The most widely recognised credit score in India, given to both individuals and companies, is the CIBIL Score. Which indicates the applicant’s creditworthiness for a home loan. Lenders view an applicant’s CIBIL score as one of the most crucial considerations when determining whether to approve them for a home loan. It provides reassurance to lenders on the borrower’s ability to repay the home loan.

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A candidate’s CIBIL score, which is determined by a number of variables including the history of loans they have taken out and returned, can range from 300 to 900. The likelihood of someone obtaining a home loan increase with CIBIL score.

Lenders take into account a number of property criteria in addition to the applicant’s credit score and other factors when awarding a home loan. Continue reading to find out more about how your CIBIL score influences your chances of getting approve for a home loan. Additionally, see how you may make it better and easily apply for a home loan.

How Low is a “Low CIBIL Score”?

A Low CIBIL Score does not have a set definition. Generally speaking, house loan lenders view a score of less than 600 as low. However, each lender may have different eligibility requirements for CIBIL scores.

Banks require a minimum CIBIL score of 700–750 in order to approve a home loan. The majority of Indian banks need a minimum score of 700, while individual banks may have varied requirements. A person who scores between 700 and 750 on the CIBIL is regards as the least risky to be approve for a home loan.

Banks view borrowers with credit scores between 650 and 700 as moderately risky, and they may be subject to one or more of the following restrictions on home loans: reduced loan amounts, increased interest rates, stricter criteria for supporting documentation, increased processing fees & other expenses, etc. Compared to borrowers with scores above 700.

Applications for home loans from applicants who have scores lower than 650 are considered high-risk, & lenders may reject them. Now, the 650 thresholds may vary for each lender. A cut-off score of 650 may apply to certain nationalized or private banks. Although non-banking financial companies (NBFC) may be more forgiving and view a score of 550 as the minimum.

Many lenders typically refuse to grant a home loan based on a borrower’s CIBIL score. Keep reading to discover simple tactics for quickly improving your CIBIL score.

Factors that can lower your CIBIL Score

There are several things that can lower your CIBIL score. One may address the problems if they were disregard in the past in order to raise their credit score. The following are things to think about:

Late or non-payment of credit obligations: Your credit score may be greatly impact if you consistently miss or delay EMIs or credit card payments. A long-term nonpayment of even a little sum can have a significant impact on your CIBIL score.

Multiple credit applications: Applying for more than one loan or credit card in a short amount of time can result in a lower credit score. It suggests that you are insatiably eager for loans and might miss payments.

Errors in the CIBIL report: Your credit score may decrease if your CIBIL report has errors, such as missing account information, inaccurate loan balances, or inaccurate personal information. This can be the result of fraud or a mistake on the part of the bank. Check your CIBIL score frequently, and if you see any discrepancies, submit a query.

How to Obtain a Home Loan Despite a Low CIBIL Score

Here are a few strategies you can employ in spite of your low CIBIL score to obtain a house loan.

Approach an NBFC for a home loan:

Non-Banking Financial Company is refers to as NBFC. It is a financial institution that, like a bank, lends money to clients; however, it doesn’t carry out any other operations, such as taking deposits, sending money, handling payroll, etc. In India, some of the well-known NBFCs are HDB Financial Services, Bajaj Finserv, Tata Capital, and Muthoot Fincorp.

Another kind of NBFC, the Housing Finance Company (HFC), focuses solely on housing loans. Several prominent housing finance companies in India include LIC Housing Finance, Indiabulls Housing Finance, Dewan Housing Finance Limited (DHFL), Housing Development Finance Corporation (HDFC), and others.

In contrast to NBFCs, banks typically have stricter guidelines when it comes to processing house loan applications based on the CIBIL report of the applicant. Therefore, applying for a house loan through an NBFC rather than a bank increases the chances of loan acceptance.

For example, as of August 2022, the Bank of India requires a minimum CIBIL score of 675 in order to apply for a home loan; yet, LIC Housing Finance also offers home loans with CIBIL scores as low as 650.

It should be mention, nevertheless, that NBFCs typically charge greater interest rates than banks.

For example, as of August 2022, the State Bank of India (SBI) charges a minimum interest rate of 8.40% annually on home loans. Whereas DHFL charges a minimum interest rate of 10.50%.

Add a Co-Applying Person with a High CIBIL Score:

Adding a co-applicant to your home loan application is a popular practice to raise your CIBIL score. Certain banks may approve your home loan application if your co-applicant or guarantor has a CIBIL score higher than 750 and you have a lower score. It should be mentioned that applying for a home loan with a low CIBIL score using this strategy is not assured. The bank may choose not to grant a house loan in which one of the applicants has a lower CIBIL score because these circumstances are unusual         .

When one applicant has a CIBIL score of more than 750 and the other has a score of less than 550, banks frequently deny home loans.

Boost Your CIBIL Rating:

Having said that, you ought to endeavour to improve your CIBIL score because a poor score usually deters many lenders from making a house loan offer. A few efficient ways to raise your credit score are to pay off all of your bills, make loan payments on time, file a credit repair request, etc. To learn more about quick fixes to raise your credit score, continue reading.

Ways to Raise Your CIBIL Score

A few quick and easy methods to raise your CIBIL Score are listed below.

Submit a Credit Repair Request:

The CIBIL website is the place to submit a credit repair request. If borrowers’ past irregular repayments have resulted in a low CIBIL score, they must raise this request. Technical issues that arise when debiting the EMI amount, failure to get the credit card statement in a timely manner prior to the due date, disregard for EMI holidays or the moratorium period, etc., are some of the reasons why payments are delayed or skipped. The credit score can be updated based on the information and documentation provided by submitting a credit repair request.

Pay Off All of Your Debt:

This calls for paying off all of your debt, primarily unsecured debt such as credit card and personal loan balances, in full rather than by agreeing to a settlement that is less than the whole amount owed. Please ensure that the lender provides you with a “No Objection Certificate” (NOC) for the same. Which should not state that the account has been paid.

Financial institutions handle debt settlement when a borrower is unable to pay back the credit they have obtained and the lender offers to settle the account for a sum that has been mutually agreed upon. These accounts significantly reduce the score and show up in CIBIL reports as “settled.”

Regularize Your payback Record:

To ensure that there are no inconsistencies in your prior payment payback record, you must pay your credit card and EMI balances on time each month. Putting this into practice for a minimum of a year would improve the CIBIL score and report.

Refrain from Applying for Multiple Loans:

We have a natural urge to apply for the same credit card or personal loan at multiple banks when one bank rejects our application. Furthermore, we apply for that repeatedly within a short period of time—six months—with the same bank. The CIBIL score is lowered in certain situations.

Before granting credit for any unsecured loan, including a credit card or personal loan. Banks review your credit history through your CIBIL report. These days, CIBIL reporting businesses monitor the number of times a CIBIL report is accessed. We refer to this as Hard Inquiry. Because a Hard Inquiry is associated with a particular loan application, it typically results in a 10-point deduction to the score.

It is often advise that those with poor CIBIL scores wait a year or so before applying for new credit cards or loans. A year of waiting combined with consistent loan repayments (if any) throughout that time significantly raises CIBIL score.

Consolidate Your Debts:

Alternatively, you may choose to combine your debts by using Home Loan Balance Transfer Services, applying for a personal loan, using the proceeds to pay off your home loan, and so on. This enables you to create a new repayment plan based on your financial choices and consolidate all of your obligations to be paid off at once.

Lenders Take into Account Additional Factors Before Offering a Home Loan

While CIBIL is one of the most significant variables taken into account when approving a home loan, certain lenders could ignore a little variation in the minimum CIBIL score needed.  For example, if the applicant has a CIBIL score between 620 and 630 and the lender has a minimum demand of 650. It should be emphasize once more that approvals under these circumstances are completely voluntary and at the Bank’s discretion. These could vary depending on the lender.

Under these circumstances, lenders may take the following into account when approving loans:

• The applicant works for a reputable multinational corporation or a government agency. And their pay is far more than the minimum needed to qualify for the requested loan amount.
• The candidate has a good track record of steadiness in her job (about ten years).
• The applicant and the bank enjoy a positive and harmonious relationship.
• The candidate works in a career that is respect. Such as that of a defence officer, physician, nurse, senior teacher, IAS officer, etc.
• The applicant satisfies the lender’s monthly income requirements.

How to Get an Online CIBIL Report?

Here’s how to easily check your CIBIL Score and obtain the CIBIL report online.

Step 1: Go to the CIBIL website and fill out the online application form by entering your location, bank account information, name, and mobile number, among other facts.

Step 2: Use your chosen payment method to settle the CIBIL Report charges. Before completing the application, keep the payment receipt and write down the transaction ID.

Step 3: Provide answers to a few credit-related inquiries. Including those about your current loans, credit card details, loan payback history, etc. After the authentication process is successful, your registered email address will receive your CIBIL Report.

Benefits of Low-CIBIL Score Home Loans

A few significant benefits of obtaining a house loan despite having a poor credit score are list below.

• You can finance the property of your choice with home loans even if your credit score is low.
• They have adjustable repayment schedules and can be reimburse in convenient monthly installments.
• If you have sufficient money to pay back such house loans before the final due date, you can also pre-close them.
• If you pay back these home loans on schedule, they will help you raise your credit score.

Home Loans with a Low CIBIL Score Drawbacks

A few drawbacks of obtaining a house loan with a poor credit score are list below.

• Home loans for people with poor credit have higher interest rates.
• These home loans come with additional fees and other associated expenses.

The Facts About Low CIBIL Score

Now that you are aware of how to raise your CIBIL score, put it into practice right now. When submitting an application for a home loan, make sure your credit score is decent. It not only expedites the approval process for your home loan application. But it also offers other advantages like increased loan amounts, reduced interest rates, flexible repayment plans, and much more.

You can browse our Home Loans department and choose our Home Loan Cashback Package to locate the finest home loan offers. The bundle includes a few special features that could help you save money on your house loans. And streamline the entire home loan application process. Benefits include free MB Prime membership, rebates on home loans, free financial counselling from a designated financial advisor, and more.

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