Everything You've Ever Wanted to Know About Cibil Score For Home Loan

Be it Lucknow, Mumbai, Chennai, Delhi, or any other city, buying a home involves a handful of expenses that cannot be easily managed without raising a home loan. While offering a home loan, banks or financial institutions check multiple things like documents, cibil is a credit score , and the CIBIL score of the loan applicant in order to make sure that the loan applicant can repay the loan within the specified time limit. Here, the term CIBIL score might seem new to most readers, but you don't need to worry about this as this article has got you covered. 

In this article, we will learn everything about CIBIL Score and its importance for Home Loan. 

Meaning of CIBIL Score

A CIBIL Score or credit score is a three-digit numeric summary of your overall credit history. The normal value of the CIBIL score generally ranges between 300-and 900 and it is prepared based on your credit history. This score involves summarising all the secured and unsecured loans, and any other debts that you might have or have had in the past.

You can obtain your credit score from CIBIL for nominal charges and know your credit score before applying for a home loan. Your credit report will involve a list of information stated below:

1. Record of credit availed by you

2. Record of repaying credit card bills and loans

3. Loans and credit cards that you currently hold

4. Defaults or late payments on past credit held by you

5. Credit card applications and recent information about loans submitted by you

CIBIL score plays a crucial role in processing home loan applications. It is one of the most significant criteria on the basis of which banks and other financial institutions decide whether or not to process a home loan application. 

As a homebuyer, when you submit your filled home loan application, the financial institution initially checks your credit score and credit history. In case your credit score is low and you have a bad credit history, your home loan application will be rejected. On the contrary, if you have a good CIBIL score, your application for a home loan will be approved and processed quickly. 

While most home loan applicants are confused regarding how much credit score is good for a home loan, the straightforward answer to this question is that there is no universal score. Yes, you read that right! Every bank just has a minimum CIBIL score that acts as an indicator or cut-off to accept or reject home loan applications. In general, a CIBIL score of 750 or above is considered a good score, 350-750 is an average score or might be acceptable, and the CIBIL score below 350 is considered poor. 

How is CIBIL Score Used for Home Loans?

In this section, we will understand how a CIBIL Score is used for home loan applications. Before processing your application for a home loan, financial institutions or banks will obtain your credit score and repayment history from CIBIL. CIBIL collects and organises all your data and information and offers the same to all banks when required. 

It generally gets hold of all your information with the help of credit institutions and banks that are members of the CIBIL by default. CIBIL receives information on a monthly basis and prepares a Credit Information Report (CIR) and credit score for each commercial organisation and individual. 

Financial institutions or banks refer to the history of the home loan applicant in order to determine whether a home loan should be approved or rejected. Credit score allows banks to disburse loans more efficiently by preventing taking on risky or default customers, thereby reducing fraud. 

The Necessity of CIBIL Score for Home Loan

A home loan is a kind of secured loan where the home loan applicant borrows money from a financial institution or bank. The main intention behind this borrowing is to buy or build a dream home in any city. Since a home loan is a secured loan, the money lenders will require some sort of collateral against the loan until the entire home loan amount is repaid with interest. 

When approving such loans, financial institutions usually check people's credit scores to determine their creditworthiness or their ability to pay back the borrowed money on time. Moreover, the banks use this score to decide whether to process a home loan application or not. 

Having a higher CIBIL score means that you will not be a risk for the moneylender, and your home loans will easily be approved. However, a low CIBIL score is more dangerous and risky for the moneylender. Hence, a home loan application by a person with a low CIBIL score might either be rejected or the applicant  will have to pay higher interest rates. 

Having a good credit score or CIBIL score can be advantageous and help you assure that financial institutions will extend you a home loan. So, make sure to maintain a good credit score by regularly checking your credit report. And remember to pay your credit bills and EMIs on time. If you still have any queries, you may ask us by commenting below. 

Also read: Factors To Consider Before Choosing the Best Bank for Home Loan