Can You Really Get a Home Loan in India with a Low Credit Score?

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With an online interface and availability of a doorstep facility, it is now relatively easy to avail of a home loan even from the comforts of your home. However, to do so, you must meet the home loan eligibility criteria. One of them is a high credit score. While lenders consider other eligibility factors like your income, age, property location, etc., your credit score plays an important role in the loan approval. Undoubtedly, it is easier to avail a housing loan for an applicant with a high credit score. But what if you have a low credit score? Can you still get a home loan? Let us find out in the following article. 

What Is a Credit Score?

A credit score is the three-digit numerical representation of your creditworthiness. Credit scores in India are measured on a scale of 300 to 900, where 300 is the lowest and 900 is the highest. The higher the credit score, the better. In India, you need a credit score of 700 or above to avail of a home loan. Your credit score acts as a risk assessment for the lender. Through your credit score, they judge if you would be able to repay the loan amount on time. 

Can You Get a Home Loan in India with a Low Credit Score?

If you apply for home loan with a low credit score, the lenders are more likely to reject your loan application. Lenders do not wish to lend money to an applicant whose creditworthiness is doubtful. However, if you fulfill other eligibility criteria, the lender can lend you a housing loan subject to certain conditions. With a low credit score, the lender can charge you a higher interest rate on the loan. Also, you might have to pay higher processing fees. The lender can also reduce your loan amount or increase your loan tenure. 

However, if you still need to avail of a loan with a low credit score, you can take a joint home loan and clear your outstanding debts to enhance your credibility and repayment capacity. 

How Can You Improve Your Credit Score?

It is suggested that you take steps to improve your credit score before applying for a home loan.

  • Maintain a low credit utilization. 
  • Pay your debts on time, including credit card bills.
  • Avoid taking credit unnecessarily. 
  • Do not take multiple loans or debts at the same time.
  • Avoid applying for a housing loan immediately after your application has been rejected once. 
  • Check your credit report and identify any discrepancies. If you find any, report the same to the credit bureau for rectification. 

Bottom line

Lenders take a high risk when they lend you lakhs of money as a home loan. Your credit score is one of the factors that help them determine if they should approve your application. Therefore, having a high credit score is crucial to get housing loan approval. While you can get a home loan with a low credit score, you should not do so. Experts opine that you should improve your credit score and then proceed with the home loan application. 

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