If you are planning to take a home loan, then prepare first, know at what CIBIL score you will get a cheap loan, and when the bank can refuse!

Know your CIBIL score before taking a home loan. Banks offer cheap loans on a score above 750; difficulties increase if it is below 650. Know at what CIBIL score the bank can refuse to give you a loan, and what is the way to improve a bad credit score.

Taking a home loan is a big financial decision. It not only fulfills the dream of buying a house but also affects your pocket for many years. Therefore, it is very important to make complete preparations before applying for a home loan. An important part of this preparation is to understand your credit score or CIBIL score. This is the parameter on which banks test you before giving you a loan.

If your CIBIL score is good then you also get a loan at a cheap interest rate. But if your CIBIL is bad, then many times the bank refuses to give you a loan or even if it gives, it is very expensive. Know here at what CIBIL score you will get a cheap loan, when the bank can refuse!

What is CIBIL score and why is it important?

CIBIL score is a three-digit number which is between 300 to 900. This number shows the payment history of all your previous loans and credit cards. In simple words, it tells whether you have ever paid any loan or credit card bill on time or not. If you have always paid your installments and bills on time, then your CIBIL score will be good. On the other hand, if you have been late or missed making payments, then your score may be low.

Banks and financial institutions decide how reliable a customer you are by looking at your CIBIL score. A good CIBIL score shows that you take your financial responsibilities seriously and make payments on time. On this basis, banks decide to give you a loan and decide the interest rate.

CIBIL Score Parameters

CIBIL score is divided into different categories, which makes it easier to understand how good or bad your score is:

300 to 550: Bad

550 to 650: Average

650 to 750: Good

750 to 900: Very good

At what score will you get a cheap home loan?

If your CIBIL score is between 750 and 900, then understand that banks will roll out the red carpet for you. On this score, you will not only get a loan easily, but will also get the lowest interest rates. Banks consider such customers reliable and give them priority. If your CIBIL score is between 650 and 750, you can still get a home loan. However, interest rates may be slightly higher.

When can banks refuse!

If your CIBIL score is between 550 and 650, then it falls in the average category. In this situation, banks can give you a loan or even refuse to give you one. Banks consider such customers risky, so they increase the interest rates to cover their risk. This will increase your EMI and you will have to pay more money on the loan. If your score is between 300 and 550, then most banks can refuse to give you a loan.

These are also the disadvantages of a low CIBIL score

Low loan amount: You may not get the loan amount you applied for. Banks can reduce the loan amount to reduce the risk.

Strict conditions: Banks can also impose some strict conditions on the loan, such as demanding a guarantor or asking for a higher down payment.

Who prepares the CIBIL score?

There are many credit bureaus in India that collect financial records of people and prepare the CIBIL score based on them. Some of the major companies are:

TransUnion CIBIL

Equifax

Experian

CRIF Highmark

These companies track people's credit history, which includes loans, credit cards, payment dates and outstanding amounts. They generate your CIBIL score by analyzing this data.

How to improve a bad CIBIL score?

If your CIBIL score is bad, then there is no need to panic. You can improve it by keeping some things in mind:

Make payments on time

This is the most important thing. Always pay all your loan installments (home loan, auto loan, personal loan) and credit card bills on time. Do not miss a single payment.

Use credit cards wisely

Avoid using your full credit limit. Try to keep the credit utilization ratio (i.e. how much percentage of your total credit limit are you using) below 30%.

Avoid taking multiple loans at once

If you already have multiple loans running, taking a new loan can affect your CIBIL score.

Avoid taking a loan on a credit card

Taking a personal loan on a credit card can prove to be expensive and can also increase your credit utilization ratio.

Check your CIBIL score from time to time

Keep checking your score regularly so that you can catch any mistakes and make corrections. You can download your credit report for free from the website of these credit bureaus.

Do not close old accounts

If you have an old credit card or loan account that you no longer use, avoid closing it. Old and well-managed accounts help improve your CIBIL score.

FAQs

Q1. What should be the ideal CIBIL score for a home loan?

With a score of at least 750 or more, the bank offers loans at a cheaper interest rate.

Q2. Can a home loan be availed with a CIBIL score of 650?

Yes, you can, but the interest rate will be higher, and the bank's terms and conditions will be strict.

Q3. Why is a loan more expensive with a low score?

A low score means that the risk is higher for the bank. Therefore, the bank increases the interest rate.

Q4. How to increase CIBIL score?

Pay loan and credit card bills on time, avoid taking new loans, and use credit cards less.