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How Does Your CIBIL Score Affect Your Home Loan Application?


by Mahindra Finance


April 18, 2024


4 mins read

Buying a dream home is not just about finding the perfect property; it's also a significant investment. With rising housing prices in India, securing a home loan has become crucial for many individuals. While factors like age, income, and employment status determine whether you can apply for a home loan, your CIBIL score plays an equally important role. 

This guide explores the impact of CIBIL scores on loan applications and provides tips to improve them:

What is a CIBIL score?

Your CIBIL score is a 3-digit numeric snapshot of your credit history, ranging from 300 to 900. It represents your creditworthiness and repayment capacity. The higher your CIBIL score, the better your chances of obtaining a home loan at competitive rates.

How does the CIBIL score affect home loan applications?

1. Application rejection:

Lenders consider credit scores when assessing loan applications. If your CIBIL score is poor (below 500), lenders may reject your application even if you have a stable income or employment. Multiple existing debts or low income can further decrease your approval chances. Additionally, each time you apply for a loan, it triggers a hard inquiry against your PAN, which reduces your score.

Conversely, if your CIBIL score is above 750, lenders perceive you as a financially responsible and low-risk borrower, increasing the chances of faster approval for your home loan.

2. Higher interest rate:

A credit score between 650 and 750 may lead to a higher home loan interest rate. When compared to individuals with a credit score between 750 and 900, you will end up paying more in terms of equated monthly instalments (EMIs) and total debt servicing costs. Lenders charge higher interest rates for lower credit scores due to the perceived risk associated with lending to such individuals. Use a home loan EMI calculator to know your exact monthly payout after taking the loan.

3. Smaller loan amount:

Lenders determine the sanctioned loan amount based on your income and credit score. A lower income and CIBIL score will result in a smaller loan amount, while a higher income and credit score can secure you a larger loan.

4. Lower loan tenure:

With a high CIBIL score, you can enjoy flexible repayment tenures of up to 30 years. Longer tenures result in lower EMIs, making it easier to manage your finances.

5. Lower negotiation power:

A low credit score makes it harder to negotiate favourable loan terms such as longer tenure, competitive home loan interest rates, or larger loan amounts.

How to boost your CIBIL score

Improving your CIBIL score is essential before applying for a home loan. Here are a few tips:

  • Pay existing EMIs and credit card dues on time
  • Maintain your credit card accounts
  • Choose longer tenures when taking loans
  • Avoid frequent loan applications
  • Regularly check your credit report


A good CIBIL score is vital for securing a home loan at favourable terms and conditions. By understanding the impact of your CIBIL score on loan applications and implementing strategies to improve it, you can increase your chances of obtaining a home loan with competitive interest rates and flexible repayment options.

Remember to check your eligibility using a home loan EMI calculator to plan your finances effectively. Mahindra Finance offers housing loans starting from ₹2,00,000 at affordable rates with minimal documentation requirements. Apply for a home loan today and make your dream of homeownership a reality!


Q1: Does my CIBIL score affect my home loan application?

Yes. A higher credit score increases your chances of loan approval at a competitive home loan interest rate.

Q2: What is considered a good credit score for a home loan?

Lenders usually prefer applicants with a CIBIL score above 750 for home loans.

Q3: How to check home loan eligibility before applying?

You can use online tools like the Mahindra Finance home loan EMI calculator to check home loan eligibility based on factors like income, age, and repayment capacity.

Q4: Are there any home loan tax benefits?

Yes, you can enjoy home loan tax benefits on both, the principal repayment and interest paid for your home loan. 

Q5: Can I apply for a home loan with a low CIBIL score?

Obtaining a home loan with a low credit score is challenging. To improve your eligibility, consider having a co-borrower with a higher credit score or take steps to boost your credit score before applying.

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