Bad credit score? Don't worry, you can still avail home and personal loans; here's how to apply
New Delhi | Jagran Business Desk: CIBIL is a leading credit information bureau and thus the term "CIBIL" has become a synonym for your credit history. A credit information bureau stores the history of borrowers' credit transactions based on data provided by financial institutions. The CIBIL score is a number between 300 and 900, which is based on your transactions with financial institutions.
The higher the CIBIL score, the greater your chances of getting a loan and the easier the conditions become. However, if you have never taken a loan or credit card before, your credit score may be zero. If your credit history available with the credit bureau is less than six months, then the credit score may be -1. Cibil scores between one and five for new borrowers.
According to tax and investment expert Balwant Jain, before providing any credit facility to the customer, the lender wants to satisfy itself that the borrower will repay the loan in due time. The Credit Information Bureau solves this problem of lenders through credit scores.
The Credit Information Bureau issues a credit score based on the credit behaviour of the borrower in the past, which allows lenders to detect the possibility of a customer defaulting. The credit score is prepared by the software with the help of various parameters. Lenders are comfortable giving loans to a customer who has a credit score of more than 750.
Can a person without credit history also get a loan?
According to Jain, the credit score is a starting point for lenders to consider lending to borrowers, it is not the only criterion that lenders see for lending a loan. So even if you do not have a credit history, you can take home loans from lenders, but you will have to give more documents to the lender so that the lender can be satisfied with your ability to pay EMI on time.
The Credit Information Bureau came into existence only after the year 2005, but banks have been giving loans for many decades. So even if the borrower does not have a credit history of anyone, he can still get a home loan and in this case, the lenders take help of some other criteria in determining the eligibility of the borrower to give a home loan.
According to Jain, in such a situation your educational qualification and job profile are important criteria used by the lender. For example, if you are a doctor or a CA, it ensures your regular income. Lenders are comfortable with such qualifications. Similarly, if someone is in a high position in the government such as IAS or IPS, then he is very likely to get a home loan even though he has no previous credit history.
If you are not so lucky that you have a government job or have a high educational qualification, you can still get a home loan. In such cases, lenders may ask you for the bank statements of the last few years to know your financial situation. If there are regular debit information for investments such as Systematic Investment Plans (SIP), then this can assure the lenders about your savings habit.
Banks can also examine your banking transactions in detail to understand whether you pay utility bills like electricity bills or mobile bills regularly. This gives the lender information about the regularity of your banking transactions.
If you are staying at a rental place, they can also verify the regularity of your rental payment. Your spending and savings habits can be known from your bank statements, which can be used to determine whether you will be able to repay the loan on time or not. Banks can also ask you to get a guarantee from someone who has a good credit history and credit score.
These are some optional criteria that can be used by the lender in the absence of regular credit reports. However, these criteria are not perfect and every bank may have different internal standards.
Posted By: Talibuddin Khan