Credit Score may be jargon for many. Although this is supposed to be the key player while getting loan approval from any lender. But the main question that arises – Is it only the score that matters or is it the track record that is important?
The answer to this is not definitive. The score is as important as credit history. All the leading lenders have started with a new rate of interest structures based on the Credit score of the applicants. Hence having a good score for all borrowers would yield the applicants with the lowest interest rates possible.
|List of Banks/NBFCs||Home Loan Interest Rates|
|Axis Bank||8.75% - 9.15%|
|Bank of Baroda||8.50% - 10.60%|
|HDFC Limited||8.50% - 9.40%|
|ICICI Bank||9.00% - 10.05%|
|LIC Housing Finance (LIC HFL)||8.50% - 10.75%|
|PNB Housing Finance (PNBHFL)||8.50% - 11.95%|
|State Bank of India (SBI)||9.15% - 11.30%|
|YES BANK||9.15% - 11.25%|
The point to note here is, the interest rate can only be availed if the application is approved. The main question is if the profile has delay payments despite having a good score, will I get loan approval from financial institutions?
The answer to this is subjective. Over a period of time, the credit appraisers at Financial Institutions have become strict in terms of Credit rating. CIBIL’s report is commonly used by lenders to evaluate the credit rating of the applicant. CIBIL rating ranges between 300 to 900. It is assumed higher the rating, one has a good credit record. But that may not be the case always.
The credit profile for a minimum of the last five years is reviewed by the credit appraisers. If there is no Delay payments, settlements and written offs in recent times, the profile is considered strong. Another major factor that makes the profile strong is less CIBIL enquiries in a stipulated time period.
Any delayed payment even for days less than a week are questioned by the credit appraiser. Any bouncing of payment or EMI is identified and brings the customer in credit appraisers radar of questions. The credit appraiser to avoid increasing NPAs of the financial institution questions all the delay payments.
There are instances where the customers have some disputes running with there existing lenders. Usually, such cases are seen with credit card defaults. The customers have issues of incorrect swiping running with the financial institutions. However, the same customers would own new credit cards and loans from various other lenders. Since an existing dispute is open in the credit history, getting a home loan done in such a scenario is difficult.
Multiple instances have been seen where the obligations were unpaid due to an unforeseen medical emergency or a medical condition with the loan applicant. However, post-recovery the same customer has been regular in repaying the EMIs. Subject to providing the medical documents and justifying the delays in their monthly instalments, cases can be considered for home loan approvals. These customers may have a score less than 750 but with justifications, the loan approval can be given.
Any existing obligation where the repayments are delibrately delayed or not made, or cases where the customer has overdue in one of the many existing obligations or cards, chances are that the credit score may be above 730 however these live accounts reflecting as overdue are required to be closed before the loan application. The credit appraisers require the No objection certificate and loan closure details for such accounts. Approval of loan application with live running overdue accounts is not possible.
Appraisers also review how frequently an applicant applies or gets inquiries in his CIBIL account for other loans and advances. Multiple hard inquiries in less than a month can lead to a bad impression of the applicant. Any hard inquiry made also leads to a reduction in CIBIL Score.
Hence it is always suggested to maintain not only a good credit score but also maintain a good credit history as the score is not just what matters but the entire history of accounts used is what is reviewed by the financial institutions.