Applying for Housing Loan? Watch Your CIBIL Credit Score First..!

 Wondering why your Home loan application was rejected & that too after being regular in repayments?

The answer may lie in seeking too many loans or / no loans at all. With credit scores becoming a key to garnering loans, too many loans is depicted as ‘hunger for credit’ while no loans means you have no credit history.

Negative Score..!

According to officials of major credit rating agencies, if you have not applied for any loan for a few years, the rating agencies does not have enough data on you & that means a negative score.

For example, the score given by CIBIL (CREDIT INFORMATION BUREAU (INDIA) LIMITED) is calculated based on the credit history of the borrower over the past 2 years (24 months).

 According to Mr.Harshala Chandorkar, Senior Vice-President, Consumer Relations said, “A minimum of six (6) months of recent credit history is required for generating the CIBIL TransUnion Score on a borrower”

So, if an individual has paid back & closed his / her loan or credit cards a few years back &  does not have any credit cards or/  existing loans since then, he / she will not get a credit score.

A value of '-1' will be put against his / or her credit score which implies no history (NH) is available on the borrower for generating the credit score.


Do bankers or housing Finance companies take the rating of NH seriously?

According to them, if you do not have a score or  / loan history, the bank / HFCs would seek more information, making the process of loan approval slower.

Says a senior with a leading private HFC: “While it gives a clean history, the absence of any information means more checks & balances. So, we ask such people to give us more references so that we can cross-check the person’s background.”

There are other traits that the credit agency will consider while giving your credit rating.

Sudden usage of all credit cards when you have been using only one for a long time, high credit utilisation consistently and, of course, too many unsecured loans.

According to  Mr.Mohan Jayaraman, MD, Experian Credit Information Company,  “Having too many unsecured loans (like personal loan or credit card loan) can be seen as risky behaviour, since it is an indication that there are too many contingencies in your life. This may make the lender question about your ability to repay on time,''

Consequently, if you are planning to go for a big loan, housing or car, you really do not want these factors to come into play. It would be wise to clean your books and well in advance, say six  (6) months to 12 months (one year). If you have too many personal loans / credit card loans, take one big loan & clear all the other dues. This applies for a large credit card due. Similarly, ensure instalments are paid on time and regularly.

Small things such as dues of some fees due to bouncing of an earlier cheque needs to be cleared. The amounts might be small like Rs.  500 to Rs. 750 but it hurts your loan-taking ability. For youngsters with little or no credit history, it would make more sense to have a parent as a co-applicant.

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Src: BS


Unknown said...

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Unknown said...

I had no idea my credit was bad. The guys at Credit Sudhaar analysed my report. The process took some time but my credit was restored, enhanced and protected. I have no reason for complaints.