What is the Ideal Credit Score Required for Home Loan in India

CIBIL Score for Home loan

A good credit score for a home loan in India is a mix of your debt-to-income ratio, employment status, and the type of loan which you wish to take out.

If you plan to buy a house, you might need to take a home loan for it. Lenders have specific requirements and eligibility criteria for all applicants. They approve loans only to those who meet the requirements and submit home loan documents required by the lender. 

An acceptable credit score is a prerequisite for a lender to sanction a loan. So what is the ideal credit score for a home loan in India?

What Is A Credit Score?

A credit score is a three-digit number ranging from 300 to 900 that reflects your creditworthiness. The higher the score, the better it is. Credit bureaus like CIBIL get information about your loans and repayment history; based on that, they calculate your credit score. 

If you have been a responsible borrower in the past, have paid your dues on time, and have not been credit hungry, you will have a good rating. A good score indicates responsible borrower behavior, and lenders sanction loans to applicants with a good rating. 

What Is The Ideal Credit Score Required For A Home Loan in India?

The table below explains what different ranges of credit scores indicate. As we said before, range from 300 to 900; the closer you are to 900, the higher your chances of getting a home loan sanctioned. 

Score What It Indicates
  • Indicates poor credit health
  • Reflects missed, irregular, or delayed payments
  • Also indicative of credit dependency
  • Chances of defaulting are high
  • Fair credit health
  • Irresponsible credit behavior; delayed or missed payments
  • Indicates multiple hard inquiries due to frequent loan applications
  • Indicates good credit health
  • Responsible credit behavior; timely payments of EMIs and credit card dues
  • Low risk of default
  • Indicates excellent credit health
  • Impeccable repayment history
  • Almost negligible chances of default

Various lenders may consider different scores acceptable, but a score of 750 and above is considered an ideal CIBIL score for home loanIf you have a score above 750, your choice of lenders is wide, as all lenders will be willing to sanction a loan provided you fulfill other requirements. Some lenders also consider a score above 700 acceptable.

A score between 650 and 749 is good, if not excellent. Lenders may consider giving you a loan at this score after they do some extra due diligence. 

They may ask you to submit additional financial records or documents to assess your financial stability or may ask you to apply with a co-applicant who has better credit health. You have little bargaining power with this score.

A score between 550 and 649 is not the ideal score to get a home loan. Few lenders will be willing to sanction a loan at this score as it indicates poor credit behavior. At this score, you can get a home loan (if at all) at very high rates. 

A credit score below 550 is not an acceptable CIBIL score for  a home loanit is also a call to focus on your credit health. It reflects poor credit behavior and the need to work on improving your credit health. 

At this score level, getting a home loan is highly unlikely due to the high chances of default.

How To Improve Credit rating

For someone with a score below 550, they must work on improving their credit health. Here are a few ways that can help you improve your credit rating:

  • Pay your dues on time which includes all EMIs and credit card payments
  • Do not use your credit limit beyond 30% of the sanctioned limit
  • Refrain from paying just the minimum amount on your credit card
  • Check your credit report thoroughly for any inadvertent errors that may be there in it
  • If there are some old pending dues or disputes, get in touch with the lender or the card agency to sort it out

To Sum It Up

To get a home loan sanctioned, you need to meet the eligibility criteria, have a good credit rating and submit the home loan documents requiredas per the lender guidelines. Each aspect is crucial; however, your credit report check is the first step, so focus on staying credit healthy.

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