Ever wondered, how getting your own home in today’s world has become so simple and easy. Many of us have big dreams of owing an abode of our own, and to fulfill that dream home loan is the best option that we can opt for while maintaining good credit score. Home loan helps all of us in providing much needed funds to buy our house. An individual who applies for home loan, his or her property is mortgaged with the lender until the tenure of the loan or till the home loan is paid or whichever is earlier. Therefore, home loan is a secured loan and the lender has the authority to auction the property in case one fails to pay the loan in full.
Role of good credit score in getting your home loan at better interest rate?
Credit score plays a vital role if you want to avail any kind of loan. A credit score is basically a numeric representation of your creditworthiness. The credit score calculation is based on your past repayment track record. Therefore, it becomes easy for the lender to decide whether to offer loan or not. So, if you are applying for a home loan, it is most important that you have a good credit score. If you have a low credit score, the chances of denial of your home loan becomes much higher. Every lender would want to give credit to a person with high credit score as the chances of repayment are higher.
What is a CIBIL Report or Credit Score ?
Credit report is provided by existing four credit bureaus — TransUnion CIBIL (Credit Information Bureau of India Limited), Experian, Equifax and CRIF High Mark. The most popular among these four bureaus is CIBIL. A CIBIL score is a 3 digit number that ranges between 300 and 900. The closer the score is to 900, the better it is.
Generally a CIBIL score of 850 is considered a good credit score and of course more than 850 will make you fall in the elite category of high credit score borrowers. Getting a home loan still may not be a hassle as it requires few more simple requirements. Avoid applying multiple loans simultaneously, as every application sent to lender may affect your credit score. Your credit report provides all the necessary information for the financial institutions to analyze and offer home loan. You can download your free CIBIL credit report from Paisabazaar.com and can also get free monthly updates that will help you keep a tab on your credit score over the time.
Your current income and employment history are also important to banks. Banks just want to know you have steady employment and the monthly cash flow necessary to make your mortgage payments.
Simple Steps To Apply For A Home Loan
- Check your credit score: Check your credit score before applying for a home loan. If you have a low credit score, the chances of your loan application being rejected are high. So, it is always better that you check your credit score beforehand when applying for a home loan. Also, certain errors in your credit report can lead to rejection of your loan application. So, it is better that you get the report rectified before applying for a loan.
- Keep a check on errors: In some scenarios there can be errors, such as your name is printed incorrectly or your address provided is wrong. Therefore, keep a check on all the details sent to you via credit report. Also remember that the credit bureau can’t make any changes in your credit report. In case of discrepancy, you will have to raise a dispute with your credit bureau and the bureau in return will take up the issue with the bank or non-banking institution which will verify if the dispute is right or not. If it is correct then the lender will ask the credit bureau to make the changes. The credit bureau will then rectify the credit report. This whole process takes around 30 days. So, if you check your credit report before applying for home loan, your loan approval will not get delayed unnecessarily.
- Avoid applying home loan with numerous lenders: It is always recommended that one should not apply for any loan with multiple lenders simultaneously. This will give a negative impression to the lenders and will impact or decrease your credit score if the loan application gets rejected. Eventually, a good credit score is always helpful in getting approval on home loan request from any lender.
Steps that help improve credit score to avail home loan at lesser interest rates
- Always try paying your dues on time: An individual who is using credit card or has any loan to repay is always recommended to pay all the monthly installments on time to avoid late payment charge and to get easy home loan at best interest rates.
- Review your credit history: Reviewing your credit history at regular intervals is important to avoid loan rejection from banks. Credit bureaus charge some amount to provide credit report at request, but at Paisabazaar.com we provide you credit report, absolutely free with periodic updates.
- Avoid closing old credit cards and carrying too much debt: The length of your credit history is averaged across all of your credit accounts. The older your accounts, the more they’ll help you in getting home loan, therefore avoid closing old credit cards. Likewise, avoid opening any new credit cards or loans if possible as they’ll decrease the average length of your credit history, and may decrease your credit score.
Therefore, to enjoy lifelong dream of your own home its always better to keep improving your credit history that shall eventually result in offering best home loan for you and your family’s benefit.