Want to Buy a House? Check Your Credit Score!

Updated on: 18 Jan 2024 // 4 min read // Home Loans
Author :(466 posts)

The decision to purchase your own home is undoubtedly the most significant decision of your life. It is a significant financial commitment, which you must honour for a large part of your working life. Earlier, people were able to purchase their own home with the help of their savings. It was possible due to the low prices of residential real estate across the country. Times have changed now; we cannot even imagine owning multiple residential properties due to the ever-increasing prices of properties across the length and breadth of the country. Your own income and savings are not going to be enough to enable you to make an outright purchase. In such a situation, Availing a Home Loan is the best option that you have. Every year, hundreds of thousands of aspiring homeowners take a Home Loan to be able to realise their dream of owning their own house.

HDFC Home Loan Offer

What is a Home Loan?

A Home Loan is a secured loan that is extended by a large number of financial institutions operating in India for their customers. When you avail a Home Loan in order to purchase a residential property, the purchase property is mortgaged with the bank, until you repay the loan amount along with interest. Money borrowed as a Home Loancan only be used for the purpose of purchasing a residential property only. At present, the Home Loan interest rate in the market starts at 8.45% and the repayment tenure can go up to 30 years. The amount available can run into crores, depending on your credit profile and the value of the property.

With the rapid assimilation of technological progress in the financial services sector, a large number of lenders have started offering Home Loans through online channels. You can apply for the same using the website of the lender,or you can also use a reliable online finance marketplace such as MyMoneyMantra. Here you can easily access all the information regarding various Home Loan products, compare them, calculate your EMI (Equated Monthly Instlment) eligibility and understand various other essential terms and conditions. Once you are satisfied with your research, you can proceed to apply for the Home Loan at the current Home Loan interest rate.

Why Must You Check Your Credit Score?

With the financial institutions stressing on the transparency of operations, the importance of a good credit score has become indispensable. Your credit score reflects your creditworthiness to the lenders and is calculated based on a number of parameters defined by various credit information bureaus such as TransUnion CIBIL or Experian. It helps the lenders to assess your past credit behavior and analyse if you will be able to repay the loan on time. At present, a credit score of 650+ is considered as ideal by lenders and also helps you to get the loans at lowest interest rates.

It is recommended that you must check your credit score yourself before you apply for a Home Loan. This is due to the importance of having a credit score over 650 and take corrective actions if the credit score is below the required threshold. Here are a few important reasons to help you understand the importance of checking your credit score before you move your application for a Home Loan:

Assess Your Eligibility

As per the recent guidelines of the Reserve Bank of India (RBI), all credit bureaus are obliged to offer you one complete credit report every year. So, you should definitely access your credit report before applying for a Home Loan. This would help you understand where you stand in terms of the possibility of getting the Home Loan application approved by the lender. If your credit score is below 650, then you should wait for some time and work towards improving your credit score. Once your credit score is above the specified threshold, you can proceed ahead with your application and avail low Home Loan interest rate.

Lowest Interest Rates

Most lenders consider a credit score of 650+ as ideal. At this score your creditworthiness is high,and the chances of default from your side are reduced significantly. That is why lenders are able to offer you the lowest interest rates against your Home Loan application if your credit score is above 650.

Identify Issues in the Credit Report

Credit reports are prepared by software,and it is certainly possible for the software to goof-up once in a while. When you access your credit report, you are able to identify various types of loans or Credit Cards running under your name. If there is any entry that you are not aware of and feel is not correct, you must raise a complaint about rectification. This will help you restore your credit score, which was reduced for no mistake of yours.

Safety of Token Money

When you purchase a property, it is a norm in India that you must pay token money to the seller. Now, if due to poor credit history or low credit score, your application is rejected, you would stand to lose your deposit. Checking your credit score before applying for a Home Loan can save you from lots of hassles later on.

Plan Your Finances

If your credit score is above 650, then your chances of being approved for the Home Loan as well as various other types of loans are significantly improved. If you know that you can have easy access to credit facilities, you can plan your finances accordingly and make some smart investments for your safe future.

Therefore, you must make it a point to access your credit report and check your credit score, before you apply for a Home Loan. This will not only help you get the loan sanctioned at a lower interest rate but would also help with your future financial planning.