Housing Loan – Why “NO” when CIBIL cleared.

POSTED BY meutsav70 ON February 26, 2013 12:24 pm COMMENTS (19)

I’ve cleared all my dues in CIBIL reflecting as settled or write-off. Also no loan is running at present. The CIBIL score is 779. My current Credit Card is having a record that I’ve not apid any overdue or any other charges. My bank balance is good. No cheque bouncing for last 12 months in my statement. Then does bank still can say “NO” if I apply for Housing loan whos EMI is just 50-60% of my total net take home income (present) which would increase every year with minimum 10% average rate? Even if my CIBIl crosses 800 then still banks would say “NO” to my loan request?

19 replies on this article “Housing Loan – Why “NO” when CIBIL cleared.”

  1. Credexpert says:

    Dear Ashish,

    Removing the duplicate enquiries from your report would bring them down to 10 and could also help in improving your score. We would suggest that you do the same by raising a dispute with the bureau. Continue the timely repayments and maintain the positive behaviour.

    Regards,
    Credexpert

  2. Dear Ashish, please continue your discipline.

    thanks

    Ashal

  3. meutsav70 says:

    @ Ashal: I’m agree to your inputs… I can wait … I have to wait..

  4. Credexpert says:

    Dear Ashish,

    Your credit hungry behaviour has affected your score. What is the number of Enquiries on your report? Do not make any new credit applications unless you genuinely need one. Also majority of your loans are unsecured loans which come with a high interest. Their repayments can prove to be a burden in future. Also your score is already around 790 – 800, any increase would be a marginal increase. Repay on time, do not make any new enquiries and your score should increase gradually.

    Regards,
    Credexpert

    1. Ashish says:

      Dear Credexpert,

      There are about 13 enquiries in my CIBIL report of that 3 are from the same bank for same amount (may be repetition entry).

      I have never delayed any payment be it credit card, loan or even bills. All the loans taken were paid on time or before time without any cheque bounce / return EMI / delay in payment and of course my intention is to continue my payments the same way without any default.

  5. Dear Meutsav70, I w’d prefer a 40% NMI as EMI. anything above this is not at all good for your long term financial health.

    Thanks

    Ashal

  6. meutsav70 says:

    @ Ashal: How about to increase the down payment amount to bring the EMI to the level of 50% of NMI? This would come down further as annual increments are due in next financial year’s 1st Quater?

  7. meutsav70 says:

    @ Ashal: Your Idea sounds Great Ashal. Yes It can be done…. Fare enough..

  8. Dear Meutsav70, even at this point of time, asking 60% NMI for EMI is not a good thing. In all probability the internal checking system of banks, ‘ll raise a red flag against your loan application. Please do not worry for housing prices & location, You ‘ll always get one. if you delay your choice now & invest that much EMI amount, you can handle your situation better after 2-3 years.

    Thanks

    Ashal

  9. meutsav70 says:

    @ Ashal: The problem in waiting for Housing Loan is that there are the chances that I might not get the house in my desired location or close to desired location within my budget ( i.e. EMI within max 60% of my net take home salary). Because I’ve to plan for my kids higher education ( I initiated on it seriously last year only) and about good corpus for my retirement as well. Also if I opt for Housing Loan 2-3 years after then cost of the hosing would be very very high which is already on higher side against my affordability. There are some banks who are looking at my CIBIL with positive view as I have shared with them all my NOCs. Of course individual who is handling my case is also having positive attitude. But I want to reach situation in future where I need not to depend on my destiny for my Loan Approvals (if I require). Because 2-3 years down the line I would be opting out for Auto Loan. I believe at that time I would be situation when I when I would be getting the loan easily.

  10. Dear Meautsav70, For past you can not erase. You can only stop applying for fresh credit lines (Cards, PLs, HLs, CLs). This 2Y old thing ‘ll improve only in next 2-3Y, as each passing month ‘ll erase data for 3Y prev. data. Actually data ‘ll not be erased, it’s just that your report ‘ll show only latest 36 months’ past. 🙂

    Regarding your home loan which you want to go ahead, If possible you may opt to wait for few more months. Else please go ahead & apply & declare your past actions also which you have undertaken to correct past mistakes.

    Thanks

    Ashal

  11. meutsav70 says:

    @ Ashal: I’ve contacted Credit Sudhar also . They are one who helps to improve the CIBIL scores. The best part from them is that they appreciated my efforts and honestly told me that I don’t require their services as I have already taken the corrective actions. Of course, other inputs given by you and Manish in past helped me in a great way to get the confidence for continuation of my efforts in the same direction. But I failed to improve the inquiry sheet in my CIBIL. In past 2 years back I hitted numerous inquiries for Housing Loans and Credit Card. Is their any other way to get it corrected thru CIBIL or my present financial discipline & good CIBIL score would marginalize that in near future?

  12. Dear Meautsav, it seems your house is in order. So you should not worry. Please go ahead & apply for your desired home loan.

    Thanks

    Ashal

  13. meutsav70 says:

    @ Manish: Dear Manish, with God’s grace I shed off all the liabilities long time back. For last 2 years I tried to consolidate my finances. I’m interested only Housing Loan not in any other kind of a loan. Also I don’t prefer to have more credit cards. Of course, if I get the housing loan then 2 year after I would be going for only auto loan.

    Only problem is past though I’ve corrected and my CIBIL score subsequently has improved significantly. There is nothing in DPD area except 1 loan which is fully paid and that is because of Bank’s fault for which I’m in touch with them.

    RGDS,

  14. Dear Ashish, the basic issue is discussed already between you & dear Manish, I want to know the recent home loan thing. You wrote in original query, that you want a loan EMI of 50-60% of your NMI. So what’s your current EMI as %age of NMI?

    What are you doing to bring down it to 35-40% level. Just a Year (you may add few more months into) back, everything was fine for now defunct Kingfisher Airline. So having 50-60%age NMI as EMI was not an issue. Now it’s an issue of survival more than anything for all those people who were working there. Think over it.

    Thanks

    Ashal

  15. Ashish says:

    Dear Manish,

    I really like the way you answer. I also had similar question (though my loan was not denied) but was just wondering why my score is hovering around 790-800 though I do not have any loan running, all loan repaid in time without even a single EMI delayed or defaulted, all credit card payments made in time except for one in 2004 which was paid DPD 100 or so.

    Now I have realised the reason for a score of 790-800 and not 880-890, is my credit hunger. I looked back and noticed:
    1. Consumer loan in 1999 (fully repaid)
    2. Two wheeler loan in 2002 (fully repaid)
    3. Personal loan in 2003 (Fully repaid)
    4. Home Loan in 2007 (Fully repaid)
    5. Car Loan in 2009 (Fully repaid)
    6. Consumer loan in 2010 (Fully repaid)
    7. Consumer loan in 2011 (Fully repaid)
    8. Consumer loan in 2012 (Fully repaid)
    9. Consumer loan in 2012 (Fully repaid)
    10. Home loan again in 2013 (EMI started)

    This is surely reflecting that though I have been repaying on time but still I am a credit hungry person who uses loan a lot.

    But can I further improve it to take it to 825+ or so. Just curious about it.

    Regards,

    Ashish

    1. The issue is exactly that . You are extremelly dependent on loan . So many loans requirement from a single person is rare . In general if you see a generic person, he should get somewhere around 3-4 loans in total , plus minus 1-2 loans here and there. But you have taken a lot of loans and that too recently (2011-2012) .

      And now as banks are taking cibil report too seriously . You are now looked down as “a potential threat” in case of default. So banks do not want to take a lot of risk with you, hence they are declining your requests for loan .

      I think you will have to now slow down a bit . If you keep on applying for loans , every rejection will also go to the report and make life tough for you 🙂 .

      You might try with some other lenders , its their individual decison , for which they might ask for a higher interest rate (for the fovor they are doing for you) .

      Manish

      1. Ashish says:

        Dear Manish,

        After reading your previous answer, I did think so. Well now my current home loan is such that I can not even think of taking another loan forget about actually taking it.

        I thank the jago investor forum for making individuals understand lot of big and small issues related to finances, be it investment or credit loans.

        Regards,

  16. I can see that your understanding of how overall CIBIL works and how banks look at it . Let me make it simple for you

    1. CIBIL is your report card . At this moment, what is the status of all your past loans ? You said that you have cleared all of them . So right now there is no loan which has a remark like SETTLED or WRITTEN OFF , correct ? If thats true , then its good, else your report is BAD.

    2. Even if your overall report does not have bad remarks, still your DPD section might be messed up because of your karma in last 3 yrs .

    3. There are other things like like your current number of loans, how many enquires have you put in past and how fast (which all shows how credit hungry and dependent you are) . All that matters to bank .

    4. Banks generally give loan to someone whose total EMI is less than 50% of his take home . Do you have any other loan going on ?

    Manish

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