Homeownership Dreams: Achieving the Ideal CIBIL Score for a Home Loan - Loan Trivia


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Tuesday 9 January 2024

Homeownership Dreams: Achieving the Ideal CIBIL Score for a Home Loan

For many, the dream of becoming a homeowner depends entirely on whether or not they will get approved for a home loan. Homes have become expensive and many people find themselves in need of loans to arrange the funds needed to realize one's dream of homeownership. However, one's chances of getting approved for a home loan depend on various factors, such as age, job and income stability, quality of the collateral, CIBIL score, etc. Of these various factors, an individual's CIBIL score is one of the most crucial factors that affect their home loan eligibility and chances of loan approval. 

TransUnion CIBIL is the oldest credit information agency operational in India. TransUnion CIBIL gathers information on credit users, such as the amount of credit a user has, how reliable and punctual they have been with debt repayment in the past, the kind of credit they have handled and how dependent they are on credit, etc. TransUnion CIBIL collates this information and based on that, it assigns a CIBIL score to each credit user. The CIBIL score ranges from 300 to 900. 300 is the worst CIBIL score a user can have and 900 is the best CIBIL score possible. The ideal CIBIL score for home loans in India is 750 to 900.

A CIBIL score between 750 and 900 is considered excellent. Borrowers whose CIBIL score falls within this range are people who can be trusted with timely repayment of debt. These are people who borrow cautiously, repay without defaulting and in general, are cautious about maintaining a low credit utilization and debt-to-income ratio. Borrowers whose CIBIL score falls within this range make excellent clients and therefore, all lenders readily sanction loans to such individuals. Individuals whose CIBIL score ranges from 700 to 749 are people who borrow cautiously and have a serious attitude towards credit. However, such people have made some mistakes related to credit in the past. For instance, sometimes having a very high credit utilization ratio or missing one's EMI due date more than once, can cause a person's CIBIL score to get pushed down from excellent to good. Borrowers who have a good CIBIL score get approved for a home loan. However, since lenders have reasons to doubt their repayment capacity, lenders do not indulge in negotiations regarding home loan interest rates, sanction amount and other details, with such borrowers.

If you are planning to apply for a home loan, check your CIBIL score before initiating the loan application process. If your CIBIL score is below 700, improve your score first and then apply for a loan. If your CIBIL score is below 700, do not worry or get impatient. Start paying your credit card bills and loan EMIs on time, maintain a low credit utilization ratio and a healthy mix of secured and unsecured loans and do not show excessive dependency on credit and your credit score will automatically improve within a few months and your will easily be able to score the best home loan deal you can get.

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