From determining your eligibility to setting your home loan interest rate, lenders depend upon your credit score. While it is important to have a good credit score, at times home loans may be rejected despite having a good score. This is because credit score is just one of the parameters considered by lenders for assessing your home loan eligibility. Besides credit score, lenders factor in other parameters.
Listed here are common reasons for home loan rejection despite good credit score:
- Error in your credit report
Despite a clean past credit history, your credit report might contain errors, which may result in home loan rejection. Thus, before you apply for a home loan, ensure to review your report to assess if there is any error. In case of errors, immediately approach the credit bureau or concerned lender for rectification. A rectified report can enhance your chances of availing home loan.
- Delay in loan repayment guaranteed by you
While your past credit repayment record for the loans you availed might be clean, you must note that the loan you assure for your friends and family too can affect your credit history. If the loan guaranteed by you fails to receive payment by the primary borrower, it may not just impact the primary borrower’s credit score but also your credit score. Thus, ensure to keep a close watch on the loan repayments guaranteed by you.
- Constant job hopping
While switching job for future endows better prospects, frequent job change creates uncertainty in the minds of lenders concerning your finances.
- Uncomfortable with employer profile
While you might have a strong credit record, your employment and employer profile have a bearing on your loan approval prospect. An association with a risky job profile or employer lowers your chances of availing home loan approval.
- Incomplete documentation
Home loan is approved predominantly based on the documents provided by you. In case the documents required for a home loan are not in order, lenders might not approve your home loan application.
- Property issues
Property’s age has a bearing on your loan approval chances. If the property is extremely old, lenders might hesitate to provide you a home loan.
- High debt level
You might not avail loan if you have multiple loans and a high interest debt. It is because such scenarios create uncertainty concerning your repayment capacity.
In case you are approaching the age of retirement, you might not be able to avail a home loan as you have inadequate time to make the loan repayment. However, if the lender is convinced that you have sufficient income to make loan repayment before retirement, then your home loan application may be approved.
Credit score is a major indicator of credibility used to decide your loan approval chances and set your housing loan interest rate. A strong credit score is looked upon as important to avail home loan approval from lenders. However, at times despite having a strong score, home loan applications might be turned down due to the above-listed reasons. Thus, ensure to consider the above factors before placing an application for a home loan to avoid home loan rejection. While placing your home loan application, ensure to use the home loan EMI calculator to compute the EMI as per your repayment capacity.