Until two decades ago, the idea of a loan scared people. When it came to buying a home, people saved throughout their life and when they had saved up enough, they would take on the burden of building their own home. Things have changed, people these days do not wait their entire life to build a home. They are okay with the idea of seeking external assistance in the form of Home Loans to fund real estate purchases. The fact that Home Loan interest rates have gone down considerably is another reason why more and more people are opting for Home Loans to buy property.
Unfortunately, this growing demand for Home Loans has led to increased cases of loan default. Therefore, these days, lenders have become quite stringent about borrowers meeting their eligibility requirements. Lenders assess each loan application against factors, such as job and income stability, current debt situation, credit repayment history, etc. One of the key factors that help lenders decide whether to extend a loan to an applicant is their credit score. An applicant’s credit score is a numerical representation of their creditworthiness. It is a number ranging between 300 and 900 that shows how much a lender can trust a borrower regarding loan repayment. The higher an applicant’s credit score, the better their chances of availing of a loan on good terms and conditions.
Before we talk about credit score importance and why one must maintain a good credit score, let us first talk about what is a good CIBIL score for Home Loans.
What is a Good CIBIL Score for Home Loans?
Lenders require borrowers to have a CIBIL score of 750 and above to be eligible for a Home Loan. Let us look at CIBIL score ranges in India and what they mean from a lender’s perspective.
A CIBIL score between 800 and 900 is considered excellent. Such a CIBIL score is the mark of a highly reliable and trustworthy borrower. Borrowers who pay their EMIs and credit card bills on time, maintain a low credit utilization ratio on their cards and apply for debt only when necessary have such an excellent CIBIL score. If your CIBIL score falls under this range, lenders will offer you lower Home Loan interest rates. You may even be offered a higher loan sanction and you will also be able to negotiate for a longer loan tenor.
If your CIBIL score is between 750 and 800, lenders will see it as a very good credit score. Borrowers with a credit score between this range can negotiate for better loan terms. Credit score between 625-750 says that you have defaulted on loan repayment once or twice in the past. Therefore, your lender will not trust your repayment capacity blindly and they may not also offer you the lowest interest rates they have to offer. If you have such a credit score, lenders will not agree to sanction you a loan on your own. They will ask you to add a co-borrower to enhance your combined CIBIL score and Home Loan eligibility
If your credit score is below 625, it is highly unlikely that any lender will offer you a Home Loan. In this case, your only option would be to work on your CIBIL score first and then apply for a loan.
Also Read: Know What CIBIL Score Is Considered Good for a Home Loan
Let us now talk about credit score importance for Home Loans.
Why should Borrowers Maintain a Good CIBIL Score?
For lenders, the CIBIL score is important as it allows them to judge the risk involved for the lender in lending money to the borrower. The CIBIL score tells a lender the borrower’s repayment capacity. When the lender thinks there is too much risk involved, they reject Home Loan applications. Thus, the concept of the CIBIL score helps lenders stay safe and avoid loan defaults and losses. Let us now look at the CIBIL Score importance for borrowers.
A Good CIBIL Score Helps Borrowers Get Approved for a Loan Quickly
If your credit score is 750 or above, you are a highly reliable borrower. It is quite unlikely that you will default on loan repayment. Thus, all lenders will approve your loan application quickly. This is a good thing as with quick approval, you will be able to buy your dream home easily.
Such a Credit Score Will Also Help You Avail of a Low-Interest Rate Home Loan
When it comes to Home Loans, it is crucial that borrowers try and avail of the lowest Home Loan interest rates possible. Low-interest rates make Home Loans affordable and easy to repay. They also help borrowers save a lot of money in the long run. Lenders extend their best Home Loan deals and lowest Home Loan interest rates to borrowers who have a credit score of 750 or above.
Also Read: Is a Good CIBIL Score Mandatory for Home Loan Approval?
A High CIBIL Score Also Gives Borrowers Higher Negotiating Power
Since a high CIBIL score is the mark of a highly reliable borrower, lenders agree to negotiate with such borrowers regarding the terms and conditions of their loan. Thus, when borrowers have a high CIBIL score, they can negotiate with lenders and ask for a higher loan sanction or a longer loan repayment tenor to make loan repayment easy.
A Good CIBIL Score Could Even Help People Land a Reputed Job
These days, many reputed companies check an applicant’s CIBIL score before extending a job offer to them. They do so to make sure they are hiring the right person. Thus, apart from helping a borrower get a good Home Loan deal, a good credit score can also help them land a good job.
Also Read: Ways to Increase CIBIL Score After Job Loss
Final Words
In conclusion, the CIBIL score is important for lenders as it helps them make the right decision regarding who they should extend a loan to. For borrowers, the CIBIL score is important as a good CIBIL score helps them avail themselves of many Home Loan-related benefits. What is a good CIBIL score for Home Loans? Anything above 750 is considered excellent. So, make sure yours is 750 or above if you are planning to apply for a housing loan any time soon.
Also Read: How to Increase Your CIBIL Score Above 800?
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