Have a Poor CIBIL Score but Need a Home Loan?

CIBIL score is one of the most accepted and preferred credit scores in India checked by lenders to understand your credibility as an applicant for a home loan. While approving your home loan application, lenders factor in your credit score. Note that your credit score is one of the crucial parameters for accessing your home loan eligibility. It endows an assurance to lenders that you have the potential of repaying the home loan on time and in full. CIBIL score ranges anywhere from 300 to 900, computed basis different parameters like your repayment history, history of loans, credit mix and other parameters. The higher your credit score is, the higher the chances for you of availing a home loan. 

Apart from credit score, various property-linked parameters are even factored in by lenders when approving your home loan. Continue reading to understand more about how credit score plays a crucial role in getting your home loan approved. Also, read on to understand how you can ameliorate it and opt for the home loan of your preference and choice with zero hassle. 

What is a low credit score?

There’s zero standard definition of a low credit score. Usually, a credit score below 750 is looked upon as low by most home loan lenders. However, credit score eligibility might differ from one lender to another. A minimum credit score of 750 is desired by most lenders for approving your home loan. In case, you have no idea of the minimum credit score preferred by the bank of your choice then you may consider approaching the concerned bank. For instance, if you prefer availing a loan from Canara bank or Bank of India, but, there’s nowhere on their site that mentioned as what their preferred score and the required down payment for granting you a loan, then you may consider may contact the respective banks. You may consider contacting the banks through the customer care number. In case they are not available on the customer care number provided on their respective sites, then you may dial any number, may it be the Bank of India balance check number or Canara bank balance checking number, then get the appropriate contact numbers and get an idea about the details you require. 

Different financial institutions might have their own specific criterion for minimum credit score, but most agree on approving a home loan if your score is at 750. If your credit score is around 750 and above, you are looked upon as less risky for approving a home loan. In case your credit score ranges anywhere between 650 and 750, then you may be looked upon as moderately risky by financial institutions and might be eligible for the home loan upon agreeing to abide by specific terms and conditions like reduced loan proceeds, higher rate of interest, enhanced documentation requirement, higher processing charges and others, than those applicable if you had a higher score of 750 and above. 

A credit score of less than 650 is looked upon as high risk and lenders might turn down your home loan application. Now, this credit limit of 650 might differ from one lender to another. Few private and nationalised banks may reduce this limit to 650 while few NBFCs (non-banking financial companies) might be lenient and consider a credit score of 550 as the lower limit. A credit score is generally a deterrent for various lenders to endow a home loan. Continue reading to understand the effective means of enhancing your credit score with ease. 

How can you avail a home loan with a poor credit score?

Mentioned here are some of the important ways that you can undertake to avail a home loan despite a low credit score. These include – 

Approach an NBFC for availing home loan

NBFCs basically stand for non-banking financial companies. This is a lender that approves loans to you same as banks but does not offer other crucial banking services such as accepting deposits, payroll services, fund transfers and others. A few of the crucial NBFCs present in India involve Tata Capital, Bajaj Finserv, HDB Financial Services, Muthoot Fincorp, etc. 

HFCs even known as Housing Finance Company even a kind of NBFC but deals just in home loans. Indiabulls housing finance, LIC housing finance, DHFL or Dewan housing finance limited, HDFC or Housing development finance corporation and others are a few of the important HFCs present in India. Banks generally have a strict regulation than NBFCs, when it is to home loan application approval and majorly is approved depending on your credit score. Thus, placing an application for a home loan to HFCs has increased the chances of availing loan approval more than banks. 

For example, from August 2022, the minimum credit score needed to place an application for a home loan with BOI or Bank of India is around 675, however, LIC housing finance may allow home loan approval even if your credit score is less than 650. However, it must be noted here that usually NBFCs levy a higher rate of interest than banks to make up for the involvement of higher credit risk in lending to you. 

For instance, at present Piramal Finance levies a minimum rate of interest of 11 per cent per annum on a home loan while SBI or State Bank of India levies a minimum home loan interest rate of 8.75 per cent per annum.  

Adds in a co-borrower having an excellent credit score

It is a popular practice to apply jointly apply for a home loan along with a co-applicant for increasing your chances of availing a home loan if you hold a low credit score. If you hold a lower credit score and your co-applicant/guarantor holds a credit score of over 750, then few lenders might sanction your home loan application. However, it must be noted that this specific method is not an assured means of availing a home loan with a low credit score. Such cases are extremely rare, and it is right up to the bank’s discretion to sanction a home loan.