While evaluating your soundness for a home loan, one of the most vital
things that a bank would go through is your credit score. Read this blog to
know what this score is and how it influences your loan.
Verify your credit report for any mistakes
that might be influencing your score.
To prevent any non-payments,
banks now take their eligibility conditions very seriously. Home loans are given
to people who meet these minimum conditions that are related to the income, age
and employment history of the borrowers. While these things help them safeguard
that you have a steady income and will pay the EMIs on time, banks would also
like to know your credit history. In other words, the bank would like to know
how responsible you were at managing credit in the past. To find this, they verify
something known as a credit score. What is this score? How does it impact the
interest rate of your loan?
Let us have a look.
What is a credit
score?
There are now credit agencies
like CIBIL that keep the credit history of individuals. Based on how you have managed
with loans and credit cards in the past, these credit bureaus assess a 3-digit
score. This score helps lenders understand whether or not you are an individual
who can comfortably pay the loan amount.
The score is between 300 and
900 and the closer you are to 900 mark, the more trustworthy borrower you have
been. People with exceptional credit scores are considered by the bank when
granting a home loan
as it helps them lessen the risks of default.
How does credit
score impact the home loan?
Besides from assisting you in
meeting the house loan eligibility, the score can also support you get a better
deal from the lender. Banks would rather give loans to individuals with a score
of at least 750 and more. If your score is more than 750, it allows you to
negotiate to get a better housing finance deal. As the lender knows that you
are a trustworthy borrower, they might slightly lower the interest rate to give
you an incentive for having an excellent credit score.
How to increase
the credit score?
Banks now have home loan
eligibility calculator on their website to facilitate the borrowers to know
whether or not they meet the eligibility conditions of the bank or financial
institution. If your score is lower than the minimum score required for taking
a housing loan from a particular bank, there are a few ways to increase your
score.
Here are some of the most effective measures:
If you know your credit score is poor, you
should attempt to limit the number of times you apply for a loan at different
banks. Repeated loan applications can have a negative affect your credit
report.
Try to pay off your existing loans before
applying for a new loan. This is especially true if your existing loan is Personal
Loan which is an unsecured loan.
