Don’t have a credit score? Here’s How You Can Still Get a Home Loan Photo credit: BCCL
New Delhi: The credit score is extremely important. A credit score, also commonly referred to as a CIBIL score, is a 3-digit number between 300 and 900 that represents how you have handled your credit, such as a personal loan or your credit cards, in the past. This score is primarily a measure of your ability to borrow – calculated based on your past behavior with credit.
Credit score is determined by Credit Information Bureau (India) Limited (CIBIL) based on your past transactions with financial institutions. CIBIL is a credit rating agency. Other bureaus such as CRIF High Mark, Equifax and Experian are also used to assess the creditworthiness of potential borrowers.
Your credit score tells lenders whether you are a reliable or risky borrower, and the likelihood that you will responsibly repay a new loan. When you apply for a loan or credit card, the lending bank or NBFC closely examines your credit score and your credit history which is kept on your credit report to determine your creditworthiness. The higher your credit score, the more likely lenders are to approve you for new credit. Usually a score of 750 and above is preferred by lenders.
If your credit score is zero or negative, it means that there is no immediate credit history available to the borrower in the past six months. A negative credit history can also be a sign of bankruptcy on your credit report. Lenders usually turn down loan applications, credit card applications from people with low credit scores, given the high risk involved.
Getting a home loan without a credit history:
Home loan is a huge financial responsibility because the amount is huge and the term is also long. Lenders prefer to give home loans to borrowers who have a strong credit history and a high credit rating. It is impossible to build a credit history without looking for credit, while banks do not lend money unless you are satisfied with the borrower’s credit history. So how do you go about getting a home loan with a zero credit score?
While credit rating is the first factor lenders consider when deciding on the credibility of their borrowers, it is not the only one. Borrowers without a credit history are also eligible to apply for loans as there are factors beyond credit history that help lenders assess the borrowers’ ability to repay the loan taken out. Borrowers can submit necessary documents to the lender that can convince the lender of the lender’s ability to repay loans on time.
Talk to lenders:
The old associations help. Experts say that if a borrower has no credit rating due to lack of credit history, it can be discussed with the financial institution with which they have their salary account or with which they have a long history. association. This could help get better loan terms, especially if there has been a recent pay improvement. Banks lent money to their customers and other borrowers long before the concept of a credit score was proposed in 2005.
Educational diploma and job profile:
Banks are more than willing to provide loans to potential borrowers who are well educated and have a well paying job. Borrowers with a stable source of income are more likely to attract the attention of lenders because the regularity of income gives the lender confidence that the borrower will be able to repay the loan. People employed in senior positions in government are often considered more suited to mortgage loans, even if there is no record of borrowing in the past.
Get a guarantor: A joint loan can help overcome a low credit score in front of lenders. A borrower can co-opt for a loan with someone who has a good credit profile such as a spouse or family member. This increases the chances of a person with a low credit rating to obtain loans easily.
There are also several other parameters that banks and finance companies use in the absence of a credit history to decide before granting loans. Lenders have different criteria to determine the credibility of their borrowers and assess their ability to repay the loan. Remember that with a zero credit score, you will not get loans at the best interest rates reserved for borrowers with a credit score above 750.
How you manage your money is important to lenders and that is why lenders ask for bank statements to verify savings and regular investments. When reviewing applications, lenders look at your past financial transactions to check your attitude towards systematic investment plans or regular premium payments for life insurance policies. Day-to-day expenses such as rent or frequency of purchases using debit cards are also checked before deciding on the eligible loan amount. Even if your credit score is low or zero, make sure your transaction history is impeccable.