Unsatisfactory CIBIL Score? - Here are the Steps to Take Before Applying for a Home Loan

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Home loan: Your Gateway to Home Ownership

Most people strive to buy their home, but hardly they can afford such a huge investment just from their savings.

As a result, many people seek a ‘Home Loan’.

However, not every would-be home buyer gets approved for a home loan.

PSU banks as well as NBFCs and private lenders look for various factors before approving a loan application.

The CIBIL Score is one such major factor!

CIBIL Score: An Introduction

Banks and NBFC’s use the CIBIL score to value the potential risk posed by every loan applicant.

Lenders use this CIBIL score to determine the eligibility of an applicant to avail loans and credit limits.

The CIBIL score is a 3 digit number and may range from 300-900.900 is considered the best score.

If one doesn’t have a credit history, the CIBIL score will be -1.

If one has a credit history of just 6 months, the CIBIL score will be 0.

It usually takes 18-36 months to build a credit history.

Unsatisfactory CIBIL Score: Here’s what to do

Most banks or other lenders look for a CIBIL score of at least 750 before they approve a loan application

However, if your CIBIL score is lower, it does not mean the end of the road.

There is a lot you can do if you think your home loan application might be rejected on account of a Low CIBIL score!

5 things to do when the CIBIL score is unsatisfactory

RBI has made it mandatory for banks and other lenders to assess the CIBIL score of home loan applicants.

This makes it critical for borrowers to understand and work on their CIBIL score to get approval for their loan application.

However, this takes time and must be planned much before submitting a loan application.

Let us now talk about the five things one can do to dispel the fear of a low CIBIL score  

1. Look for errors in the report

In many cases, even the borrowers with good credit behavior find their loan application rejected due to a low CIBIL score!

There may be discrepancies in your CIBIL report that you are not aware of.

Some common errors are:-Wrong information of an existing or overdue loan -Mixed-up identity

Solution: Check your credit report periodically. In case you find errors, raise a ‘dispute request’ with CIBIL before you apply for a loan.

2. Prepare an infallible repayment plan

Sometimes, a bad payment history lowers the credit score. In such a case, the only solution is to rectify it! Here’s how you can do this:

Start by tackling the costliest debt first.If it is credit card debt is high, clear out all your dues at once. Don't cancel your credit card. Hold its usage for a while, and ensure that the utilization is below 20%.Make bill payments on credit cards well before the due date.

Cut down on expenses and get into strict financial discipline. Unless you do it, there is no way you can improve your CIBIL score.

3. Consider co-applying with your spouse or parent

If your CIBIL score is low, you can consider co-applying with your spouse; if he or she has a good credit score. This may increase the chances of your loan approval.

Likewise, if your father is still gainfully employed, he can be a co-applicant on your home loan application; provided he has a good credit history.

4. Consider living on rent a bit longer

The concept of home ownership is exciting, and we all want to move into our home as soon as possible!

However, buying a home comes with a million strings attached. Taking a loan on top of a relatively lower credit score will do you no good in the long run.

It might make more sense to continue staying on rent a little longer, and save up more for your future home loan.

In the meanwhile, focus on improving your credit score by following a strict financial regime.

5. Apply online through a FinTech lending platform

If you have been turned away by banks in the past, it doesn’t mean the end of your chances to get your home loan application approved.

Apply online through a FinTech platform.

By applying online you get access to:Free online registration within minutesAccess to a wide lender network Competitive interest rates offered by lendersOnline loan application, approval and disbursalFast loan processingSafe, paperless transactionsAccess real time home loan details onlineExemplary customer service

CIBIL score improvement needs time, and planning

The CIBIL score is built over a period of time, typically 18-36 months.

Similarly, mending your CIBIL score takes time. Hence, start working on it months before you submit your loan application.

Advance planning is very important when applying for a home loan.

Check your CIBIL score at least once in a year to make sure that it is free from any errors.

Follow a healthy credit regime, and your dream home could be just a home loan away!

At Biz2Credit, we offer a paperless, fast, transparent and easy home loan application process. Home loan seekers using our online platform get the privilege of a dedicated Case Manager to help them at every stage of the loan application process.

Visit www.biz2credit.in to get more details.

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