What is a good CIBIL score to Apply for a Home Loan?

Your CIBIL score (credit score) plays a key role in determining your eligibility to get a home loan. Based on this score, your lender will determine whether your home loan application is approved or rejected.

When you submit your application for a home loan, online or in person, the first thing your lender will check is your CIBIL score. If the CIBIL score is low along with a bad credit history, your home loan is likely to get rejected. But with a good enough CIBIL score, it will be approved at varying interest rates as per the score. And your application will be processed quickly with a high loan amount and low interest rates if your credit score is outstanding.

credit score

 

So, what is a poor, good or great CIBIL score? Although there is no standard score to define good or bad, every lender has a minimum number that determines approval or disapproval of applications. Usually, all banks and lending institutions consider 750 and above very good and below 350 very bad. This three digit summary of your finances is analyzed as per your credit history, debts and their repayments, credit cards overdues, and secured and/or unsecured loans, among others. Credit score valuation for home loans usually ranges from 300 to 900.

For home loan eligibility, you must have a CIBIL score of more than 700. Nonetheless, the higher your score is, the more faith your bank will have in you. This gives them surety of on-time repayments, which further enables you to get good interest rates. With a good credit score (closer to 900) and a good credit history, your lender may approve a home loan up to 85% of the property’s total cost.

It’s fairly easy to obtain your credit report from the CIBIL website at a minimal fee. This comes handy in figuring out where you stand when applying for a home loan. And in case, it’s not as great, you can always improve it. Your credit report at CIBIL provides information like:

Records of availed credit, loan repayments and credit card bills,

  • Defaults of late payments made by you,
  • Current credit card debts and loans, and
  • Information about loans and credit cards for which you have applied in the past.

With this list of your credit information, you can find out your home loan eligibility before applying and close previous debts to avail a better score for future.

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Why Credit Score is Important when Applying for a Home Loan

Buying a house is a cherished dream and to fulfill it, you work hard for years – whether to earn money or find that perfect abode where you can raise your family with pride and joy. However, many homebuyers find themselves stuck in a difficult situation when they apply for a home loan and either get declined or obtain loan at high interest rates. This happens to applicants who don’t have good enough credit score. So, let’s find out how credit score impacts your lending eligibility.

home loan

 

Lending institutions check the credit profile of every applicant prior to deciding whether or not to lend and the lending amount as well as at what interest rate. It’s just like recruiters checking out your resume for a job. When checking out home loan applications, lenders assign a credit score to each applicant. The scores begin from 300 and go up to 900, with 700-750 considered perfect for home loans.

Your credit score is crucial for determining your home loan eligibility by lenders. Here are the things that really impact your credit score.

Credit history

The credit history of applicants determine their creditworthiness and makes lenders sure of each applicant’s ability to repay the loan. You have to show records of your past bank statements, outstanding loan amounts (if any), and recent credit activities.

Capacity of borrower

This section includes checking whether or not the borrower is capable of paying up in future, irrespective of market conditions. The most determining factor for capacity is the borrower’s debt to income ratio.

Collateral

When applying for a home loan, borrowers pledge something they own as collateral for secured home loan. The property to be bought is taken as collateral by the lenders and even the loan amount is considered based on the value of collateral.

Capital

This part includes your investments, savings and assets as alternate repayment sources since your monthly income is the primary source. This assures lenders of guaranteed repayments even if primary source is unavailable for any reason.

Prior to applying for a home loan, you should check your credit score yourself and be sure beforehand. Work on the problem points of your credit score and then apply for a loan so that you have better chances of getting good amount at great prices. And this will also help you save up on the processing fee, just in case your credit score isn’t good enough right now.

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