A Simple Guide to CIBIL Score for Home Loans

1. What is a CIBIL score and why is it important for a Home loan?

Credit Information Bureau of India Limited (CIBIL) is an authorized credit bureau that records the credit history of consumers and commercial borrowers and provides a credit score. The CIBIL credit score is a major criterion based on which lending institutions such as banks decide whether to process a home loan application or not. The CIBIL credit score ranges from 300-900 and any score above 700 is considered a good credit score. The minimum CIBIL score/credit score required for home loan eligibility is generally 700 and above. However, the minimum credit score requirement may vary slightly from bank to bank. The higher your credit score, the better are your chances of securing a home loan approval. Moreover, having a high credit score can get you further advantages like larger loan amounts, lower interest rates, simpler documentation and quick loan approval.

2. How is my CIBIL score used for home loan application?

Banks obtain your credit score and repayment history from CIBIL before processing your home loan application. Based on the information provided by CIBIL and your credit score, the bank will determine whether your home loan application should be approved or not. This way, banks can effectively avoid taking on risky customers with a history of loan default, thereby reducing losses.

3. How is Credit score calculated?

Each credit bureau in India uses its own proprietary algorithms to calculate the credit scores. However, the core elements of a credit score composition largely remain the same. The credit score calculation is based on factors such as:

• Your repayment history.
• The credit balance or the total amount that you owe to different lenders.
• The amount of time for which you have used credit.
• Any new credit that you have applied or taken.
• The credit mix ( credit composition in terms of different types of loans).

4. How can I check my CIBIL score?

You can check your CIBIL score online by visiting the official CIBIL website. Follow these steps to know your CIBIL score:

• Fill up the online application form on the website by furnishing details such as name, date of birth, address, phone number, ID proofs, income and loan details.
• Submit the form.
• You will then be redirected to a payment page, wherein you will have to pay INR 470 using your preferred mode of payment.
• Once the payment is completed, you will be asked 3-5 questions about your loans and credit cards to proceed further.
• Answer the questions and your authentication will be completed successfully.
• CIBIL will then send your credit score through e-mail within 24 hours.

5. How can I improve my credit score for a home loan?

Having a good credit score is essential for successful home loan applications. In case you have a low credit score, you must take all steps possible to improve your credit score. Here’s how to improve your credit score:

• Make your loan/credit card payments on time. Any late payments can affect your score drastically.
• Too many unsecured loans and less secured loans can affect your credit score for the worse. Try to maintain a balance between secured and unsecured loans so that your credit score can improve.
• Check your credit reports on a regular basis and rectify errors, if any.
• Avoid applying for multiple loans at the same time.
• Avoid using more than 50% of your credit limit.

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