CIBIL score is one of the most widely accepted credit scores in India. A credit score represents the creditworthiness of the individual who wishes to take loans from banks and financial institutions. A good credit score can help the borrower to get lower home loan rates. While approving a home loan, lenders consider the CIBIL score one of the most important factors. It assures that the borrower will pay their dues on time, thus providing proof of the borrower’s creditworthiness. This article will look at scenarios where the borrower can apply for an online home loan and get lower home loan rates even with a low CIBIL score.
What is a Low CIBIL Score?
Generally, a CIBIL score below 600 is considered a low credit score by online home loan lenders. The CIBIL score eligibility criteria are different for every lender. For an online home loan, the applicant should have at least a CIBIL score ranging from 700 to 750. The applicant with a CIBIL score between 700 to 750 is considered the least risky borrower.
Applicants with a CIBIL score between 650 to 700 are considered moderately risky borrowers by banks and may or may not be approved for an online home loan. If they are granted a home loan, it will be granted with conditions like a reduced loan amount, a high home loan rate, an increase in the documentation procedure, and higher processing fees or other hidden charges.
Any CIBIL score below 650 is considered high risk by the banks, and lenders will surely not approve the request of such applicants. This limit varies from lender to lender. Some nationalised banks may have their cut-offs at 650, whereas some NBFCs may allow applicants with a CIBIL score of as low as 550.
How to Get an Online Home Loan with a Lower CIBIL Score?
With the following strategies, you can get home loans even with a low credit score.
Approaching NBFCs for a Home Loan
NBFC is the acronym for Non-Banking Financial Company. NBFCs are financial institutions that lend loans to their customers but do not offer other banking services like accepting deposits, payroll services, fund transfers, etc. Some well-known NBFCs include Bajaj Finserv, Tata Capital, Muthoot FIncorp and others. HFCs or Housing Finance Companies are also NBFCs that deal only with offline and online home loans. Banks usually have more complicated terms and conditions for approving home loans regarding the CIBIL score. Therefore, an applicant with a low CIBIL score can try to apply for an offline and online home loan with reasonable home loan rates at HFCs and NBFCs.
Include a Co-applicant with a Higher CIBIL Score
It is a very common occurrence to apply for home loans jointly. If an applicant has a lower CIBIL score, they can enhance their CIBIL score by applying jointly with someone with a higher CIBIL score. If the co-applicant or guarantor has a CIBIL score of more than 750, some of the banks may approve the home loan with a good home loan rate. However, this method is not completely guaranteed, and the bank may or may not approve the loan. It is completely up to the discretion of the lender whether or not to approve an online home loan when one of the applicants has a lower CIBIL score.
Increase the CIBIL Score
As discussed above, a low CIBIL score prevents many banks and lenders from approving an online home loan. Therefore, the applicant should try and increase their CIBIL score. Some effective ways to increase the CIBIL score include regularising loan repayments, paying off all your debts, raising credit repair requests, etc.
How to Increase CIBIL Score?
Regardless of your home loan application, you must always ensure a good CIBIL score and try to improve it whenever necessary.
Raising a Credit Repair Request
An applicant can raise a credit repair request on the CIBIL website. Borrowers can raise this request if they want to increase their low CIBIL score due to irregular past payments. Some of the reasons for delayed or missed payments can be technical errors which may be caused while debiting EMI amounts, non-receipt of credit card statements within the allotted time before the due date, and others. With the help of a credit repair request, such flaws can be corrected with the help of available proofs and data.
Clearing Dues
This strategy requires the applicant to clear all their outstanding dues in full payment and not through the settlement amount, which is lower than the outstanding amount. The applicant should acquire a No Objection Certificate from their lender and make sure not to mention that the account is settled. Debt settlements are done when the borrower cannot complete their repayment, and the lender and the borrower agree upon a mutually feasible amount to settle the debt. The status of that particular debt is marked as ‘settled’, and it lowers the CIBIL score.
Regularising Payment Records
This method requires the applicant to duly and timely pay any ongoing EMIs before the due date. Following this practice for at least 12 months can help the applicant improve their CIBIL score.
Avoid Applying for Multiple Loans
The CIBIL score decreases when too credit inquiries are reported. Whenever the applicant applies for an online home loan or any other loan at a financial institution, and it gets rejected, they move forward to another institution. Every time an applicant applies for a loan, their CIBIL score is checked. This process is called a Hard Inquiry. A Hard Inquiry lowers the credit score by 10. Therefore, it is advisable to wait for at least 12 months before applying for another new loan.
Conclusion
In conclusion, it is important to maintain and keep up a good credit score to get a reasonable home loan rate on an offline or online home loan!
