Decoding the Minimum CIBIL Score Required for a Home Loan - Loan Trivia


Full-Width Version (true/false)

Wednesday 20 March 2024

Decoding the Minimum CIBIL Score Required for a Home Loan

Of the four credit information bureaus that the Reserve Bank of India recognizes and has authorized to operate in India, TransUnion CIBIL is the oldest and most popular. It was founded in 2000 and today, it maintains records on over 600 million individuals. The credit score that TransUnion CIBIL score assigns to credit users is called the CIBIL score. 

In the home loan application process, the CIBIL score plays an important role. The CIBIL score is a numerical representation of a loan applicant's creditworthiness and repayment capacity. Lenders check a loan applicant's CIBIL score to fairly assess the risk involved for the borrower in doing business with the loan applicant. A high CIBIL score implies a low risk for the lender. Consequentially, borrowers with a high CIBIL score are sanctioned loans quickly. Such people are also able to negotiate for the most beneficial loan terms and conditions. 

Let us look at different CIBIL score ranges and what they mean for home loan approval in India. 

A CIBIL score in the range of 750 to 900 is considered very good. People who use credit cautiously and wisely, pay their EMIs and credit card bills on time and are not excessively dependent on credit have such a credit score. Such individuals' repayment history serves as proof that these individuals are highly unlikely to default on loan repayment. Therefore, lenders are quite willing to lend money to such borrowers. Lenders want such borrowers as clients and therefore, they are also quite willing to negotiate on the home loan terms and conditions and reach a middle ground. 

A CIBIL score in the range of 700 to 750 is considered good. 700 is the minimum CIBIL score lenders ask for home loans in India. Individuals with such a credit score are people who are reliable but who have also made some credit-related mistakes in the past. Therefore, they do not have the ideal CIBIL score for home loan. When such individuals apply for home loans, they get approved quickly. However, lenders are not always willing to negotiate on the loan terms and conditions. In other words, such borrowers are often required to accept the home loan offer at slightly higher interest rates or sometimes, even settle for a slightly lower home loan amount.

A credit score in the range of 600 to 699 is considered average. Such a score belongs to individuals who cannot be entirely trusted with the repayment of loan money. Therefore, lenders not only sanction loans to such individuals at a much higher home loan interest rate but such individuals are also often asked to add a co-borrower or buy home loan insurance to reduce the risk for the lender. Individuals with CIBIL scores below 599 are considered very high-risk individuals and therefore, no lender is willing to sanction loans to such borrowers. 

In conclusion, the CIBIL score plays a determining role in ensuring home loan approval and availability of the loan on beneficial terms and conditions. If you are planning to apply for a home loan in India make sure your CIBIL score is at least 750.

No comments:

Post a Comment