An individual obtains a Home Loan from a lending institution to buy a property and repays it in EMIs. The repayment tenure may go up to 30 years, depending on the lender’s policy and the borrower’s monthly repayment capacity. Since home loans involve substantial amounts for a long tenure, lending institutions check an individual’s CIBIL score to get an idea of their credit behavior. A CIBIL score of 700 is good enough to get a decent loan amount at competitive interest rates. However, what if you do not meet this threshold?
If you are a low CIBIL score applicant, you must be wondering if it is possible to get a Home Loan with low CIBIL score. Here, we will give some possible solutions to getting a housing loan in such a situation.
Understand How CIBIL Score Works
The CIBIL score plays a crucial role in Home Loan processing. Many lending institutions consider it a significant criterion while approving or rejecting loan applications. Whenever an individual applies for a Home Loan, the lender first reviews their credit history and CIBIL score. If it is less than 700 with a poor credit history, the chances are that the lender will reject the application.
CIBIL calculates the CIBIL score based on several factors, including an individual’s repayment habits, credit length, diversity in the portfolio, DTI, CUR, etc. Ranging from 300 to 900, a score of 700 is sufficient to get a loan from most lending institutions.
Include a Co-Applicant
If the borrower’s income and credit score records are less than the desired number, they can consider adding a co-applicant with a better CIBIL score and stable income source. This simple step will increase the probability of loan approval at a lower interest rate.
Research and Compare
Compare loan offers from multiple lending institutions. If you do not qualify for a Home Loan from one, you can always enquire about it from another lender. However, do not apply for multiple loans at a time as it shows credit-hungry behavior and makes lending institutions susceptible to rejecting your application.
Maintain Regular Credit Card Bill Payments
If you ask how to increase your CIBIL score, paying credit card bills before the due date is an efficient way to do that quickly. Try to pay the bills in full each month, as dragging its debt is expensive and attracts hefty interest charges. If paying in full is not possible, spend a little more than the minimum amount to reduce the outstanding balance over time. Since credit card usage is critical in maintaining the CIBIL score, try to keep the credit utilization ratio below 30% to ensure a decent credit score.
Apply with the Existing Lender
Low-score individuals can benefit from their long-term relationship with their existing lending institution, as they prefer lending loans to their current borrowers based on their repayment history and credit behavior. Since your existing lender is already aware of your repayment habits, applying for a loan from them is advisable. Besides, it has already done a credit assessment of your purchases, savings, cash inflows, and bank details, reducing the paperwork and turnaround time for loan approval.
Make a Higher Down Payment
If an applicant proposes a high down payment, the lending institution trusts their intention to repay the loan despite a low credit score. A bigger down payment often compensates for a low CIBIL score, making a Home Loan with a low CIBIL score a possibility.
Review the Credit Score
Reviewing the credit score and knowing how to increase the CIBIL score improves the chances of loan approval. Go through the credit report and understand the reasons for a low score. If there are any errors or discrepancies in the report, get them rectified to boost the score instantly. Pay off outstanding balances, consolidate debts, diversify the portfolio, and find other ways to improve the credit score and get higher eligibility for a Home Loan.
Although lending institutions consider CIBIL scores to judge an applicant’s creditworthiness and repayment capacity, a low CIBIL rating is not the end of the world. Use the tips mentioned above to get a Home Loan with a low CIBIL score and avail of the desired credit facility.
