What Should be the right CIBIL score for home loan and Tips to Improve It

Lenders now lay major emphasis on the CIBIL score of the borrowers. If you are looking for a home loan, read this post to know the right CIBIL score for the loan and how you can improve it.

While there are a lot of reasons for a lender to reject your home loan application, one of the most important is your CIBIL score. Also known as credit score, the CIBIL score is a three-digit number calculated based on your credit files. In a way, it helps lenders to understand your credit history and whether or not you are a responsible borrower.

If you are planning to take a home loan, it is very important for you to know the right CIBIL score in order to get approved for the loan. If your score is lower than required, we’ve also listed some useful tips to help you improve it.

Right CIBIL Score for Home Loan Eligibility

CIBIL score ranges between 300 and 900. If you want to qualify for a home loan, you should have a score of at least 700. The higher your score is, the better are the chances of loan approval and getting a better deal on loan.

While some lenders do offer loans to people with CIBIL score in the range of 600-700, the interest on such loans is generally higher than a loan given to someone with a score higher than 700. If your score is above 700 and you fulfil all the other eligibility criteria of the lender, you can get up to 80% of the cost of the property as a home loan.

Improving CIBIL score

If your CIBIL score is below 700, there are a few ways to improve it to make yourself eligible for a home loan. Some of the most useful tips are as follows-

1.     Repay on "Time"- Be it an existing loan or credit card bills, make sure that you make all the payments on time. Pay the credit card bills on time and ensure that loan EMIs are paid regularly.

1.     Do not be "Credit Hungry"- Using multiple credit cards and applying for loans at multiple loan providers affects your CIBIL score negatively. Moreover, lenders consider this as a credit hungry behaviour and might reject your loan application.

2.     Avoid Reaching the "Maximum Limit" of your Credit Card- A simple and very effective way to improve your credit score is to not use a credit card up to its maximum limit. Keep it around 50%-60% of the limit and pay the bills regularly.

3.     Avoid "Settling" Credit Cards and Loans- Settlement is when your lender or credit card provider lets you close a loan or credit card by paying an amount lower than what you are supposed to pay. While banks entertain such requests at times, it reduces your credit score.

4.     Check the "Credit Report" Periodically- If you want to improve your CIBIL score for home loan, checking the credit report is an excellent idea. This will not only help you know the credit cards or loans that are reducing your score but will also enable you to check if there are some errors in the report. In case of any error, you can get in touch with CIBIL to get it rectified. However, do not ask for CIBIL report too many times as doing so may have a negative impact on the score too.

Your CIBIL score works as an indicator for the lenders and helps them whether or not you are a good borrower. If your CIBIL score is above 700, start searching for a top lender and if it is below 700, use the tips mentioned above to improve it before applying for the loan.