Planning to get a housing loan? Make sure your CIBIL score is at least 750. If your CIBIL score is below 750, improve your CIBIL score first and then apply for a home loan.
For those who do not know, the CIBIL score is a three-digit number between 300 and 900 that is reflective of a loan applicant’s repayment capacity and creditworthiness. A credit score above 750 is reflective of an individual who has a very responsible attitude towards credit and its repayment.
Consequently, when individuals with credit scores in this range attempt to get a housing loan, not only does home loan approval become easy but borrowers are also able to negotiate for the best loan terms and conditions, such as a high home loan sanction, a longer repayment tenor and a low home loan interest rate. The CIBIL report is an electronic representation of your credit behaviour. This article focuses on the CIBIL report, how to read it and what different CIBIL score ranges mean.
How Do I Read My CIBIL Report? Here’s How.
TransUnion CIBIL hosts a ‘Understand Your CIR’ document on its website. You can go through this document to get a detailed understanding of what your CIBIL report contains. For now, let us walk you through your CIBIL report and its contents.
1. CIBIL Score: Your CIBIL report contains your CIBIL score. The score is a three-digit number between 300 and 900 that’s reflective of your creditworthiness and repayment capacity. To get a housing loan in India, you must have a CIBIL score of 750 or above. Such a score is considered an ideal cibil home loan. You will find your credit score under the ‘Accounts’ and ‘Enquiries’ sections.
2. Personal Information and Contact Information: Under personal information, you will find details, such as your name, gender, and date of birth as well as identification numbers, such as PAN and Aadhar. Under contact information, TransUnion CIBIL mentions your addresses and phone numbers.
3. Employment Information: Under this section, you will find details about your monthly and annual income.
4. Account Information: This section of your CIBIL report is rather important as it contains details about the credit you currently owe. For instance, under this section, you will find details, such as names of lenders you are currently repaying, types of loans availed of, the opening date of each loan account, pending amounts to be paid, etc. Lenders get a very clear idea of your debt situation by looking at this section of your CIBIL report.
5. Enquiry Information: Under this section of your CIBIL report, you will find details related to the number of hard enquiries you have made. Every time you apply to a lender and the lender checks with TransUnion CIBIL regarding your creditworthiness, the enquiry that the lender makes gets registered as a hard enquiry. Too many hard enquiries portray a borrower to be credit-hungry and hamper their chances of availing of a loan on the best loan terms and conditions.
Let us now look at what different CIBIL Score ranges mean for home loan approval.
CIBIL Score Ranges and How They Affect Loan Approval
1. Excellent (750 to 900): A credit score in this range is considered ideal for home loans. Individuals whose CIBIL score falls within this range are people who are not excessively dependent on credit and have a very serious attitude towards its repayment. These are people who can be completely trusted with timely repayment of loan EMIs and consequently, such individuals have high home loan eligibility and negotiating power.
2. Very Good (700 to 749): A credit score in this range is considered the mark of a borrower who has a healthy and responsible attitude towards credit but who has also made some minor credit-related mistakes in the past. Therefore, lenders may have some doubts about their repayment capacity. However, by and large, they can be trusted. While home loan approval is guaranteed for such credit users, their negotiating power in terms of the loan terms and conditions is not exemplary.
3. Average (600 to 699): If your CIBIL score falls within this range, to get a housing loan, you will have to either add a co-borrower or loan guarantor with excellent creditworthiness or buy mortgage insurance. Such a credit score does not invoke great confidence in lenders regarding a borrower’s ability to repay their loan and therefore, loan approval can become challenging without a co-borrower and guarantor.
4. Poor (500 to 599): If your CIBIL score falls within this range, finding a lender will be challenging. In this case, you will need to improve CIBIL score first. Building a strong and clean repayment track record, a healthy mix of secured and unsecured loans and a low credit utilization ratio on your cards will help you do so.
5. Very Poor (Below 499): If your CIBIL score is below 499, it is very unlikely that you will get approved for a home loan. You can consider improving your CIBIL score first. However, that too will also easily take a few months.
Final Words
Your CIBIL score and CIBIL report play a pivotal role in ensuring quick loan approval and good negotiating power. Therefore, borrowers must always check their CIBIL score at least a few months before applying for a loan and move ahead with the loan application procedure only if they meet their lender’s qualifying criteria regarding credit scores.