Getting a home loan can be tricky with a low CIBIL score. A credit score generally shows a person’s better money management in the past, such as paying bills on time. Getting a property loan with a low credit score conveys to the lenders that you might be a risky person for home loans.
But you need not worry because getting a property loan with a low credit score is not impossible. This blog will help you understand ways to get a home loan with a low CIBIL score.
Key Takeaways:-
- What is the CIBIL score?
- How does a CIBIL score work?
- How do I get a home loan with a low CIBIL score?
- The Bottom line
What is the CIBIL score?
Banks entirely rely on CIBIL scores while processing home loan applications. CIBIL is India’s leading credit bureau that helps with credit reports and scores for individuals. CIBIL’s holistic approach to working states that a person who has at least 750 or more is considered good. CIBIL collects all the personal financial data, such as loans and credit card information, from the major banks, as this significantly influences the lender’s decision to approve or deny your loan.
Once you submit your application, the bank first assesses your credit score and history from major banks and other financial institutions in India. A home loan for a low CIBIL score and a low credit history will likely result in the bank denying your home loan application. Alternatively, a high Cibil score lends to faster processing of your home loan application.
Let’s have some credit improvement tips:
- Understanding your credit report: One can look for errors, see what is affecting their CIBIL score, and look for proper measures to resolve the dispute.
- Reducing existing debt: One can pay out the previous debts of credit cards, and this will ultimately showcase lenders that you are responsible for.
- On-time payments: Paying all your bills on time, including rent and other utilities from today.
- Consider a Credit Builder Loan: These small loans help build your credit history by showing you can repay them.
- Look for lenders who specialize in bad credit. Some lenders are more willing to work with people who have lower credit scores.
- Get a Co-signer: Finding someone with good credit to co-sign your loan is good. This reduces the risk for the lender.
By taking these steps, you can improve your credit score and increase your chances of getting a home loan, even if you’ve had credit problems in the past.
How does a CIBIL score work?
CIBIL scores are analyzed based on an individual’s credit report that is carefully examined. Some of the factors that affect the calculations of the CIBIL score include:
- Credit Payment History: This payment history includes all the credit payments on time that significantly boost the credit score. If the loan borrower, conversely, delays or defaults on the payments, the credit score is negatively impacted.
- Credit Utilization: This means the credit splendid limit should be balanced with the available credit. The higher the credit utilization, the lower the credit score will be.
- Credit Mix: Having multiple credit portfolios, including credit cards, installment loans, and mortgages, positively impacts the CIBIL score.
- Length of credit history: Usually, the longer the credit history, the higher the credit score. The duration of credit accounts and time taken are considered good.
- New Credit: Opening numerous new credit accounts within a short timeframe may negatively impact the score.
An improved credit score acts as a standardized and continuous assessment tool for lenders to examine the risk associated with offering credit to an individual. The higher score signifies lower credit risk, which enhances the likelihood of a favourable loan term at lower interest rates.
A regular review and clear understanding of your CIBIL score are important to maintain good financial health and to address any issues that disturb your creditworthiness. By staying informed about credit status, a person can take the necessary steps to improve it.
Can you get a home with a low CIBIL score?
Owning a home is a universal aspiration of every individual. Many individuals prioritize the financial security of homeownership over renting. However, escalating property costs often necessitate seeking home loans to achieve this goal. A crucial factor in securing home loan approval is maintaining a strong CIBIL score.
Therefore, individuals with a low CIBIL score may encounter challenges obtaining a loan.
In such a scenario, several strategies can be employed to improve their chances of loan approval.
The Bottom Line
Securing a home loan with a low CIBIL score presents a challenge, but it remains achievable. Various factors influence your credit score, necessitating strategic decisions to improve it and increase your chances of loan approval.
Key steps include diligently paying off existing debts, rectifying any errors in your credit report, and exploring the option of applying for a loan with a co-signer. By implementing these strategies and maintaining sound financial management, you can steadily progress toward your goal of homeownership.
