Buying a house is a big dream in everyone’s life. But for the first time, taking this decision for those who buy the house is not only associated with emotion, but also a big financial step. In the current era, most people resort to home loans due to continuous increase in real estate prices in India. In such a situation, the credit score comes out as a special factor.
What is a credit score?
Credit score is a number of three digits, which shows your credit eligibility. This score is between 300 and 900. The higher this score, the better the chances of taking your loan. Along with this, interest rates will also be less. It is very important to have a good credit score, because the lenders first check it. This score suggests how capable you are to repay the loan.
While taking a home loan, this score decides whether you are eligible for the loan and how much interest rate will be collected from you. A good credit score helps you get home loans without any hindrance and gives better interest rates than others. At the same time, interest rates can be higher due to a low score or your loan application can also be rejected.
Credit score range and its advantage
As mentioned earlier, the credit score is usually between 300 and 900. With the details below, you can understand what every score range meant –
Na/nh: This means ‘No History’ or ‘Not Applicable’. This means that you have not taken any credit (borrowing) till now or your credit record is not available. This score does not reveal your credit qualification.
300-549: The score of this range is considered weak. This indicates that you have never paid a loan or EMI on time before. It can be difficult to get a loan on this score.
550-649: The score of this range is considered to be the average. Although there is a possibility of getting a loan on this score, the interest can be offered a lot.
650-749: This score is considered good. This means that your credit history is fine and the loan can be easily approved.
750-900: This score is considered to be the best. This shows that your credit history is very strong and you can get better loan offers and low interest rates from banks or NBFCs.
There are four major credit bureau in India which offer scores.
You can check your credit score for free by visiting the Moneycontrol app or website. If you are looking for a multi-pure loan loan, you can also apply a complete digital loan of up to 50 lakh rupees through the Moneycontrol app.
A score of more than 750 is necessary for home loan
A score of more than 750 is considered ideal for home loans in India. However, even if the score is above 700, the chances of getting a loan for the first time for the house buyer increases significantly. Whereas there is a possibility of getting a loan rejecting on a low score or a higher interest rate. Good credit history helps you get better loan offers.
These are the major factors affecting the credit score
Payment History: EMI and card payment increases the score on time.
Long Credit History: AA long credit history indicates your better management skills, which increases your credit score.
Credit utilization ratio: This reflects the percentage of used credits. The low credit utilization ratio indicates better credit management.
New credit app: Repeatedly applying for new loans can reduce the score.
Credit Mix: Different types of loans (cards, personal, homes) improve scores.
On the Moneycontrol app, you can check the credit score for free and can also apply for digital loans up to Rs 50 lakh. This process is completely digital, where the work is completed in three steps – fill the details, complete the KYC and set the EMI.
conclusion
Buying a house is a big decision and it is necessary to make a strong credit score before that. Pay on time, use credit cards properly and do not apply for new loans quickly. By doing this you can easily find your dream house.
If you want to take an instant personal loan, you can explore a loan offer of up to 50 lakhs on Moneycontrol, where there is a minimal documentation and instant disorder.
Summary
Credit score plays an important role while taking a home loan. Learn how a good credit score increases your home loan approval and helps unlock the conditions of better interest rates and loan.
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Disclaimer
This fraction/article is written by an external partner and does not reflect the work of the editorial team of Moneycontrol. This may include references to products and services offered by Moneycontrol.