Credit Score for Home Loan: How to get funds with an average CIBIL score?

Credit Score for Home Loan: Banks consider a number of factors beyond just the credit score when assessing a loan application, such as stability of income, employment history, current loans, and the ability of applicant to make a down payment. 

If your CIBIL score is average, you may still qualify for a home loan, but you might face challenges in getting favourable terms. 

It’s vital to ask around different banks and find the one that is willing to work with your credit profile. 

Besides, improving your credit score over time can help you qualify for better loan terms in the future.

These are five ways in which you can get a loan: 

Ask around: Different banks have different criteria for approving loans. Some lenders may be more lenient with credit scores than their rivals. So, you should ask around and compare loan offers from multiple lenders to find one that suits your needs.

Higher down payment: Giving a higher down payment can bring down the risk for the lender, making them more willing to approve your loan despite your average credit score. A larger down payment also reduces the loan amount, which can make the lender more comfortable with your ability to repay.

Joint applicant: If you have a family member with a good credit score, you could consider applying for the loan together or having them co-sign the loan. Their stronger credit profile can help offset the impact of your average credit score.

Provide additional documentation: Bank, at times, may consider additional documentation beyond just the credit score when evaluating your application. 

This could include proof of stable income, employment history, assets, and any other factors that demonstrate your ability to repay the loan.

Credit improvement: While it may not give an immediate solution, working on improving your credit score over time can raise your chances of qualifying for better loan terms in the future. 

This could involve making timely payments on existing debts, reducing credit card balances, and avoiding new credit inquiries.

Frequently Asked Questions:

Why should you check your credit report?

Monitoring your credit score regularly helps you stay informed about your financial standing and any changes that may impact your ability to borrow money or access financial products.

Can there be mistakes in credit reports?

It is not uncommon to spot mistakes on credit reports. So, regularly checking your credit score allows you to spot any errors, such as inaccuracies in personal information or incorrect reporting of accounts or payments.

What is the key disadvantage of a low credit score?

Among several disadvantages, one of the key disadvantages is that you are likely to be offered higher interest rates even when a loan is approved.

Do banks take a decision of giving a loan on the basis of borrower’s credit score?

Yes, lenders generally use credit score as a key factor in determining whether to approve a loan application. A low credit score may result in denial of credit or approval with less favourable terms.

What is the impact of low credit utilisation ratio?

A low credit utilisation ratio shows responsible credit management and may impact your credit score positively. It’s recommended to keep the credit utilisation ratio below 30 percent.