Lenders take a risk when they lend money to a borrower. To make up for this risk, they charge interest on the loan value. Lenders decide the interest to be charged after considering several different factors, one of the most important of which is the CIBIL score.
The CIBIL score is the numerical representation of a borrower’s creditworthiness and repayment capacity. It is a three-digit number between 300 and 900 that tells a lender the chances of a borrower defaulting on loan repayment.
What is a good CIBIL score for Home Loans or any other loans, you may ask? The answer is a score of 750 and above. In fact, the closer you are to 900, the better your chances of getting approved for a loan and your preferred lender offering you lucrative terms and conditions, such as low rate of interest, higher loan sanction and long repayment tenor.
A good CIBIL score improves chances of loan approval and a bad CIBIL score increases chances of rejection. Missing EMI payments, defaulting on loans, constantly exhausting one’s credit cards and continuously applying for new credit are habits that cause borrowers to have a low CIBIL score. If you check CIBIL score online and find your CIBIL score does not meet your lender’s loan qualifying criteria, what should you do? How can a borrower improve credit score and remove a bad repayment track from their CIBIL report? Read on to know the answer.
Identifying A Bad Repayment Track From CIBIL
The most important factor that affects a borrower’s credit score is their repayment history.
- Have you always paid your EMIs on time?
- Have you ever defaulted on loan repayment?
That apart, factors such as credit utilization ratio, credit mix, new credit applications, etc. also affect a borrower’s credit score. Sometimes, life happens and unfavourable life scenarios compel us to do things that we had never planned on doing, such as missing EMI payments, defaulting on loans and exhausting the limit on one’s credit card.
- What should one do in this case?
- What should you do if you do not have the minimum CIBIL score for Home Loan?
- Is it possible to remove a bad credit history or negative accounts from the CIBIL report?
The answer is yes.
If you are planning to apply for a Home Loan or a loan of any kind and do not have the right CIBIL score for it, follow these steps to eliminate a bad CIBIL report.
The first step is to identify the entry or mention in your CIBIL report that is pulling down your credit score. For this, you will have to get hold of your credit report. Borrowers can check CIBIL score online as well as their CIBIL report for free. However, if you want to identify and remove a bad repayment, you must avail of your CIBIL report directly from TransUnion CIBIL. To be able do this, you will have to fill out an application form on the company’s website and pay a small fee based on the subscription plan you have chosen. Once you do this, CIBIL will send you your detailed CIBIL report.
If the bad repayment you have identified is due to an error, report the error to CIBIL and request them to remove it as soon as possible. If the bad repayment you have tracked down is due to an EMI or EMIs you have missed or a fault on your own, you will have to talk to CIBIL and request them to remove the bad repayment from your CIBIL report. You may even be required to pay a small penalty fee. CIBIL is not authorized to remove errors like this. Therefore, getting the bad repayment track removed won’t be easy. So, be patient and follow up with CIBIL as often as you can.
Borrowers must know that though they can contact CIBIL and request the credit information agency to remove a bad credit repayment track, there is no guarantee that CIBIL will remove it. Therefore, borrowers must know how to avail of a loan even if they do not have a minimum CIBIL score for Home Loan.
Also Read: How to Increase Your CIBIL Score Above 800
How To Avail Of A Home Loan If You Have A Bad CIBIL Score?
If you check CIBIL score online and find out it is much below 750, do not worry. It is possible to avail of a loan even with a low CIBIL score. Here are a few tips that will help.
- To start with, if you do not have the minimum CIBIL score for Home Loan, do not apply to just any lender. Instead, apply for a Home Loan to a lender who has known you for years and with whom you have a history. Even if you have missed EMI payments, this lender will know about your repayment history because of all the accounts you maintain with them.
- To increase you chances of getting approved for a loan, apply for a loan amount lower than what you are eligible for. This will increase your lender’s confidence in your repayment ability, and they might approve your loan even if you have a bad credit score.
- You can also get approved for a loan even with a bad CIBIL score by adding additional income sources to your loan application. The idea is to convince your lender of your repayment capacity.
- If you have a low CIBIL score and you wish to avail of a Home Loan, add a co-borrower or guarantor. This co-borrower or guarantor must be someone with high CIBIL score and excellent repayment capacity.
- Yet another thing you can do is take a small loan amount and pay it on time. This will help you improve your credit rating over time and increase your chances of availing of a Home Loan on beneficial loan terms and conditions.
Read Also: Everything Need to Know About How to Check Cibil Score
Final Words
If you are planning to apply for a loan of any kind, be it a Home Loan or a Loan Against Property or a personal loan, know that a good CIBIL score will help you get approved for a loan. However, if you do not have the required CIBIL score, do not worry. If your CIBIL score has gone down due to an error in your report, report the error immediately. If the fault is your own and your CIBIL score has gone down to missed EMI payments or other credit-related mistakes you may have made in the past, request CIBIL to remove the error. If this doesn’t work, use the tips mentioned above to avail yourself of a loan, even if you do not meet your lender’s eligibility requirements.