How important is CIBIL score in getting a Home Loan?

For most Indians, a house is not just a shelter but an asset and a path to financial stability.

But merely having basic capital to buy that dream house isn’t enough. You also need a good credit profile. Many applications may be rejected owing to unfavourable CIBIL scores.

The affordable housing sector usually has first-time borrowers. It is therefore important to understand what a CIBIL score is and how it affects loan applications.

What is CIBIL score?

The Credit Bureau Information (India) Limited, also known as CIBIL, is a three-digit number usually ranging between 300 and 900, which determines a home loan seeker’s creditworthiness. This score is arrived at from borrowers’ credit records.

It collects and records the borrower’s credit-related information from banks and NBFCs. Based on this data, it prepares a report on the loan applicant.

If the credit report records bankruptcy and irregularity in loan repayments, the borrower’s CIBIL score drops, making lenders reluctant to offer home finance.

Is a good CIBIL score everything?

While a CIBIL score is generally a reflection of borrowers’ credit health, some banks and lenders consider other factors while evaluating loan applications, like repayment capacity, cash flow, or business operating expenses.

At Grihum Housing Finance Limited, 680 is a bare minimum CIBIL score to qualify for a housing loan. Do we accommodate a lesser score? Yes, we make exceptions in certain cases. However, the borrower must provide evidence as to why his or her CIBIL score is low. For instance, since most of our borrowers come from informal sectors, they don’t necessarily follow the right processes. They might pay EMIs by cash and that too, at a later date. CIBIL scores get affected if the entries are not recorded in such cases.

The borrower should have a valid reason for a low CIBIL score. For example, a customer once approached Grihum for a home loan. He had a low credit score. It turned out that there was a dispute between the customer and his bank over his credit card’s annual fees.

Here, the customer was able to provide satisfactory clarifications.

Why Grihum Housing Finance Limited?

While CIBIL matters in housing finance, for Grihum Housing Finance Limited, it isn’t all. We treat loan applications with sensitivity and an open mind and educate our clients as well.

Do keep these pointers about the CIBIL score. After all, knowledge is your best friend.