Know the Perfect Credit Score Range to Avail a Home Loan

When applying for a home loan, you need to keep certain parameters in mind, like your credit score. It is a three-digit number which describes your creditworthiness. There are different credit score ranges which help NBFCs make informed decisions. The majority of the lenders in India ask for a minimum score of 750 and above to sanction the loan. To know how to check your credit score for free online, read along.

What are the different credit score ranges?

A credit score ranges from 300–900. The minimum you can get is 300 and the maximum is 900. The different range of scores can help the lender decide how responsible you are when dealing with loan repayments.

Listed down below are the different ranges:

NA/NH

This rating is for applicants without credit histories or who are not qualified for loans. It is advisable to have a credit card and use it responsibly to raise your score since if you do not have one, you will have no credit history.

350–549

This range is regarded as having a low score; the cause may include late credit card or EMI payments. There is a significant chance of the loan getting rejected as there is a possibility of you being a defaulter.

550–649

Consider your CIBIL score to be fair if it falls within this range. The lenders may charge you high-interest rates for a loan and very few will even consider offering you one because this score may indicate that you are having trouble paying your debts.

650–749

If you have a score between this range is considered to be a good CIBIL score. You can further increase your score by showcasing good credit behaviour; paying your dues on time and spending lesser than your limit. Although you will get an offer for a loan you will not be able to negotiate the offer much.

750–900

This is an excellent CIBIL score range. It suggests you have done regular payments and have an impressive credit history. Banks will easily offer you loans because you are at a low risk of being a defaulter.

How to calculate CIBIL score?

You can take the help of the online credit score checker on the CIBIL website to know your score for free once every year. This score is calculated based on the following parameters:

1. Existing debts and credit utilisation — Up to 30% of your credit score account for this factor. Your credit card history shows how much credit you were granted and how much have you utilised already. If you continuously use too much credit from your card each month this can negatively impact your credit score.
2. Repayment history — How you repay the loans taken in the past affects around 35% of the credit score. Hence do not miss out on payment deadlines. This will improve your score and make you eligible for loans in future.
3. Repayment tenor and types of credit taken — The duration of the loan and types of loan taken can affect your score. It is beneficial to take both secured and unsecured types of loans. The duration adds up to 15% and the credit mix adds up to 10% of your credit score.
4. How many credit enquiries have you made — every time you are applying for credit and how many times it got rejected is present in your CIBIL report. If you have a lot of rejections it can affect the score negatively as it constitutes 10% of the score.

Importance of maintaining a good credit score?

Having a good CIBIL score can help you in the following ways:

Quick loan eligibility

Borrowers with a good credit score are eligible to get loans easily. Lenders easily trust such applicants with their money, as a good score means that they have paid dues on time.

Easy access to premium credit cards

Not only home loans, you can get premium credit cards as well by maintaining a good CIBIL score. You can enjoy more offers and rewards through this which can help you in saving money. The credit limit is also higher for people with excellent scores.

Lower rate of interest

There is a possibility that you can get a lower rate of interest depending on how good your score is. You can also negotiate with the lenders up to a point if your score is above 750 and above.

Faster approval time

Some NBFCs in India provide pre-approved offers on the basis of your credit score. Borrowers can avail these on various financial products like home loans, LAP, etc. The entire home loan application process gets streamlined. Willing borrowers can submit their names and contact details to check their pre-approved offers.

How to maintain an excellent credit score range?

Now that you know the importance of maintaining a good credit score, here are a few things to do so:

• Pay all your bills or EMIs on time
• Maintain a low credit utilisation ratio
• Try to maintain old credit cards for good credit history
• Avoid making multiple credit inquiries at the same time
• Maintain a balance between secured and unsecured loans

Before applying for a home loan, ensure your credit score is up to mark. You can conduct a free online credit score check to know “what is your score” to avoid future rejections.