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What is CIBIL Score - How Does it Impact Your Home Loan Application

Updated: Feb 17, 2022
CIBIL score for Home Loan - How Does it Impact Your Loan Application

Planning to take a home loan to buy your dream home? This is an excellent decision, especially since a home loan has several advantages, the most important being that it gives you the ability to get your own home. However, before applying for a home loan, it is highly recommended that one should check their credit score as it plays a very big role in determining the chances of approval of the home loan application.

This is because credit score is one such metric that lets lenders measure the creditworthiness of the borrower and risk of default instantly. Therefore, having a good credit score is crucial to boosting your home loan eligibility and getting the loan at an attractive interest rate.

In India, there are 6 major credit bureaus, but the most commonly used credit score is the one provided by TransUnion CIBIL. Like all other credit bureaus, it collects information from financial institutions and analyzes the credit related transactions (including credit card and loan applications) for every PAN card holder in the country. . Based on the information collected, CIBIL calculates the credit score for each individual. Let’s understand it in detail.

CIBIL Score Definition

CIBIL Score is a three-digit number that represents your credit score. The CIBIL credit score ranges between 300-900, with a score close to 300 indicating extremely poor creditworthiness of the borrower. And, a score above 700 is considered to be a good credit score and preferred by lenders. A score of “NH” or “-1” means that the person has never had any credit related transactions.

However, you should note, the impact on the credit score will not be instantaneous. It will improve gradually over the next few months. Therefore, whatever steps you are taking should be aimed at making a long-lasting impact on the CIBIL score.

CIBIL Score Calculation

To calculate the credit score, CIBIL evaluates the past credit repayment history, number of loan accounts, loan tenure of the last seven years.

The following are the credit score ranges that showcases good or bad CIBIL score:

  • Below 600: Very Bad
  • 600-649: Bad
  • 650-699: Satisfactorily
  • 700-749: Good
  • 750 and above: Very Good
  • “NH” or “-1” : No credit history

Lenders prefer borrowers falling under the last two categories (Good and Very Good), as the chances of default are least. To get a home loan from Grihashakti, you need to have a CIBIL score of at least 700.

Must Read : How Your Credit Score Can Impact Your Home Loan ?

What Are The Various Factors That Go Into The Calculation Of A Credit Score?

Various factors play a role in the calculation of a Credit Score, which includes:

  • Your Borrowings: Your past loans and credit card usage significantly impact your creditworthiness. The key consideration is whether your previous credit accounts have been settled or are in default, which plays a pivotal role in determining your credit score and financial reliability.
  • Prompt Repayments on Existing Borrowings: The consistency of your payment schedule matters since a highly regular repayment pattern contributes to a positive credit score, reflecting your reliability in managing existing debts effectively.
  • Credit Utilization Ratio: This ratio compares your credit card spending to the total limit, which should ideally stay below 30%. Exceeding this threshold regularly may jeopardize your credit score, emphasizing the importance of responsible credit card usage to maintain a favourable financial standing.
  • Credit Mix: Borrowings can be either secured, backed by collateral like home or vehicle loans, or unsecured, such as personal loans or credit cards without collateral. A balanced mix of both types is advantageous. However, an excess of unsecured loans may negatively impact your credit score.
  • Length of Credit History: Lenders favour individuals with a substantial credit history, indicating experience in managing credit responsibly. A longer credit history enhances creditworthiness, making it a crucial factor in determining your ability to handle financial obligations.
  • Number of Previous Hard Inquiries: Each time you apply for credit, lenders conduct a Hard Inquiry, accessing your credit score and history from the Credit Bureau. A high number of inquiries may suggest credit-hungry behaviour, posing a risk of a lower credit score. Prudent credit application practices are advisable to maintain a positive credit profile.

CIBIL Score Required for Home Loan

Home loans are big-ticket size loans and the repayment tenure usually ranges between 10-20 years. These factors increase the risk factors for lenders as it gets extremely difficult to judge whether the borrower will make timely repayments or not.

At Grihashakti, the minimum cut-off for the CIBIL score required for a home loan is 700. This cut-off may be different for other lenders.

If you have a credit score below 700, but higher than 600, there are still chances of your home loan application getting approved if you provide a higher down payment and have a co-applicant who has an excellent credit score and a stable income. However, this entirely depends on the lender’s policy and it may be better to check with the lender before applying.

In case, your CIBIL Score is below 600, you should consider taking steps to improve your credit score before applying for a home loan.

How Does CIBIL Score Affect Home Loan Approvals?

Here are 3 situations explaining how CIBIL scores affect an individual’s home loan application:

  • Housing Loan Application Rejection: A low CIBIL score, such as 500, combined with factors like insufficient income and outstanding debts often results in the outright rejection of a home loan application. Lenders consider the credit score alongside other financial aspects, and a poor score can significantly impact loan approval.
  • Home Loan Approvals at a Higher Interest Rate: For credit scores ranging between 650-750, home loan approval is possible, but the applied interest rate tends to be higher compared to borrowers with scores of 750 and above. The score influences the interest rate offered, impacting the overall cost of the loan for the borrower.
  • Home Loan Approvals at Unfavorable Terms: In cases of lower CIBIL scores, lenders may approve home loans but impose unfavourable terms. This includes shorter repayment tenors, reduced Loan-to-Value Ratio, or higher down payment requirements. These adjustments can place a heavier financial burden on the borrower, impacting the overall affordability of the Home Loan.

Tips to Improve CIBIL Score

Improving your CIBIL score is not an overnight process. It takes around 4 to 12 months of consistent effort to improve the CIBIL score. The following are a few tips to improve CIBIL score:

Make timely repayments and be disciplined with credit:

Repayments of outstanding debt have a significant impact on your credit score. Missing one or two EMIs can significantly lower your credit score and impact creditworthiness. Always pay your loan EMIs as well as credit card dues in full and on time.In case of any defaults or missed EMIs, settle these with the lender at the earliest to avoid constant loan rejections.

Reduce credit utilization ratio:

If you use a credit card, reduce the spending to up to 30% of the total card limit. A higher credit utilization ratio indicates you are highly dependent on credit to meet your short term requirement and that is considered negative.

You can also consider increasing your credit card limit to reduce the credit utilization ratio and continue enjoying the credit card benefits.

Opt for longer loan tenure:

When borrowing a loan, always take a longer repayment tenure. This will help you to reduce the risk of default and a low EMI amount will ensure that you don’t face any problems while repaying.

Avoid applying for a loan to multiple lenders within a short period: Whenever you apply for a loan, the lender initiates a hard inquiry to check your credit profile from the CIBIL database. Multiple hard inquiries within a short duration indicate you may be in financial trouble and are looking for funds desperately. Therefore, you should maintain at least a 6 months gap between two loan applications.

Rectify errors in the credit report:

There may be mistakes on part of CIBIL or your lender in reporting or updating records. This also impacts your credit score. Therefore, you should study your credit report at regular intervals to ensure there are no errors. In case of any, you should report to your lender and CIBIL for dispute resolution.


You must have understood how the CIBIL score influences your home loan, and what steps you need to take to ensure a higher approval of the home loan application by the lender.

To further improve the chances of approval of a home loan application, your total EMI to income ratio (debt to income ratio) should not cross the 30% threshold. Through this way, you can ensure there is enough disposable income at hand to meet the necessary expenses and don’t add to any financial stress. The lender may also consider you to be a good candidate and offer you better terms on the loan.

Use the home loan eligibility calculator to know your home loan eligibility as well as for EMI planning.

Must Read : Steps to get home loan with Low CIBIL Score.


Is 750 A Good CIBIL Score For A Home Loan?

A score above 750 enhances approval chances for a home loan, while a low score diminishes approval prospects. Lenders rely on this score as a key factor in evaluating the creditworthiness of a home loan. A CIBIL score significantly impacts home loan eligibility as lenders assess the score to determine approval.

Where Can I Check My CIBIL Score For A Home Loan?

To determine the credit score needed for a home loan, visit a credit agency's site. Accessing the required information ensures you are aware of your creditworthiness before applying for a home loan.

Can I Get A Home Loan With My Low CIBIL Score?

Obtaining a home loan with a low CIBIL score is possible, but it's crucial to note that it may come with a higher interest rate. Lenders often charge elevated interest rates for individuals with lower credit scores, reflecting the increased risk associated with lending to those with a less favourable credit history.

Is It Possible To Get A Home Loan After Defaulting?

Securing home loan approval becomes challenging after past defaults. While some lenders may consider approval with responsible financial behaviour post-default and a low Fixed Income to Obligation Ratio (FOIR), higher interest rates are likely.

What Is The Average Credit Score?

The average credit score for Indians during the financial year 2021-22 was reported to be 715, according to data from OneScore, a credit score monitoring platform. This metric provides insight into the creditworthiness distribution within the surveyed population during that specific period.

How To Remove Name From CIBIL?

To eliminate a name from a CIBIL report, the individual must settle their existing dues entirely. If full repayment is not feasible, the borrower can opt for settlement by agreeing on dues with the lender. Following settlement, obtaining a No Objection Certificate (NOC) from the lender is necessary. This NOC should be submitted to CIBIL for documentation, facilitating the removal of the 'write-off' status from the individual's credit report.

Why Do You Need To Check Your Credit Report?

Reviewing your credit history and scores is essential for gaining insights into your current credit standing. Regularly checking credit reports enhances awareness of how lenders perceive your creditworthiness. Additionally, monitoring your credit reports allows you to identify and rectify any inaccurate or incomplete information.

How To Improve CIBIL Score Immediately?

Improving a CIBIL score involves strategic steps such as:

  • Timely Bill Payments: Pay bills punctually each month, as late payments have a significant impact on your credit score.
  • Reduce Credit Utilization: Lower credit utilization by using a smaller portion of your credit limit.
  • Review Credit Report: Regularly check your credit reports for free from both credit bureaus and identify and rectify any errors affecting your score.
  • Consider a Secured Card: Opt for one reporting to all three credit bureaus to maximize positive impacts on your credit standing.
Is A Credit Score Of 800 Good?

Yes, a credit score of 800 is good. Achieving and consistently maintaining such a high credit score is commendable, as only a small percentage of individuals reach this level. A score of 800 signifies strong creditworthiness and increases the likelihood of favourable terms on financial transactions.

Disclaimer: *Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG Grihashakti. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG Grihashakti’s policy at the time of loan application. If you wish to know more about our products and services, please contact us.

SMFG India Home Finance Co. Ltd. (Formerly Fullerton India Home Finance Co. Ltd.)
CIN number: U65922TN2010PLC076972

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