Six hacks to tackle low CIBIL score before making a home loan application

If you are planning to buy property now or in the near future, you know by now that maintaining a good CIBIL score is of utmost importance. With RBI having made CIBIL score assessment mandatory, most commercial banks in India are unlikely to consider people with a CIBIL score below 750 (out of 900) for a home loan.

In case your CIBIL score is unsatisfactory, here are five things to do if things are not in your favor for a home loan application.

Check for errors in the report

Even after maintaining a good credit behavior you find that your CIBIL score is low, check your CIBIL report for errors. Sometimes discrepancies can appear on your CIBIL report for no fault of yours. There can be wrong information about an overdue loan that has been closed from your end, or a mix up of identity that may have occurred when the bank was passing on your credit information to CIBIL. If you spot such an error, you need to approach CIBIL with a request for the rectification of the same. This is called raising a “dispute request”.

CIBIL will then route your request to the Dispute Resolution Department. This team will then analyze the error and resolve it with the help of the relevant bank, which has given the said information to CIBIL. Once the issue is resolved, the updated information is put up on your credit report in approximately a month’s time. After the dispute resolution process is complete, you can make your home loan application.

Make an infallible repayment plan

If there are no errors in your CIBIL report and your credit score is low due to bad payment history, you have no choice but to rectify it. Here’s what you can do to get your CIBIL score back in order.

· Start by tackling the costliest debt.
· If it is credit card debt which is your pain point, clear out all your dues at once.
· If need be consider liquidating some other assets to pay off your credit card dues
· Don’t cancel your credit card. Keep usage on hold for a while, and ensure that the utilization is under 20%.
· Make bill payments on credit cards well before the due date.

You may have to cut down on some expenses and get into strict financial discipline to achieve this goal, but unless you do it, there is no way you can improve your CIBIL score.

Consider co-applying with your spouse or parent

If you have to take a home loan and there is no choice, despite a poor credit score, you can consider co-applying with your spouse if she has a good credit score. You may also consider taking a loan with your father if he is still working and has an impeccable credit history.

Put down a higher down payment

If you have set your heart on a property and are not willing to let go of it no matter what, you can also consider putting a higher down payment of more than 20% of the purchase price. Your bank may be willing it lend if you show some credibility on that front but may still offer you a loan that may be a higher rate of interest than the prevailing rates in the markets.

Approach a smaller bank

The largest commercial banks may not be willing to give you a home loan with a poor CIBIL score, but there are regional rural banks, co-operative banks or even family banks that may still be willing to give you a home loan with a poor CIBIL score. Of course the interest rates may be higher in such banks and the paperwork and application process may be much more elaborate, but you may just able to get a loan out of such banks, even with an unflattering CIBIL score.

Stay on rent a little while longer

It’s great to dream about having your own home, but there are literally a million expenses you have to think about when you actually go about buying one. Taking on a mortgage with a poor credit score will escalate your costs further. Considering all of this, it may make better sense for you to stay on rent for a little while longer and save up a little more for your own home. You can concentrate on improving your credit score in the meanwhile.

A poor CIBIL score just before you apply for a mortgage can indeed be troublesome, but you need not lament about it because it is not something that will stick to you forever. All you have to do is get into a strict financial regimen and get your credit history back on track in order to get your CIBIL score in order before you make a fresh application for a mortgage.


(Rajiv Raj is the Director and Co-Founder of www.creditvidya.com)

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