Rajiv Raj is Director & Co-Founder, www.creditvidya.com
Having a home of your own is a dream you may have cherished and worked hard to put together the down payment for the same. But just when you think you are ready, what if you come to know that your application is rejected by your bank!
Before processing your home loan application, your lender is going to look at your credit score apart from you income and other details to decide on your eligibility for a mortgage. Here are some likely reasons why your loan application may get rejected owing to a poor Cibil report.
Your credit report is checked often
If you have taken too many loans or applied for a lot of credit cards in the past, all the past lenders are likely to have gone through your Cibil report, a record of which will be maintained by Cibil. For example, if you submit applications for multiple credit facility especially unsecured loans at the same time, this could set alarm bells ringing with lenders. Multiple inquiries will have pulled the credit score down. This will work against your case when you are making a mortgage application. To avoid this, do not apply for any fresh loans or credit cards at least six months prior to making a mortgage application.
A poor credit score
Your mortgage application may get rejected if you have a bad credit history. A bad credit history is a result of late repayments, missed repayment schedules and the likes. Your Cibil score will also be unflattering if you remain perilously close to the credit limits on your cards ore have a high percentage of unsecured loans (such as personal loans) in your debt history as opposed to secured loans (such as a car or property loan).
No credit or a single type of credit
A majority of Indians are still averse to the idea of living on credit and thus do not take credit cards or loans. If you belong to the same category and think that you will have a high Cibil score because you have no credit history or a single type of credit at best, you are mistaken. In fact it works the other way round and shows your inability to take up debt responsibly. In order to have a good credit score, you should have a good mix of secured and unsecured loans and meet the repayment criterion of the same.
Discrepancies in Cibil or mismatched identity
Sometimes there may be some errors in your Cibil report, because the past lenders who have submitted your credit information may have fed in the wrong data. You can also be a victim of mismatched identity in case if a major fault. It is therefore necessary for you to check your Cibil score often to resolve such disputes in a timely manner and be mortgage ready.
Thus, as you can see, not keeping a check over of credit score may have disastrous effects. If you harbour dreams of being a home owner one day, you must maintain a good credit history, lest your bank squashes your dreams!