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.
Simple...Apply for a home loan with a reputed bank.
Then a rude shock…The bank has rejected your home loan
application.
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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