Importance of CIBIL Score before Applying Home Loan


CIBIL score also renowned as credit score is a key parameter that is taken into account by all lenders across the board including housing finance entities, scheduled, co-operative, and public sector banks before sanctioning any kind of credit. The applicant availing home loan, home loan topup or for that purpose any kind of loan needs to have a good CIBIL score.

A CIBIL score can be defined as a 3 digit numeric conclusion of the entire credit history. This score normally ranges from 300 to 900 and is derived based on all financial activities including but not limited to:

  • Record of all secured and not secured loans
  • Track record of repaying credit card bills
  • Defaults on any EMI or credit card bills
  • Late payment penalties on any kind of financial transaction
  • Cheque bounce instances if any
  • Recent information of loan and credit card applications made, etc.

A good financial track record means that the CIBIL score will be in upwards of 700 points which is positive from the home loan application point of view. However, score nearer to 900 is regarded as excellent and banks do not take much time either to sanction loans for applicants with such high scores. The complete details about CIBIL and its importance in home loans is explained in detail in the home loan section of Nonetheless, here are the reasons as to why CIBIL score is of paramount importance for home loan customers –

Helps expedite the approval process

One of the major advantages of having a good CIBIL score is that it expedites the entire loan approval process. It is one of the first things that creditors check when the application for housing loan or home loan topup is received. While, it must also be noted that this is not the only criterion, it is certainly one of the key factors that helps in availing loan in quick and seamless manner. The other factors that impact home loan application include:

  • Current age of the applicant
  • Nature of job
  • Current residential address
  • Amount of credit required
  • Kind of property to be purchased
  • Current job status – probation, notice period or permanent
  • Net monthly income
  • Overall expense
  • Current monthly obligations, etc.

Enables to get the better deals most times

The other important benefit of a good CIBIL score that cannot be easily discounted is that most times, it helps to sweeten the home loan deals. Applicants with good financial track record, settled job and a credit score of 850 + stand to gain on multiple fronts. These days owning to intense competitions between banks to increase their retail loan book, they do not shy away from offering host of enticing offers to good customers. This can include:

  • Partial or complete waiver of processing fees
  • Reduced interest rate
  • Extended repayment tenure
  • Free savings account
  • Free credit and other facilities

However, these days getting a good offer from banks on home loans is not far away. People just need to visit, compare the loan offers from several banks and housing finance entities and apply online with one that best fits their requirement.

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