL score ranges from 300 to 900, with 900 being the highest and 300 being the lowest.

An ideal credit score for a home loan would be 750 and above, but this is not absolute. 650 is considered the minimum CIBIL score for home loans. There are different areas with different advantages and disadvantages. Let's delve into the question of the CIBIL score required for home loans:

1. 300 – 599:

A credit rating in this area significantly reduces the chances of getting a home loan. This gives the lender a disappointing picture of the borrower's ability to pay and reduces the borrower's credibility. It represents a bad credit history. If the lender is willing to provide you with a loan, it would only be a small amount of money with a high interest rate or against collateral such as a fixed deposit, assets and shares. If the lender is unwilling to lend money, which most people would be, the person should first improve their credit history and then apply for a home loan. Long story short, this range is considered a low CIBIL score for home loans.

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2. 600 – 749:

This credit score range is definitely better than the previous one. This provides the lender with a better credit history of the borrower and gives the lender a sense of security about the borrower's ability to repay. To be eligible for a home loan with this credit rating, other factors like monthly salary and job stability are taken into consideration. These are the factors that reinforce the belief in paying back the loan. As a general rule of thumb, 650 is considered the minimum CIBIL score required for home loans.

3. 750 – 900:

This is the best mount. The chances of getting a home loan are the best. Bargaining power is in the hands of the borrower in relation to the principal amount and the interest rate. There is an opportunity to choose the best available offer instead of accepting what is given. This is the ideal credit rating for a home loan, and anyone looking to apply for a home loan should strive for this rating.

Relationship between CIBIL score and home loan eligibility

There is a direct proportional relationship between the CIBIL score and home loans. The higher your credit rating, the better your chances of getting a home loan, and this is how it works:

1. Credibility and Credibility:

A good credit rating reflects a good credit history, which means a good past payment history. This serves as a guarantee for the lender to lend money to the borrower. It increases the borrower's credibility and the entire housing loan application process becomes faster and more peaceful.

2. Interest rate and principal amount:

The higher the credit rating, the higher the loan amount and the lower the interest rate. As already mentioned, with a good credit rating, bargaining power comes into play, which allows the borrower to choose a cheap loan option with a low interest rate and a high loan amount. Application processing is also fast and hurdle-free.

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Eligibility of CIBIL Defaulters for a Home Loan

CIBIL defaulters are those who havedefault on loansor EMIs and therefore have low credit ratings. Like the first bracket point number discussed earlier. So yes, they are definitely eligible for a home loan, but the chances are slim. For the lender, a low credit score lowers the borrower's ability to pay and this creates problems in the loan application process. To avoid getting a low loan and a high interest rate, or even being accepted for a home loan, the borrower can inculcate good financial habits, such as opening a joint account with a person with good credit as a guarantor.

Steps to Get a Home Loan and Improve Your Credit Score

Before applying for a home loan, there are a few steps to consider. They include:

1. Credit check:

This is the first and most important step to take. To do so, visit the official CIBIL website and opt for the free annual option or the paid multiple times annual subscription plan. After entering all the details and completing a form, the CIBIL score will be sent to you via email within 24 hours.

2. Check for errors:

After obtaining the credit score, it is important to review it thoroughly to check transactions and statements for errors and mismatches. If errors are found, then aCIBIL disputes can be raisedThis is a multi-step process that takes about 30 days. So it's good to do this step yourself in the early stages.

3. Keep an eye on the number of creditors approached:

It is important not to apply for home loans from too many lenders, because denial of an application from one lender can adversely affect your credibility with other lenders. The best option is to maintain the ideal credit for the approval of the home loan.

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In addition to these steps, there are ways to improve your credit score, which is the most important step in the entire process. They are :

1. Pay off loans and EMIs on time and in full, instead of just paying the minimum amount owed.
2. Keep old credit cards as they reflect a good credit history and don't apply for too many credit cards at once and eliminate those with low balances.
3. keep thatcredit utilizationto about 30% and never more than 50%.
4. Choose the automatic debit option if you know you might forget to make payments each month, but make sure you keep the necessary balance in your account.
5. Avoid unflattering financial habits such as, for example, receiving cash advances, applying for a house too often with too many people, etc. This negatively affects the credit score and decreases the chances of getting a loan.