CIBIL Score is one of the most important things for approving a loan whether it’s a home, personal, car or any other loans. It gives assurance to the lender that you can pay the home loan. But what if your CIBIL Score is low and still needs a home loan? Let’s understand how you can do this!
Your CIBIL score is a three-digit number ranging from 300 to 900, that tells lenders how likely you are to repay a loan or credit card bills on time. It's based on your credit history, including how much you've borrowed, your repayment history, and other factors.
A higher score (like 750 or above) usually means you're more likely to get approved for loans at better interest rates, while a lower score (Below 600) will make it harder to borrow money. Banks and lenders use this score to decide whether to give you credit and on what terms. It's important to keep your score healthy by paying bills on time and managing your debts wisely.
Here is what does it score tell about:
| Credit Score | Review |
|---|---|
| 420 | Poor category (Very difficult to get a loan) |
| 630 | Fair Category |
| 690 | Good Category |
| 770+ | Very good Category |
Low CIBIL Score generally means below 600 is considered low for a home loan. The definition of “Low” can vary with different banks and NBFC. Mostly a minimum 700-750 credit score is required for a home loan. In the category of 600-700 consider a risk to lend money. Below 650 is very difficult to get a home loan.
You can still get a home loan if your score is between 650-750 with higher interest rates, complex terms and conditions and others.
The first step is to check your credit report from CIBIL or any other credit bureau. You should look for errors, inaccuracies, or any overdue payments that might be affecting your score.
Identify discrepancies: Sometimes, mistakes in the report can lower your score. If you find any errors, report them to CIBIL to get them corrected.
Understand your financial behavior: Look for patterns that led to the low score, such as late payments, high credit utilization, or defaults.
If your score is low, including a guarantor or co-applicant with a good credit score can improve your chances of loan approval. Yes, this can really be a game changer to get the loan.
Guarantor: A guarantor is someone who guarantees to repay the loan if you default. Lenders feel more secure lending when there is a guarantor involved.
Co-applicant: Applying with a co-applicant (like a spouse or parent) can increase your loan eligibility and improve your chances of approval. Ensure the co-applicant has a good credit score.
Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs) are often more flexible with their lending criteria compared to traditional banks.
NBFCs and HFCs: NBFCs (Non-Banking Financial Companies) are financial institutions that provide services like loans, credit facilities, and investment advice, but they don't have a banking license. They can't accept deposits like regular banks but can offer loans and other financial products to individuals and businesses, filling gaps where traditional banks may not lend. NBFC like TATA Capital, L&T Finance, Indiabulls Housing Finance and others.HFCs (Housing Finance Companies) are specialized institutions that primarily focus on providing loans for buying homes, constructing houses, or renovating properties. They are regulated by authorities like the National Housing Bank and offer various types of home loans to help people purchase or improve their homes. Companies like LIC Housing finance, TATA Capital, Reliance home finance and others.
Consider your options: Research and compare different NBFCs and HFCs to find one that offers the best terms for your situation.
4. Try to increase CIBIL Score by clearing the dues
One of the most effective ways to improve your CIBIL score is by clearing your existing dues.
Pay off outstanding debts: Focus on clearing any outstanding credit card dues, loan EMIs, and other debts.
Timely payments: Make sure all future payments are made on time to build a positive credit history.
5. Lowering your home loan amount and Increasing down payment
Lowering the loan amount you apply for and increasing your down payment can significantly improve your chances of approval. Let's imagine a simple car loan for your better understanding. So, you want to buy a car costing ₹10 lakh. Instead of applying for a loan for the full amount, you decide to lower your loan request to ₹7 lakh by making a down payment of ₹3 lakh. This means you're borrowing less money from the bank. Banks may view this positively because it shows you have saved up and can afford a larger portion of the purchase yourself. This could improve your chances of the bank approving your loan application.
Higher down payment: A higher down payment reduces the loan amount, making you less risky for the lender.
Loan amount: Apply for a loan amount that is reasonable given your financial situation and credit score.
Improving your CIBIL score requires consistent financial discipline and strategic planning.
Clear past dues: Start by clearing any existing dues.
Credit utilization ratio: Keep your credit utilization ratio below 30%. This means using less than 30% of your available credit limit.
Avoid new debt: Don’t take or apply for new credit cards or loans until your score improves.
Regular monitoring: At least once in a quarter check your credit report to track your progress and make sure there are no errors.
| Step | Action | Key Points |
|---|---|---|
| Check Credit Report | Identify reasons for low score | Look for errors, understand financial behavior |
| Guarantor/Co-applicant | Include a guarantor or co-applicant with a good score | Improves chances of loan approval |
| NBFC/HFC Option | Consider NBFCs and HFCs for more flexibility | Compare interest rates and terms |
| Increase CIBIL Score | Clear dues, make timely payments | Focus on debt repayment and future discipline |
| Lower Loan Amount/Increase Down Payment | Apply for a lower loan amount, increase down payment | Reduces risk for lenders |
| Improve CIBIL Score | Clear past dues, maintain low credit utilization | Avoid new debt, monitor credit report |
Getting a home loan when your CIBIL score is low can be tough, but it's doable with effort. To boost your chances, learn what affects your score and work on improving it. You might involve a guarantor or co-applicant, check out options with NBFCs and HFCs, and stick to good financial habits. These steps can help you realize your dream of owning a home.
How can EazyBankLoan help you in taking a loan? We understand the process of procuring a loan can be stressful. That is why we take care of your Loan application process, saving you time and hassle by handling the paperwork and communication with the loan providers.
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Yes, it is possible, but you may need to include a guarantor or co-applicant and explore options with NBFCs or HFCs.
Improving your CIBIL score can take several months to a year, depending on your financial behavior and efforts to clear dues and make timely payments.
es, applying with a co-applicant who has a good credit score can improve your chances of loan approval and potentially get better loan terms.
Most lenders prefer a CIBIL score of 750 or above, but some may consider scores in the range of 650-750 with additional conditions.
It is advisable to check your CIBIL score at least once a year or before applying for any significant credit to ensure accuracy and identify areas for improvement.
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