Why Banks Reject Your Home Loan Application:
You have just made an awesome presentation. You are being applauded by your boss and colleagues. You are rewarded with a promotion and a salary hike. Your life cannot get any better. All that is left is buying that dream home.
The past has caught up with you:
A few years age you had availed a credit card from a reputed bank. Money was in short supply .Falling behind in payments was routine (happened regularly each month). Then a great day. You made a final payment and paid back all dues on that credit card. But that was long ago and in a different bank anyways. So why was your home loan rejected by this bank which was not aware of the past?
The answer lies in a 5 letter word “CIBIL”.
Banks maintain records of your loan/credit card repayments and create a report called CIR (Credit Information Report) in your name. This report is send by banks to the Credit Information Bureau of India Limited (CIBIL) each month.
CIBIL then assigns you a score between 300-900.If you fall behind in loan repayments your CIBIL score will be low (< 600).
Your score is then shared by CIBIL with all banks, and if your score is low, banks reject your home loan application. Banks have real time data on your past repayments (repayment history) and then decide whether you will make your repayments in time or not.
You have not make repayments in time on your credit card in the past. Banks believe you could do so again.
Your CIBIL score is bad:
If you have a CIBIL score of (700 and above) banks would easily sanction your home loan. Your CIBIL score is lower than this because you had fallen back (delayed your credit card repayments in the past). Banks believe that if you have delayed/defaulted on your repayments in the past you could do so again. A bad CIBIL score means banks would reject your home loan application.
You are a grasshopper …No job hopper:
You are ambitious. It’s a modern thing you know. Changing your job every year. For a bank, job hopping is a strict No. Banks expect you to have a stable job and continuous employment in your current job for at least 2 years. This gives the bank confidence that you will make your home loan repayments in time.
You have applied for a home loan in different banks:
Applying for home loans in different banks. (Think shooting arrows in many directions hoping one will hit the target). You apply for a home loan in different banks and pay the loan processing fee (a non refundable amount paid when you apply for the home loan).
You hope that one of the banks will sanction your home loan.
Your application for that home loan with all banks is recorded by CIBIL. Every bank that you have applied for a home loan knows which other bank you have applied to. Banks believe you are desperate for that home loan because you have doubts with your repaying ability.
This means banks would reject your home loan application.
You need to maintain a good CIBIL score at all times so that the application for your home loan is easily sanctioned.
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