Minimum CIBIL Score for a Home Loan

For countless India, buying a home is their biggest life goal. And most of the people who aspire to be a homeowner rely on getting a home loan to make their dream come true. While many lenders nowadays offer home loans, getting the credit depends on a lot of factors.

Firstly, you would have to meet the lender's eligibility criteria. Secondly, you would have to meet the lender’s minimum CIBIL (Credit Information Bureau India Limited) score requirement. The lenders do a thorough background check on your credit history and credit score to evaluate your eligibility.

If your CIBIL score for a home loan is low, the lender may either outright reject your application, or they may charge a higher interest rate on the loan. So, as a borrower, if you are wondering what the CIBIL score is and what is the minimum CIBIL score for a home loan, then this guide is just for you. Read on!

What is a CIBIL Score?

In India, there are four major credit bureaus that keep track of all your credit-related transactions and prepare a credit report. These bureaus are – Experian, Equifax, CRIF High Mark and TransUnion CIBIL.  Among the four bureaus, the credit reports provided by the CIBIL are most widely by financial intuitions, and hence, the credit score assigned by this bureau is called the CIBIL score.

A CIBIL score is basically a three-digit number that ranges from 300 to 900, and the number reflects your creditworthiness. The higher your credit score, i.e., closer to 900, the higher your creditworthiness. Generally, most lenders in India consider a credit or CIBIL score of 700 or below as poor credit behaviour.

Credit bureaus like CIBIL decide your credit score based on financial credentials and behaviours, such as past loan repayment history, the number of debts taken, credit utilisation ratio, etc. If you have a higher CIBIL score, you are most likely to get your loan approved faster and with more favourable terms and conditions.

What is the minimum CIBIL score for a home loan?

There is no standard rule or best CIBIL score for home loan eligibility. This is because the credit score requirement for a home loan varies from one lender to another. However, most lenders in India consider a CIBIL score of 700 or more a good score for sanctioning a home loan.

But if you have a higher score, i.e., more than the minimum score required by the lender, you can be in a better position to negotiate with the lender and get the credit with more favourable terms and conditions.

If your CIBIL is more than 800, the lender may even offer you the home loan at the preferential interest rate, a few points lower than the interest rate offered to others. Even if you get a discount of 0.5% on the interest rate, you can save significantly on your interest payments in the long run.

In contrast, if your CIBIL score is lower than 500, it is highly likely that the lender may outright reject your home loan application. Even if you find a lender willing to sanction your loan, you may not get favourable terms and conditions, and most likely, the lender will charge a high interest rate on the loan.

Effect of CIBIL score on home loan

Now that you know the minimum CIBIL score required for a home loan, you must also be aware of its other implications.

• Rejection of application
  

  As mentioned earlier, if your CIBIL score is lower than 500 and you have a bad credit history, the lender may reject your home loan application. If you have any existing debts or credit card balance payments, your chances of getting the loan will be further diminished.

• High interest rate
  

  While some lenders are more willing to offer home loans to people with a CIBIL score of 700 or lower than others, you may get the approval with a higher interest rate. This will directly impact your EMI and the overall borrowing cost. As the interest rate increases, the EMI also increases.

• Smaller loan amount
  

  When you submit your home loan application form, the lenders do a comprehensive background check of your credit score, income, and other financial details before approving the application. If your credit score is low and you have a history of defaulting on EMI payments, the lender may not sanction the entire amount you applied for. Instead, they may sanction only about 60% to 70% of the property’s value you wish to buy.

• Lower repayment period
  

  A CIBIL score also has a direct impact on the loan tenure. Generally, for borrowers who have a high CIBIL score, lenders allow them to take a loan for the maximum duration, i.e., up to 30 years. But, if your credit score is low, the lender may reduce the tenure, which would increase your EMIs.

How to improve your CIBIL score?

If the lender rejected your home loan for a low CIBIL score, don’t worry! You can improve your score by simply being financially more responsible. Here are a few tips that will come in handy:

• Settle your dues on time—Pay off all your regular bills, including loan EMIs, credit card bills, etc., on time. This will gradually increase your CIBIL score.


• Reduce debt—If you have large debts, like a personal loan or credit card balance, focus on repaying them and avoid taking on any new debt before fully paying off the previous loans.


• Track your credit usage—Monitor all your credit transactions and keep the credit utilisation ratio below 40%. This will automatically improve your CIBIL score over time.

Getting a home loan is a big step towards accomplishing your dream of owning a house. Maintaining a high CIBIL score can only help you get the loan approved faster and with more favourable terms, resulting in valuable savings over time. So, monitor your CIBIL score regularly and take the necessary steps to improve it.

Finally, choose the right lender with a minimum CIBIL score requirement that is closest to your current score. Lenders like Aditya Birla Housing Finance are known to offer loans at attractive interest rates, starting from 8.60% per annum and funding up to 90% of the property’s value depending on your loan amount, giving you a smoother home-buying and home loan borrowing experience.