Improving Your Credit Score Can Get You a Home Loan Easily
Gaurav and Garv are siblings who are doing really well for themselves. They have a stable career in IT and earning equally handsome monthly cheque every month. Both are looking forward to purchasing a home. Gaurav gets the loan without any hassle; however, Garv’s application is rejected by the same bank. But why did bank discriminate between two brothers of exactly the same repute?
Before extending a loan, banks evaluate creditworthiness of the applicants. In this case, when bank evaluated the two loan requests, they found a striking difference in their credit history. Gaurav has been paying his outstanding loan amount and credit bills on time while Garv has been irregular in his repayments, time and again. So there was a huge difference in credit score of the two brothers and so was the difference in treatment of each application.
What Are the Parameters That Make Any Bank Accept or Reject a Home Loan?
Loans are primarily given to individuals who have a good credit rating or credit score. Banks evaluate individual’s past financial records while granting a Home Loan. Having a great credit score ensures that you can Apply for a Home Loan Online Easily, hassle-free.
What precisely is a Credit Score?
Credit score is a three digit numeric score that ranges in between 300 to 900. The closer you are to the 900 score mark; higher are the chances of your Loan approval.
A credit score is meticulously prepared after a thorough evaluation of your past credit history and loan applications. It is a point based system that proves your creditworthiness in the market.
How Can You Improve Your Credit Rating?
Ensure that you are diligent in repaying your loan EMIs (Equated Monthly Instalments) or bills. Late payment has a negative impact on your credit standing. This will also impact your ability to apply for a Home Loan with any financial institution or bank.
Setting up payment reminders is a great way to ensure that your bills are paid on time. All financial institutions and banks today offer payment reminders and ECS (Electronic Clearance Service) facility to help you save time and money.
It is not a great idea to completely base your expenditure on credit. It shows your increased dependence on borrowed money instead. Maintaining a low credit profile helps you analyse your expenditure, while keeping your credits in check. The smaller is the percentage of credit, the higher is the chance of getting the desired Home Loan approved.
It is recommended to maintain 30% or lower credit utilisation ratio. If you have multiple card outstanding balances, it is best to take a Personal Loan and pay off the pending dues. This will help you in improving your credit score. Keeping just one or two Credit Cards handy, help in keeping a tab on your Credit Card expenditure and ensures that you use it only when necessary.
It is probably a great idea to maintain a mix of credit, i.e., secured and unsecured credit. While secured could be your auto loan or Home Loan; unsecured loans include Credit Card loans or Personal Loans. Having too many unsecured loans will go against your chances of applying for a Home Loan in the future.
As mentioned above, there is a higher chance of banks disbursing your Home Loan if you have a good credit history. A high credit score can get you a lower rate of interest, while a low score may see your application getting rejected completely. Maintaining a good score enables you to get a Home Loan. However, it is always better to check with your lending partner for other factors that revolve around getting that loan. It is alright if you check your credit report just to ensure that you are doing favourably well in your credit ratings.
Rectifying your credit score is more about fixing your credit history and further maintaining it consistently, within the guidelines specified.
At www.mymoneymantra.com you get to understand the workings of financial institutions and banks well in advance. We also help you to compare interest rates before you apply for a housing loan online.
Also Read: Why Do You Need to Insure Your Home Loan?
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