Tips to avoid rejection of your home loan application

Real estate is the most coveted investment instrument in the country. Buying a home, whether for investment or residential purposes, can take years to materialise and given the prices, few can afford to pay the money upfront. In such situations, buyers inevitably turn to banks for home loans.

Although the norms for approving home loans have eased in the recent past, don't expect it to be a cake-walk. One small mistake can result in you merely dreaming of the house, and never actually owning it.

We look at factors that can play a crucial role in getting your loan approved or rejected.

BAD OR LOW CREDIT SCORE

You cannot build a house if the foundations are flimsy, right? When it comes to loan approvals, banks use a similar analogy. If you have a low credit score, you will be denied a home loan outrightly even if you fulfill all other conditions. Credit score is considered to be the most important factor by the banks while disbursing a loan.

"Credit score reflects a consumer's behavior towards the financial transactions. In some ways, it is a mirror to his financial habits and underwriters base their decision and develop risk-based pricing based on the credit score," says Anil Sachidanand, MD & CEO, Aspire Home Finance Corporation.


So, if a person has defaulted or delayed the payment on any kind of loan or credit cards, it will have a negative impact on the credit score. Other factors like being guarantor to a person who defaults on payment of his loan can affect your credit report too if you fail to repay his loan. So, be very sure before taking up the role of a guarantor. There are credit rating agencies like CIBIL, Experian Credit Information Corporation of India, Equifax Credit Information Services and High Mark Credit Information Services that provide credit score to individuals. "Once you submit your loan application, the lender seeks a copy of your credit report from the bureau. They analyse this not only for the credit score, but also to review the extent of existing loans / credit cards, performance of ongoing and closed loans. All these go in to the final assessment of your loan application," says Rahul Soota, executive director, Mymoneymantra.

A credit score provided by CIBIL is a three-digit TransUnion score which is derived from the credit history found in credit information report (CIR). A CIR is an individual's credit payment history across loan types and credit institutions over a period of time. It ranges between 300 and 900. It indicates the probability of default of a borrower based on their credit history.

To maintain a healthy credit score, one should ensure timely dues payment and avoid taking too many unsecured loans as it may be considered negative. But if the damage is already done, you can work towards improving it slowly. (See:How to repair a bad credit score).

INCORRECT PERSONAL DETAILS IN CREDIT REPORT

Your credit information report contains your personnel detail, so wrong information can lead to a mismatch between the details on your loan application and credit report and hence lead to your loan rejection. If there is any change in the personal details, you must update your lender so that it is reported to the credit information bureau and is reflected in your credit report. Any individual can get the credit report for a nominal fee from the credit bureaus.

However, it is important to check the report for anomalies like a credit card listed in your report but not owned by you, or a loan on their name which they had never taken. "Prospective borrowers can also apply directly to the credit bureau for their credit report for a nominal fee. This allows you to review the facilities listed against your name, seek corrections if you spot any anomalies like a credit card listed in your report which is not yours and to know your bureau score", says Soota. All bureaus have dispute resolution forms on their websites which aggrieved customers can fill and send with relevant identification documents.

REJECTION OF LOAN BY OTHER BANKS

Some people tend to apply to multiple banks at the same time. However, remember that if your loan is rejected from one bank then it can have an impact on your credit score and hence lead to the loan being rejected by other banks too. It is better to wait for the reply from one bank before applying to another so that you know why your loan is rejected and get the same rectified.

NEW OR UNSTABLE JOB

Since the repayment of loan is of utmost priority to the lender, they would like to ensure that you have timely repayment capabilities when he disburses the loan. In case of salaried person a steady flow of income is determined by the stability of job. "Since repayment of home loans is normally sanctioned for 15-20 years, stability of income in future becomes a necessary criterion to be assessed at the time of loan sanction. For example, if the borrower has a contract of employment with just eight months left in it, it is natural for the lender to enquire if the contract has been renewed in the past or whether the borrower holds any professional qualifications which would give comfort that alternate employment would be forthcoming," says Soota.

It is a similar story when it comes to changing jobs. While it may give the buyer a higher income level, it gives a negative impression to the lender. It is generally advised not to change your job if you are planning to take a home loan in the near future. In fact, the financial strength of the employing company is also considered as one of the factors for the evaluation of the application says Sukanya Kumar, founder and director, Retail Lending, a home loan consultancy. "People working in a proprietorship company, having less than 50 employees & not having provident fund facility, face issues in getting a home loan," adds Kumar.

AGE FACTOR

Age is one of the most important factors considered by the lender while disbursing a loan. Typically, they put a minimum age bracket of 23-24 years and maximum limit of 60-65 years for loan applicants. "Assuming a 22-year-old, who has been working for the last three years, applies for a home loan and the qualifying criterion for that lender is a minimum age of 23 years with at least two years of continuous work experience, the lender would in all probability turn down such an application," says Soota.

APPLYING WITH RELATIVES OTHER THAN SPOUSE/PARENTS

If you want to get a home loan of a higher amount, clubbing the income of your spouse is a good option. But while banks allow clubbing of income of the spouse, father and son, the same does not extend to every family member. Some banks are sceptical of clubbing the income of the siblings because in case of a dispute, the EMI could be delayed. Clubbing the income with any other relative is not allowed. Also, a coapplicant can't be a minor.

LOCATION OF THE PROPERTY

Banks also make their decision to disburse loans on the basis of the project's location. Take for instance, Noida Extension, where a number of projects suffered due to lack of clearance and acquisition disputes in 2011. As a result, a number of public sector banks stopped sanctioning fresh loan sanctions in the area, as per news reports. "All lenders have limitations with the geographic locations. If the property is beyond such limit, the loan will get declined. The technical valuation of properties in remote locations may also be lesser than the purchase cost; banks do try to cover the risk of funding in an under-developed area on case-tocase basis," adds Kumar.


UNSATISFACTORY EVALUATION OF THE PROPERTY

You must ensure that you are buying a house at a price which is close to the market price. This is important because the bank does the valuation of the property itself and will give a loan of upto 80% of the property value after considering other factors like your repayment abilities.

UNCLEAR PROPERTY TITLE

"In the event that the property does not have a clear and marketable title, or there are issues connected to the approvals from the relevant authorities, normally banks or home finance companies keep the loan sanction letter valid till the customer finds another property which has clear title and approval," says Sachidanand. So, before buying a property you must ensure that it is not involved in any dispute.

LACK OF REPAYMENT CAPABILITIES

Banks ascertain your repayment capabilities before disbursing the loan. It depends on the disposable income that is left in your hand after paying off existing EMIs. Banks generally give a loan which amounts to an EMI of upto 50% of the disposable monthly income. So, first assess your repayment capabilities before applying for a loan.

Source: yahoo.com

CIBIL Credit report folklore busted

There is no such thing as a credit ‘blacklist.’

And there's no single ‘score’ that bankers use when deciding whether to let people borrow. Instead, bankers use individual criteria to assess how unsafe, or lucrative, a customer you’re likely to be, and it's possible that while one banker will reject you for a credit card or loan, another might accept you. This applies even when they are accessing exactly the same version of your credit file, through the same credit reference agency CIBIL.


An outstanding credit rating does not promise you’ll be accepted for credit.


Eccentric as it sounds, applicants who have an excellent credit rating and who have rarely taken out credit before may be more likely to be turned down than a borrower who is under financial wrench. Lenders look for evidence that you’ll be able to pay back what you borrow, so not having any record of successful repayments can definitely count against you.


You won’t be penalised for being rejected for credit.



This is because credit reports do not record the outcome of an application. However, making multiple applications within a short space of time will have a negative impact on your credit report as it could suggest to lenders that you are in financial difficulty.

CIBIL : Glossary

Asset Classification (AC) – It is important to note that some banks report DPD as per the Asset Classification norms defined by RBI, which are as follows: 

Actual Payment Amount – Is the amount you have paid to you lender if it is different from the EMI Amount. This may be more or less than the EMI Amount. 

Amount Overdue - Indicates the total amount that has been paid to the lender in a timely fashion (includes principal and interest amount) 

Cash Limit – Applies to credit cards specifically, It is the amount of cash you are permitted to withdraw from your credit card. 

CIBIL – Credit Information Bureau of India Limited 

Credit Information Reports (CIRs) - A report on a loan applicant’s willingness and ability to make payments in a timely manner in the past. 

Credit Rating (CR) – A judgement of a person’s ability to repay debts. The rating is often based on a person’s current and projected income and past debt payment history. Also called a credit score. 

Credit Score – Is a number, between 300 and 900, that reflects a person’s credit history. 

Control Number (CN) – This is your report number and is essential if you need to raise a Dispute Requests. 

Collateral – Is provided to a lender as security to protect the lender in the event you are unable to repay your loan. This may be property, shares, gold, etc. 

Credit Limit – Applies to credit cards and overdraft facilities. It reflects the total amount of credit you have access to with regard that credit card or overdraft facility. 

Creditworthiness – The ability of a consumer to receive favourable consideration and approval for the use of credit from an establishment to which they applied. 

Current Balance – Is the amount you still owe on a particular c credit card facility. Lender, typically take 30-45 days after your payment is received to update this information with CIBIL. 

Dispute – If a consumer believes an item of information on their credit report is inaccurate or incomplete, they may challenge, or dispute the item. CIBIL will investigate and correct or remove any inaccurate information or information that cannot be verified. 

DPD (Days Past Due) – DPD or Days Past Due apears in the Account information section of your CIR. The DPD indicates how nary days a payment on that account is late that month. Anything other than ‘000’ or STD is considered negative by a lender. 

EMI Amount – Is the EMI (Equated Monthly Instalment) that you pay on the loan. 

Enquiry – Enquiries are added to your report when you apply for a loan or credit card and the lender decides to access your CIR. Details such as the name of the loan provider size and type of loan are captured in this section. Please note that the date of the enquiry may differ from your actual application date because the lender may access your CIR a day or more after you have applied. 

High Credit – Applies to credit cards and facilities. It reflects the highest amount ever billed (including interest and fees) for that particular credit card or overdraft. 

Ownership – This field tells the lender who is responsible for payments on that loan or credit card. There are 4 types of indicators that can appear on your CIR:

1. Single: You are solely responsible for making payments on the accounts.

2. Joint: You and someone else bear joint responsibility to payments on these accounts. this wiIl also reflect on the other individuals CIR.

3. Authorized User: This is used for add-on credit cards that you may have. While this reflects on your CIR, lenders know that you are rot responsible for paying dues on that particular account.

4. Guarantor: A guarantor pledges to repay a loan on behalf of a third party who has taken a loan. Hence, he provides a guarantee to the lender that he will honour the obligation, in case the principal applicant is unable to do so. 

Repayment Tenure – Is the term at your loan. This field is to be read with the ‘Payment Frequency’ field in order to accurately understand the term or the loan. For example, 120 at a monthly payment frequency would mean the term of the loan is 10 years. 

Sanctioned Amount – This is the loan amount disbusmed is Applies to account types other than credit curds aid overdraft. 

Settlement Amount – When an amount owed on a loan account in disputed, the individual and lender settle at some amount in between. lt’s what the lender believes is owed and what the individual believes he should pay. This is the amount the individual has agreed to pay. The rest of the amount (that the lender believes is owed) is written-off by the lender. 

Suit-Field / Wilful Default – In case the lender has filed a suit against you, there is specific reporting prescribed by the Reserve Bank of India (RBI). This is as follows:

1. No Suit Filed (or the field will be blank); 2. Suit filed; 3. Wilful Default; 4. Suit filed (Wilful Default) 

Written-Off Amount (Principal) – This field reflects the principal unpaid written-off by the lender. It follows that the difference between the total and principal written-off amounts is the interest amount that has been written-off on this account. 

Written-Off Amount (Total) – When a loan is written-off there is an interest and principal component. This field reflects the total interest and principal amount written-off. 

Written-Off and Settled Status – If this section is populated the lender has either restructured your loan by offering you different terms (extend the loan tenure or reduced the interest rate, etc) Written off this amount, or settled at some amount less than what the lender believes it was owed.

The possible values are as follows:

1. Restructured Loan; 2. Restructured Loan (Govt. Mandated); 3. Written-off (WO); 4. Settled; 5. Post (WO) Settled 

Reference – CIBIL

what is CIBIL ? what is the CIBIL contact number ?

what is CIBIL

CIBIL is the repository of information which has been pooled in by all Banks and lending Institutions operating in India. Presently we have a database size of over 170 million consumer records and 6.5 million company records contributed by our over 500 Members.
CIBIL’s aim is to fulfill the need of credit granting institutions for comprehensive credit information by collecting, collating and disseminating credit information pertaining to both commercial and consumer borrowers, to a closed user group of Members. Banks, Financial Institutions, Non Banking Financial Companies, Housing Finance Companies and Credit Card Companies use CIBIL’s services. Data sharing is based on the Principle of Reciprocity, which means that only Members who have submitted all their credit data, may access Credit Information Reports from CIBIL. The relationship between CIBIL and its Members is that of close interdependence.
The establishment of CIBIL is an effort made by the Government of India and the Reserve Bank of India to improve the functionality and stability of the Indian financial system by containing Non Performing Assets (NPAs) while improving credit grantors’ portfolio quality. CIBIL provides a vital service, which allows its Members to make informed, objective and faster credit decisions.

Registered Corporate Office

CREDIT INFORMATION BUREAU (INDIA) LIMITED
Hoechst House, 6th Floor,
193 Backbay Reclamation,
Nariman Point,
Mumbai 400 021
Tel : +91 - 22 6638 4600

Branch Office

CREDIT INFORMATION BUREAU (INDIA) LIMITED
Hoechst House, 7th Floor,
193 Backbay Reclamation,
Nariman Point,
Mumbai 400 021

Contact Details

Consumer Helpline Number : +91 - 22 6140 4300

Fax : +91 -22 6638 4666

To Contact Us Online

CIBIL issue ??????? Ahmedabad 9426497770 /079-40099917

The first step is get your credit report from credit rating agency - CIBIL.

The next step is to read it carefully and know the reason why your name is in the default list?

1- It could be due to Human Error e.g. Wrong - Name, DOB, Gender, PAN, Passport Number, Address etc.

2- It could be due to Incorrect Reporting/Mistake e.g. Wrong Credit Cards Details, Ownership - Accounts that aren't yours, but in your credit file, Late Payments - Reports of late payments in your credit file, when you paid on time or you may be a victim of identity theft.

3- It could be due to Loan Default e.g. Loan Defaults, Credit Cards Default, Late Payments and any other factors that are negatively impacting your CIBIL score and history.

For first reason, you would just need to report it to CIBIL with valid proof and they will fix it.

The second reason is also easy to fix. In these cases check out - who put you on default list e.g. Bank Name. If you have any acknowledge letter or any proof (related to above problem) from the bank or financial institution just submit that to CIBIL. If you don't have, you have to follow up with that bank and got a letter and forward it to CIBIL. CIBIL then verify the proof with the bank and incorporate the update on your credit file. With in few days the correct info will be displayed in your credit report.

If bank is not cooperating with you then write a letter to bank to fix it with a copy to CIBIL. If you don't hear from them in 30 days or not satisfied with the action you can lodge a complaint with Banking Ombudsman to resolve the issue.

The third reason could be that you have indeed defaulted on a loan and hence your name was entered in the defaulter list. If this is the case, You need to take up this with the defaulted bank and settle it out. And submit that settlement letter to CIBIL. The default will remain on your file but show as settled.

If you don't want to settle it than it will remain on your file for seven years and it will destroy your score. During this period no one will give you any loan or credit. After this seven year period, you again need to start rebuilding your credit by paying your loan and credit card bills on time.

policywala.com

‘Good CIBIL score can fetch profitable home loan deals’

Buying a home is one of the most crucial decisions of anyone’s life. This involves thorough planning and research and the most important factor which influences your decision is your financial ability and the home loan. In a bid to get a good home loan deal, it is important to maintain your Credit Information Bureau (India) Limited (CIBIL) Score. Harshala Chandorkar, Sr VP- Consumer Relations, Communication & CIC Compliance, CIBIL, gives suggestions on how to maintain and improve your credit score to get the best home loan deals. She takes up queries on MagicBricks.com’s live chat forum – GuruTalk. The topic of the discussion was ‘How to improve CIBIL scores to get the best home loan deal’.

While discussing how important is the credit score, Chandorkar says, “Banks access credit reports and scores from CIBIL to evaluate the credit worthiness of borrowers. The report and the score has become an important tool which is used by all the banks and financial institutions.”

So how does it function? CIBIL collates credit information from all banks and financial institutions. They share information pertaining to all the loans and credit cards with CIBIL on a monthly basis. A Credit Report is a month-on-month record of an individual’s complete loan-related EMI (home loans, personal loans, automobile loans and so on), credit card or overdraft payments.

She observed that generally a CIBIL TransUnion Score of 750 and above is considered a good score. However, each bank has its own cut off score, says she.

So, what are the opportunities and challenges for a good credit rating? CIBIL does give a credit rating but computes a credit score based on the credit history of an individual. Chandorkar states that the credit score is calculated based on the following factors in your credit history:

- Credit Utilization: How much credit is this consumer using?
- Defaulting: How many accounts are past due – by how many days and by how much?
- Number of inquiries: Has this consumer applied for additional credit lines?
- Trade Attributes: How old are this consumer’s lines of credit? What type of credit does he have? For example, Does the consumer have a good mix of credit or is it all credit cards?

“Some of the benefits of a good credit history and good score are speedier access to credit objective decisions, negotiate for better credit terms, build reputational collateral for the future”, she says.


Source: MagicBricks.com Bureau

How to Remove your Name from CIBIL Defaulter List?

The first step is get your credit report from credit rating agency - Online Request Form

The next step is to read it carefully and know the reason why your name is in the default list?

1- It could be due to Human Error e.g. Wrong - Name, DOB, Gender, PAN, Passport Number, Address etc.

2- It could be due to Incorrect Reporting/Mistake e.g. Wrong Credit Cards Details, Ownership - Accounts that aren't yours, but in your credit file, Late Payments - Reports of late payments in your credit file, when you paid on time or you may be a victim of identity theft.

3- It could be due to Loan Default e.g. Loan Defaults, Credit Cards Default, Late Payments and any other factors that are negatively impacting your CIBIL score and history.


For first reason, you would just need to report it to CIBIL with valid proof and they will fix it.


The second reason is also easy to fix. In these cases check out - who put you on default list e.g. Bank Name. If you have any acknowledge letter or any proof (related to above problem) from the bank or financial institution just submit that to CIBIL. If you don't have, you have to follow up with that bank and got a letter and forward it to CIBIL. CIBIL then verify the proof with the bank and incorporate the update on your credit file. With in few days the correct info will be displayed in your credit report.

If bank is not cooperating with you then write a letter to bank to fix it with a copy to CIBIL. If you don't hear from them in 30 days or not satisfied with the action you can lodge a complaint with Banking Ombudsman to resolve the issue.

The third reason could be that you have indeed defaulted on a loan and hence your name was entered in the defaulter list. If this is the case, You need to take up this with the defaulted bank and settle it out. And submit that settlement letter to CIBIL. The default will remain on your file but show as settled.


If you don't want to settle it than it will remain on your file for seven years and it will destroy your score. During this period no one will give you any loan or credit. After this seven year period, you again need to start rebuilding your credit by paying your loan and credit card bills on time.


policywala.com