If you are planning to apply for a home loan, you must have heard the term credit score many times. Its importance in the home loan process cannot be underestimated. All lenders check the credit score to understand the risk involved in lending money to the borrower. But what is a credit score?

What is a credit score?
A credit score is a three-digit number between 300 and 900 that is assigned to credit users by information agencies. It gives lenders a clear idea of a person's creditworthiness and his ability to repay the loan on time. Credit information agencies provide credit scores based on factors. Like borrower's payment history, credit utilization ratio, etc.

What should be the CIBIL score to take a loan?
800 to 900 Credit Score: If your credit score is excellent (800 to 900), then you are someone who always pays loan EMIs on time. You have never missed a credit card bill or loan EMI in the past. Your credit utilization ratio is less than 30% and you have a good mix of both secured and unsecured loans. More importantly, you are not overly dependent on credit. If you apply for a home loan etc., your lenders will know that they can count on you for timely payment of loan EMIs. Therefore, they will not only approve the home loan but may also be ready to negotiate regarding the terms and conditions of the loan.

700 to 800 Credit Score: If your credit score is in this range, then you are someone who has almost always paid his loan EMIs on time. You may have missed one or two EMIs in the past, but apart from this, you have always made your repayments on time. Your credit utilization ratio is good.

650 to 700 Credit Score
If your credit score is within this limit, then you are someone who has missed some EMI payments and credit card bills in the past. Therefore, your lender cannot completely trust you in terms of repayment of the loan amount. Additionally, you may not have an excellent credit utilization ratio. These reasons can become a risk for lenders. Therefore, lenders with reasonable credit scores may get approval for the loan but lenders will charge higher interest from such people.

300 to 650 Credit Score
If your credit score is in this range, you are highly dependent on credit and lenders cannot give you the loan amount. Borrowers with such credit scores may find it difficult to get a home loan approved.

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