If you intend to avail of a home loan, you should be aware that several factors are to be complied with to qualify for the loan. The eligibility for the home loan depends on income, property value, credit score, employment, experience, repayment capacity etc. For instance, to qualify for SBI Home Loan, you will have to fulfil the following criteria.
- Age should be between 18-60 years. For some of the schemes under SBI Home Loan, the maximum age limit stipulated is 70 years.
- You must have a regular income source either through salary or business.
- You should have a minimum work experience of 3 years.
- Your credit score should be above 750.
The major setback will, however, be due to credit scores. If your score is not as is required, your application will be rejected.
A credit score reflects your financial discipline, and a good score classifies you as a low-risk borrower. Since financial institutions intend to create safe assets, they prefer a home loan proposal with a good score. For Axis Bank Home Loan, your credit score should be 750 and above.
Being aware of your credit score even before you apply for a loan is very crucial. You will be able to set right the discrepancies or try to improve the score by clearing some of the outstanding dues if you know the score earlier. Otherwise, it will be challenging for you to qualify for any loan, let alone a home loan.
What score is considered a low credit score?
A credit score indicates a number between 300 to 900 assigned to individuals based on their credit history, i.e., the number of loans availed and the repayments made. The higher is your score, the better are your chances of obtaining a home loan. Generally, a score below 700 is considered low. But this again depends on the lender. To avail of an SBI Home Loan, your credit score should be 750 and above.
The minimum score criterion differs from lender to lender. However, a borrower with a credit score between 700 to 750 is considered less risky.
Steps to be taken to avail of a home with low credits
It is difficult to avail of a home loan with a low credit score, but it is not impossible. For instance, to avail of Axis Bank Home Loan, you need a credit score of 750. But with low credit, it is not impossible to avail of the loan. If you have had a long-standing relationship with the bank and are employed in reputed companies or Government Organisations, the bank still considers the loan. Still, the interest rates, loan amount and other benefits may not be as lucrative. You can consider the following to avail of a home loan with a low credit score.
● Reach out to NBFCs or HFCs
Some of the leading NBFCs or Housing Finance corporations consider home loan proposals with a low credit score. The interest rates for home loans with a low credit score will be much higher than the regular home loans. A list of NBFCs or HFCs you can approach is given below:
|Bajaj Finance||Fullerton India Finance|
|Tata Capital||Aditya Birla Finance|
|Cholamandalam Finance||Capital First Housing Finance|
|Muthoot Finance||Fasttrack Housing Finance|
|Power Finance||India Bulls Finance|
If you are employed in a reputed Company or any Government Organisation/PSU and have a good stable income, you can approach the bank for a home loan even with a low credit score. If your salary account is with SBI and regular salary credits, you can apply for SBI Home Loan. The bank may consider the loan if you provide the personal guarantee of another person with a good credit score.
● Apply for the loan jointly
Apply for the loan jointly with a person who has a regular income and a good credit score. It is preferred if the spouse is the co-borrower. You can apply for Axis Bank Home Loan even if you have a score as low as 650, and the bank may consider the application with a higher rate of interest.
● Sort out the discrepancies to improve your score
Check your Cibil Report. If the credit score is low due to EMI and credit card overdue, clear the dues with the amount set aside for home loan down payment. If you apply for SBI Home Loan, you will be paying a slightly higher interest rate if the down payment is low. An addition of 0.10% on the final rate will be charged for SBI Home Loan if the down payment is between 10% to 20%.
You can even raise a credit repair request with the Cibil Support Group if the irregularity in the repayment in the past is due to some technical glitch while remitting the EMI amount online or credit card statement received with delay etc. By providing sufficient data proof, you can get the score revised.
● Work on your repayment record
Start repaying your EMIs and credit card dues before the due date. Being disciplined for even 12 months can improve your repayment record. If any account is shown as ‘account settled’ even though you have repaid the entire liability, you can get a “No Objection Letter’ from the lender and get the remark changed to ‘closed account’.
Suppose a borrower cannot repay the entire dues and the lender makes an offer to settle for a mutually agreed amount that is much lesser than the actual outstanding. In that case, the account is considered a settled account. This will lower your score considerably.
Other aspects considered by the lender for home loan approval
A credit score is no doubt one of the crucial yardsticks to assess the creditworthiness of the borrower. If the score is slightly lower then, the lenders will not outrightly reject the application. This again is the discretion of the lender. It may vary. The lender will look into aspects like:
- The applicant is employed in a reputed organisation and has a salary much higher than the minimum required.
- Must have worked for over 10 years.
- The applicant is a professional.
Whether you have a good score or a bad score, you can apply for SBI Home Loan or Axis Bank Home Loan, and with the other aspects in line, you have good chances of getting the loan approval.