If you are planning to buy your dream home, the first thing that comes to your mind is how to get your funds. The answer is simple. Apply for a home loan. When you approach a lender (bank) for a home loan, the lender will check if your credit score is good. Now, what is a good credit score? Neeraj Dhawan, managing director, Experian India, explains, “A good credit score is a 3-digit number that shows how likely a consumer is to be accepted for credit. Before a lender agrees to lend money, they will calculate the borrower’s ability to replay the same. To do this, lenders look at credit score which, in turn, is provided by a credit bureau. The credit score ranges from 300 to 900.900 being the highest. The higher the credit score, the greater the chances are of the lenders approving disbursement. For consumers that have high credit scores, the chances of going delinquent are low and hence the risk for a lender to lose money is lower, lower risk is then expected to translate into lower rates of interest.”
A credit score is calculated after taking into consideration factors such as payment history, credit age, credit accounts, etc
Here are some key things a homebuyer should know while applying for a home loan:
Makes you eligible for loans: A credit score of 750 or above is usually considered a good score. Lenders tend to offer unique pricing to consumers with a high credit score. This not only makes you entitled to receive a loan but also gets discounts on interest rates, and processing fees amongst other offers.
Better interest rate: A good credit score can help in getting loans at lower interest rates.
Loans with longer tenure: The better your score the chances of getting a higher loan with a longer period
Quick approval of application: An application with a high credit score makes it simpler for the lender to process because the credibility of repayment is already verified.
Discount on loan processing fees and other charges: Once the lender is interested in providing a loan on the basis of a good credit A credit score, the borrower gets goods negotiation capacity and can ask for a discount for loan processing fees and other charges.
A poor repayment history will drop the score and render the borrower ineligible for good home loan schemes. A good credit score will allow a homebuyer to access the banks and financial institutions for their borrowing needs. It is advisable to review the loan offerings and apply to few credit institutions instead of loan shopping and close any un-utilised credit card lines to maintain a healthy score.