what should be your credit score to avail a home loan?
what should be your credit score to avail a home loan?
your home loan application approval depends on several factors including - your monthly income, savings, job stability, and age. your credit score and report which includes the history of your credit cards, payments, loans, etc. can also have a significant impact on your chance of getting a home loan approval and interest rate offers.
it is very important to check your credit score and understand your credit report if you want to apply for a home loan or a better interest rate. you can check your credit score on the CRED website before you apply for a loan. but first, let's understand how home loan applications are assessed.
home loan application assessment process
the home loan application assessment process may be different in different financial institutions and also from one product to the other, however, here are some of the common eligibility factors taken into account by most lenders:
your current finances: the lenders would check your current financial status by scanning your - current income, spending habits, and savings to access your capacity to repay the loan.
your borrowing history: the lenders would scan your borrowing history to check if you have repaid credit consistently. if you have repaid your loans consistently, your chances of a successful home loan application will increase.
your employment history: the lenders would also check how often you change jobs to access factors such as job security and stability.
what's the minimum credit score required to get a home loan?
in India, the credit score ranges from 300 to 900, with 900 being the highest and 300 being the minimum credit score. there are a total of four credit bureaus operating in India. the minimum credit score needed to get a home loan may differ from lender to lender as lenders use different formulas for home loan eligibility calculator. however, to give you a rough idea, we have prepared a list that you can refer to check your home loan application eligibility:
score | description |
|---|---|
below 600 | this credit score might not be high enough to qualify for a home loan. you need to look for ways to improve your credit score to get loan approval. |
600 to 750 | with this range of credit scores, the lenders may see you as being a greater risk, so you will find it difficult to get a home loan at the lower interest rate and may be required to have a larger deposit. top rated banks prefer customers with a higher credit score while approving home loans. |
above 750 | if your credit score is above 750, you would be considered deemed to be creditworthy. most lenders will be comfortable approving your home loan application. |
closer to 900 | you are considered to be a good quality borrower and most banks will approve your home loan application quickly and at a lower interest rate. |
how to get a home loan if you have a lower credit score?
having a lower credit score does not mean that you will never get a home loan from a financial institution. there are certain lenders who would approve the home loan applications of individuals with low credit scores but would charge higher interest rates. The lenders charge a higher interest rate to compensate themselves for the risk they take by providing a loan to someone with low creditworthiness.
however, if you want to get a home loan at lower interest rates, you need to improve your saving, spending habits and make consistent loan repayment on time. when you consistently repay your loans, your credit ratings will improve, and down the line, you would also be able to refinance to a home loan with lower interest rates.
how to increase your home loan approval chances?
credit scores are not permanent and can increase or decrease based on your borrowing and repayment behavior. in case you have a low credit score, you can follow the steps provided below to improve your credit score and increase the chances of getting a home loan approval:
start saving: the habit of saving regularly is one of the most important financial lessons for everyone. you prepare a financial plan for yourself and start saving. take a note of your everyday essential expenses and establish a budget for the same. set an auto alert for paying bills on time. savings and paying bills on time are some of the small steps that can help you improve your credit score.
pay outstanding debts: when you apply for a home loan, lenders check your habit and capacity to repay the loan on time. hence, if you already have outstanding debt, it will have a negative impact and show that you are incapable of paying off outstanding debts. to improve your creditworthiness, pay all your outstanding debts and you will see your credit score increasing with time.
show them you can repay on time: if your current credit score is low, you can talk to the lender and share your financial plan on how you plan to make repayments. you can use the CRED home loan calculator to get an idea of the monthly EMI you have to pay to clear off your home loan debt. you have to be honest about your history if you want your lender to trust you.
frequently asked questions (FAQ)
Q. what is the minimum CIBIL score required to get a loan?
A. most of the banks consider a CIBIL score of 750 and above as a good credit score to approve a loan application.
Q. do banks check your CIBIL score for home loan and balance transfer?
A. yes, all banks check your CIBIL score or credit score from other credit bureaus before approving a home loan or balance transfer.
Q. does my CIBIL score affect my home loan eligibility?
A. yes. if you have a bad CIBIL score or a CIBIL score lower than 750, the banks may decline the loan offer or charge a higher interest rate. but if your CIBIL score is higher that 750, you might get a home loan easily.
Q. can a CIBIL defaulter get a home loan?
A. most lenders would avoid giving loans to a defaulter.