Home Loans for Low Credit Scores – Is It Possible?
7 out of 10 Indians take out home loans due to the significantly rising property prices in India. Even for an average home with basic amenities, you may need around 50 lakhs. The problem is, most Indians cannot afford to pay 50 lakhs upfront.
This is why they opt for home loans. However, getting a home loan in India can be difficult, as it requires thorough due diligence from the lender. Even a minor failure in any of these areas can lead to your home loan being rejected.
Credit score is one such factor, as it reveals your financial history, including the number of loans you've taken, any missed EMIs, and defaults. If your credit score is low due to these factors, you may struggle to get approved for a loan. In this blog, we will address whether it is possible to get a home loan with a low credit score and, if so, then how?
What is credit score?
A credit score is a number that ranges from 300 to 900 and reflects your financial health. A score close to 300 indicates that you have not paid your liabilities on time, while a score near 900 means you have a history of paying your debts on time. Generally, a score above 750 is considered good, while below 700 is considered poor.
Types of Credit Score in India
Generally, there are many credit score bureaus in India but the most important are CIBIL, Experian and Equifax. The full form of CIBIL is Credit Information Bureau (India) Limited. CIBIL was founded in August 2000 and is India's first credit information firm.
Experian is a multinational credit reporting agency that operates in over 40 countries, including India. Experian plc became the first CICRA licensed credit bureau to go live in India. Equifax is a global information solutions company with operations in 24 countries, including North America, Central and South America, Europe, and the Asia Pacific region.
Equifax provides these credit reports and scores to businesses and also offers credit monitoring and fraud prevention services directly to consumers. There are some more credit bureaus in India including Trans union Cibil and CRIF high mark.
What is a good Credit Score for a home loan?
Different credit bureaus have different credit score for home loan along with ratings. As per CIBIL 750+ credit score gives you high chance of qualifying for a home loan. For Experian, 700-750 is considered good. And for Equifax 670 to 739 is considered good.
A credit score between 700 and 800 increases your chances of qualifying for a home loan. So, what if your credit score is low? Is it still possible to get a low credit score home loan?
Can I get home loan with Low Credit Score?
Every problem has a solution, but it requires different approaches. The same applies to credit scores. While it’s more challenging to get a home loan with a low credit score, there are strategies that can help.
1. Adding a co-applicant : You can add a co-applicant in a home loan, which gives you leverage of qualifying for a home loan with low credit score as the risks and borrowings are shared. Banks tend to give loan with a co-applicant in case of low credit score.
2. Bank Offers : Some banks introduces offers for people with low credit score or salary. In these offers they can get home loans upto 30 lacs or sometimes higher. Here, they need cibil scores between 650 to 700 at least and they can apply for these home loan offers if opting for a normal house.
3. Being a valuable existing customer : If you have a good relationship with your bank or its staff, your chances of getting a home loan may increase, as they may advocate for you. Apart from this, try to clear your debts on time, don’t have any debt pending more then 30 days.
4. Approach NBFC : Non-Banking Financial Company (NBFCs) provide you loan with low credit score but they charge high interest rates which can harm you in long term. NBFC requires minimum documentation and easy process of disbursement but they are not as reliable as banks.
To learn more about it read our blog on Bank Vs NBFC.
5. Consult a real estate consultancy: Real estate consultancies like Commercial Noida can assist you with the home loan process, as they often have connections with major banks that may offer favorable terms. Opting property from us will make your home loan approval process easy and effortless even with a low credit score.
If you want to secure a home loan with low credit score, you can go for these alternatives.
How to check Credit Score to get a home loan?
To check your credit score, you can visit your bank's website or simply search for "credit score check" on Google, where you'll find many websites. On these sites, you’ll need to enter your PAN number, and you'll be good to go. The result will show your credit score as per all the credit bureaus, but CIBIL holds the highest relevance among them.
Conclusion
Your credit score plays a vital role in your home loan approval. It’s important to maintain a good score and ensure that you pay your debts on time. However, if you don’t have a strong credit history or haven’t experienced major financial crises, securing the best home loan with low credit score is still possible through the alternatives mentioned above.
Frequently Asked Questions
What is the lowest credit to get a Home Loan?
You should have at least 650 credit score to secure a home loan.
Which bank gives home loan without CIBIL ?
In India, no bank will give you home loan without good or no CIBIL. But if you are borrowing first time and having a decent income, you can get it. But if you have low CIBIL, try to apply with a co-applicant (guarantor).
How to raise credit score fast?
Pay your bills on time. Don’t apply for multiple loans. If your loan gets rejected, wait for atleast three months.
Minimum CIBIL score for home loan in SBI
You need at least 650+ credit score to secure a home loan in SBI.
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