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CIBIL for Home Loan: Learn How to Improve Your Credit Score

  • Highlights

  • A credit score of 760+ can make EMIs more affordable

  • Repay your existing debts to improve your score

  • Avoid borrowing a home loan with a score below 700

  • Take measures to maintain your score

Your CIBIL or credit score directly affects your home loan interest rate. This is because your score represents your credit history and a good score indicates that you have been responsible with credit in the past. If you have repaid your old debts, be it loans or credit card bills, on time, have taken a mix of secured and unsecured loans, and have a low debt utilisation ratio, your credit score will be high. Depending on the score bracket you fall under, you will be a charged a high or a competitive home loan interest. This impacts your EMI amount and thus how affordable your home loan will be. So, it is important for you to maintain a good credit score to facilitate a stress-free borrowing experience.

Read on to understand what interest rate you can expect based on your credit score and don’t forget to calculate your home loan EMIs in advance using the home loan EMI calculator.

Credit score of 760 and more:

This is the best credit score for home loans and assures that you will be offered the most nominal interest rate by your lender. It indicates that you have managed your debt successfully in the past, and do not have existing debts that are large enough to impact your potential home loan repayment.

If you have a score in this range, simply implement strategies to maintain this score and ensure that it does not drop. You may be eligible to receive a nominal rate of interest rate from 8.35% to 8.45% when you have a CIBIL score of 760 and above.

Credit score between 700 and 760:

A score in this range is considered to be good to moderate depending on your lender. With such a score, you can successfully get an approval for a home loan albeit at a slightly higher rate of interest.

If you want to succeed in receiving a lower rate of interest, take active measures to improve your creditworthiness. You can check to see if your past loan accounts have been successfully closed by checking your CIBIL report, and pay special attention to lowering your credit utilisation ratio. When you use more credit, your ratio is higher and this lowers your score.

Credit score below 700:

A score below 700 is either considered modest or attributed to first-time borrowers. If you have no credit history, for example, you may have this score and lenders would still approve your home loan but at a higher interest rate. There are various ways you can tackle this.

What Should Be Your CIBIL Score to Apply a Home Loan

One of the most common things to do here is to take a collateral-free loan such as a personal loan and repay it in a timely manner to build your score. Another way to address it is by taking a home loan with a lower LTV or Loan to Value ratio. An ideal LTV is 80% or more in such cases, when you put down 20% of your home’s value and borrow 80% as a loan. With a lower credit score, the lower the LTV, the more your chancs are of getting a home loan easily and at a nominal interest.

So, check your credit score before you apply for a home loan and select a lender who offers competitive interest rates along with additional benefits on your home loan repayment. Bajaj Finserv Home Loans, for example, offer you simple eligibility criteria that you can match with ease, give you a high loan amount at nominal interest, and have facilities like a 3-EMI holiday.

Learn, How to Improve your Credit Score Home Loan? Practice the Following Financial Habits:

  • Acquire fewer debts before you take a home loan
  • Ensure you pay off your credit cards in full
  • Increase your credit card limit if you have higher usage
  • Repay EMIs for existing debts on time
  • Avoid making too many loan enquiries right before you apply for a home loan
 

Now that you know what a crucial role your credit score plays in making your home loan EMIs more affordable, keep a check on it, and work on improving it when necessary.

Bajaj Finserv brings you pre-approved offers for personal loans, home loans, business loans and a host of other financial products. Not only does this simplify the process of availing financing, but also helps you save on time. All you have to do is share a few basic details and check out your pre-approved offer.

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