If you are planning to take a home loan to buy a property either now or in the future, you should know by now that maintaining a good CIBIL score is considered to be of utmost importance. With the RBI having made the CIBIL score assessment mandatory. Even there are various effects of credit score on the home loans.
Most of the commercial banks in India are unlikely to consider the people with a low CIBIL score which is below 750 out of 900 for a home loan.
In case your CIBIL score is not satisfactory, the article below mentions the hacks to tackle with a low CIBIL score to make things work in favor of a home loan application.
How to tackle a low CIBIL score for Home Loan
Check for errors in the report
- Even after maintaining good credit behavior if the borrower finds that his CIBIL score is low, then he must check his CIBIL report for errors.
- Sometimes the discrepancies can appear on the CIBIL report without any fault of the borrower.
- There can be wrong information about an overdue loan that has been closed from the borrower’s end, or
- A mix up of identity that may thus have occurred when the bank was passing on the credit information to CIBIL.
- If the borrower spots such an error, he is supposed to approach CIBIL with a request for the rectification of the same. This is called raising a “dispute request”.
- The borrower’s request would then be sent to CIBIL’s Dispute Resolution Department.
- The team will analyze the error and then resolve it with the help of the relevant bank, which has given the information to CIBIL.
- Once the issue is resolved, the updated information is then put on the borrower’s credit report in approximately a month.
- After the dispute resolution process is complete, the borrower can make a home loan application.
You can also go through the terms and conditions of home loans.
Make an infallible repayment plan
If there are no errors in the CIBIL report and the borrower’s credit score is low due to bad payment history, then the borrower has no choice but to rectify it. Here’s what he can do to get your CIBIL score back in order. Prepayment of home loan can reduce your burden.
- The borrower should start by tackling the costliest debt.
- If it is a credit card debt which is the pain point, the borrower should clear out all his dues at once.
- If need be he should consider liquidating some of the other assets to pay off your credit card dues
- Don’t cancel the credit card. Keep usage on hold for a while, and then ensure that the utilization is under 20%.
- Make the bill payments on the credit cards well before the due date.
Consider co– applying with your spouse or parent
If the borrower has to take a home loan and he has no choice, despite a poor credit score, then the borrower can consider co-applying with his spouse if she has a good credit score. Even there are special home loan benefits for a woman
Put down a higher down payment
- The borrower can also consider putting a higher down payment of more than 20% of the purchase price.
- The bank may lend money if the borrower shows some credibility, however, it may offer him a loan that might be a higher rate of interest than the prevailing rates in the markets.
Approach small bank
- The large commercial banks may not be willing to give the borrower a home loan with a poor CIBIL score.
- Regional rural banks, co-operative banks, or even family banks may still be willing to give the borrower a home loan with a poor CIBIL score. One can also approach the financial institution for a home loan to get better schemes.