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How Is CIBIL Score Calculated For Home Loan?

When you apply for a home loan to buy your dream house, the bank will often examine your credit score to estimate whether or not they will grant you the loan. The bank will contact CIBIL Transunion to determine your credit score, also called the CIBIL Score. The sum of money you can loan is directly proportional to your CIBIL Score and home loan interest rate today. It is determined by computing the result based on the analysis of four primary parameters. If the borrower’s credit score falls into a range considered wrong, the bank may decide not to issue the house loan. To properly understand the procedure, you should understand how your CIBIL credit score is calculated in the first place.

How Is CIBIL Score Calculated?

When calculating a person’s CIBIL Score, that person’s whole credit history is considered. Among the most critical factors is the frequency with which payments are made and the total amount borrowed. Each of these factors is given a certain percentage of total weight, and the applicant’s overall Score is calculated as a result.

Past Performance

The applicant’s loan and credit card payback history are essential in establishing the Score. If you have a clear pattern of not paying your EMIs or credit card bills on time, this will lower your Score on this parameter. When EMIs are missed or bounced, or credit card bills are paid after the due date, the credit score goes down. It is vital to remember that a single late EMI payment or a 30-day delay in credit card payments will not result in a reduction in the credit score. If fees are late once or twice every two to three years, it will not substantially impact a person’s CIBIL score.

Repeated irregular payments, such as skipping EMIs for 2-3 months or credit card dues for 60-90 days, lower the CIBIL score by 100 points. Also, the bank will send recovery agents to get the money if you miss more than 3 EMIs or pay your credit card bill more than 90 days late. Also, it can lower the CIBIL score in a big way, which can’t be fixed for seven years.

Credit Exposure

It is also known as the Credit utilisation Ratio in some areas. The proportion of the total amount spent to the overall credit limit is still available. In other words, the person’s credit exposure measures how dependent they are on credit to maintain their standard of living. A credit exposure ratio of 30% or less is deemed optimal. At the same time, anything above that is seen as unfavourable and will result in a considerable drop in Score.

Credit Type and its Term

This parameter has two parts: one shows whether the credit taken out was secured or not, and the other shows how long it has been since the person took out their first loan. Secured credit is a loan that is taken out against something of value. If the loan is not repaid, the creditors have the legal right to liquidate the asset, whether it is a Car Loan, Two Wheeler Loan, Home Loan, etc.

You can use an unsecured loan for any personal expenditure. Therefore there are no restrictions placed on its end-use. E.g. Individual Loans, Credit Cards, and Other Options. It is recommended to have a healthy mix of secured and unsecured credit in your financial portfolio. But having more unsecured credit also brings down your Score. In addition, the availability of a consistent credit history that spans at least twenty-four months contributes to the total Score. It shows that the applicant is comfortable borrowing money and making timely payments.

Other Parameters

These include the number of loans or credit cards and how people have been paying back their debts in the last six months. A significant number of loans or credit card applications within a short time (about 6-12 months) lowers the credit score. Even seeking frequent loans harms the credit score.

What Is the Ideal CIBIL Score to Apply for a Home Loan?

The range of possible CIBIL scores is from 300 to 900. A score of 300 points is the lowest, and 900 is the best possible Score. The higher the Score, the greater the likelihood that the application for a house loan will be approved.

If you are in Hyderabad and are looking forward to applying for a loan, please research properly beforehand. Banks often require a CIBIL score between 700 and 750 before approving home loans in Hyderabad. A minimum score of 700 is needed for most Indian financial institutions.


The CIBIL score is an essential factor when a home loan is given. A strong credit score can get a reduced interest rate, whereas a poor score will earn a higher rate. Your CIBIL score will drop if you have adverse credit behaviour, such as a missed payment or late EMI.