Buying a home? How 800+ credit score will help you get better home loan interest rates and 5 tips to increase it

Your credit score plays a key role in determining your creditworthiness, especially while buying assets like home. A higher credit score usually means better chances of getting a home loan easily.

A good credit score significantly influences several parameters of a home loan application, including the rate of interest, loan-to-value (LTV), and tenure eligibility.

Here is everything you need to know about credit and CIBIL scores, and how to increase them.

What is a credit score and CIBIL score?

A credit score is a three-digit numeric value ranging from 300 to 900 that assesses a borrower's creditworthiness. Lenders typically check your credit score to determine how you are as a borrower, and then determine whether or not you are eligible for a home loan or other kinds of loans.

The higher your credit score is, the better the chances of you getting a home loan with better interest rates and tenure eligibility. If it gets too low, lenders may refuse to give you loan or demand higher interest rates.

Meanwhile, CIBIL score is a type of a credit score issued by the Credit Bureau TransUnion CIBIL. It is the most popular of the four credit information companies licensed by the Reserve Bank of India.

What are the different credit scores and what do they mean?

• Less than 600: A CIBIL score below 600 means that urgent action is needed and the approval probability for loans is low.
• 600-649: This means that the home loan applicant is considered doubtful, making loan approval difficult.
• 650-699: This indicates satisfactory or fair creditworthiness, with a possible chance of loan approval.
• 700-749: Your creditworthiness is considered good, increasing the chances of loan approval.
• 750-900: A CIBIL score in the range of 750-900 reflects an excellent credit profile, meaning a very high probability of loan approval.

Is 800 or above good CIBIL score for home loan?

Having a credit score above 800 is considered excellent. There are increased chances of home loan approval, and you will get better interest rates.

Borrowers maintaining a good CIBIL score enhance their prospects of securing favourable home loan terms, resulting in significant time and cost savings.

What is the minimum CIBIL score to get home loan?

There is no bar on having a minimum credit score, but banks prefer borrowers with a good or excellent CIBIL score if they want to take a home loan because this kind of borrowing is usually a big amount. Banks and housing finance companies want to be absolutely sure before lending you out a big home loan, so that they do not need to worry about repayment. A good CIBIL score indicates that you pay your EMIs on time.

A CIBIL score of 750 or above is generally viewed as strong for granting home loans. However a credit score above 700 will also make you eligible for a home loan, but you may face certain restrictions.

5 ways to increase credit score

• Pay your EMIs, credit card payments and utility bills on time.
• Keep your credit utilisation at less than 30% to show good credit behaviour.
• Avoid applying for multiple loans or credit cards simultaneously as these may bring your credit score down.
• Check your credit report at least every 3–4 months for errors. However, avoid making too many inquiries.
• Keep your old credit cards open even if you do not use them to demonstrate longer credit history.