Purchasing a home with a bad Credit Score may sound childish or unexpected, but it’s not impossible! Yes, it can be done! Many people forget to pull their CIBIL Scores before they start on a house hunting spree or they do it at the last minute. By the time they are aware of a bad Credit Score, it’s too late, and they already have applied to a lender and see a rejection on the way.
However, if you pull your Credit Score before applying for a Home Loan, you can work on it and prepare to explain ones that remain around.
In the same context, here are some tips that will assist you to handle a bad Credit Score when you apply for a Home Loan.
1. Always Let Your Lenders Know the Truth
Many of the probable Home Loan seekers try hiding or shying away from sharing the bad news! Never do this with your lender. Why? It’s because a lender will anyways come to know of your bad Credit Score because it will pull your credit report quickly. When they see the difference in your claim made of having a good score or hiding it and the fact, they may not approve the loan request. Thus, make it a point be ready to explain questions related to your financial health that lenders may ask. Being honest is the key!
2. Stop Messing Around with a Bad Credit
Once you know that you have a lower Credit Score, never fail to make on-time payments for all your existing loan EMIs or credit card payments/bills. Keep your credit card utilized at a maximum of 30-40% of the total limit. Don’t avail any new credits. Don’t give an impression to your lender that you are eyeing more credits because they won’t approve your Home Loan request if they see the tendency. If you continue making timely payments of your dues, lenders may consider you responsible and offer a Home Loan.
3. Make Corrections in the Credit Report
It would also be advisable to get a free copy of your credit report and review it. If you see any negative items, ensure to get it resolved. You can do this online or by mail. Like this, you can turn the tide in your favour from purchasing a home with bad credit score into doing so with not-so-bad credit.
4. Show Responsibility with Mix Credits
If you decide to purchase a home with a bad credit, you need to showcase the lenders that you can handle paying debts easily. Lenders love those who can actively handle a mix of credit such as revolving credit and instalment loans. If these credits are a year longer, it’s good! Whatever credit lines you have got, they are good to showcase to lenders. Adding another credit should not be done before applying for a Home Loan. However, if you need to consolidate all your debts and want to avail a new credit to do it, it can boost your Credit Score a bit.
The Bottom Line
Importance of CIBIL Score while availing Home Loan plays a vital role. So, along with implementing the above discussed tips, you should also go ahead and take all efforts to improve your Credit Score. Always ensuring to pay all dues and EMIs on time, not maxing out your credit card limit and paying the full amount and not minimum will help you boost your Credit Score gradually!
If you can wait to avail best Home Loan interest rates with a higher Credit Score, you should! Why? A Home Loan repayment may go into many years after all and may affect your monthly outflow if you grab it a higher rate of interest due to a bad Credit Score!