Secured credits like home loans showed a 16% YoY growth rate in FY 2018. This affected the overall GDP of India in such a fashion that the percentage of home loans as a portion of GDP grew by 0.5% in the same fiscal year.
This indicates that most homebuyers are availing a home loan to purchase their dream house. Based on your loan eligibility, you can avail a substantial home loan from your desired financial institution. One of the main factors that influence your eligibility is the CIBIL score. Hence, as a homebuyer, you need to know the minimum CIBIL score for home loan approval.
What is CIBIL score?
This score is referred to as a 3-digit numeric figure between 300 and 900, which is provided by the financial rating agency called TransUnion CIBIL limited, which is usually referred to as CIBIL; hence the name. Your CIBIL score denotes your creditworthiness. A high CIBIL score expresses responsible repayment behaviour of credits availed by you in the past.
Minimum CIBIL score for home loan
Since home loans are a form of secured credit, financial institutions look at numerous factors other than your CIBIL score before approving the loan. If you are employed at an MNC, or a reputed public/private sector company and have a monthly income of at least Rs.30,000, financial institutions will consider you as a likely candidate for home loan approval. Note that this minimum salary requirement differs between cities and an applicant who may be inelgibile in one city may be tentatively elgibile in another.
However, the value of your purchased property also plays a major role in improving your housing loan eligibility. The market value of your purchased property primarily depends on its location, age, square footage, lot size, etc. Since housing loans come with a long repayment tenor, the creditworthiness of a borrower is not overlooked but not provided with as much weightage as in case of an unsecured loan.
One of the best possible methods through which you can prove yourself as creditworthy is by possessing a decent CIBIL score. The minimum CIBIL score required to avail a home loan varies from one lender to another. However, it is advised to maintain a CIBIL score of 750 or above to avail a home loan or any other at the most beneficial terms. Thus, you are able to understand the impact of CIBIL score on home loans.
Hence, if your CIBIL score is low, it is advised to improve your score before applying for a home loan. Generally, availing a home loan is a once-in-a-lifetime venture for an individual; so it is advised to consider all the eligibility criteria before doing so. A high CIBIL score will not only improve your loan eligibility but will also help to negotiate with your lender in reducing their home loan tenor and EMI.
How to improve your CIBIL score?
There are several methods you can adopt to increase your CIBIL score, they are –
- Existing debts
Homebuyers who have existing debt will always face difficulty in improving their CIBIL score. Hence, they are required to clear those debts as quickly as possible in order to increase their CIBIL score for home loan.
- Payment of monthly dues
If you miss your home loan EMIs, your creditworthiness will surely deteriorate, which in-turn will have a negative effect on your CIBIL score. Hence, you should opt for an EMI plan and repayment tenor that suits your financial capability. So, paying your dues on time will help substantially in improving your CIBIL score.
- A low credit utilization ratio
If your CIBIL score is low, limit usage of your credit card/s. Try to maintain a credit utilization ratio of 60% and your CIBIL score is bound to increase over time.
Financial institutions and reputed HFCs like Bajaj Housing Finance Limited offer affordable interest rates and added benefits to eligible applicants. This HFC also brings forth pre-approved offers on housing loans. Check your pre-approved offer by providing your name and mobile number.
Before availing a housing loan, you should know how to calculate your home loan eligibility, where one of the most important conditions being the minimum requirement of CIBIL score for home loan.