How Much Credit Score Do I Need For A Home Loan?
A home loan is a long-term commitment. The loan amount is also quite high. It is natural that lenders want to sanction loans only to trustworthy borrowers who will consistently repay their money.
A credit score is a parameter that helps lenders to determine the creditworthiness of a borrower. Your credit score is a three-digit number that lenders use to determine whether or not to approve your credit application. It assists them in making an educated lending decision. It ranges from 300 to 900 points, with 750 being considered a good credit score for getting the best credit and loans.
In India, there are 4 authorized credit bureaus, namely, CIBIL™, Equifax, Experian and CRIF High Mark.
What is the ideal credit score to get the best home loan?
A credit score of 750 and above is considered a good score for home loan is the best deal. Such a healthy score will ensure that you get low-interest rates with other benefits and value-added services along with your home loan.
This score differs from lender to lender but 750+ is a sort of benchmark across most lenders and you can safely assume that this score will get you a home loan for sure. Yes, it is desirable to have a higher score if you want to get better terms on your home loan.
How to improve my credit score?
You can increase your credit score by following a few easy measures. Maintaining a good credit score necessitates disciplined credit management. While you won’t be able to improve your credit score immediately, these measures will have a significant effect. A fair time frame for restoring your credit score is 4-12 months. What you’ll need is patience, diligence, and self-discipline to reach your credit goals.
- Close any long-term loans or credit cards that are causing your bad credit. Your credit score will suffer if you have several liabilities on your credit report. Smaller, long-term loans or credit card balances that are having a significant effect on your credit report may be closed. This will be reflected in your subsequent credit reports and is well worth the effort.
- Examine your credit report on a regular basis: Check your credit score on a regular basis to ensure that the information on the report is right. If you discover any mistakes or omissions, you can correct them right away so that they don’t damage your credit score.
- Don’t get behind on payments: Keep track of all of your monthly bills and make sure they’re paid on time. Even if it is a genuine omission, missing payments have a negative impact on your credit score. To ensure that monthly EMI payments are made on time, you can use resources such as auto-debit, standing orders, or NEFT mandates. If you’re paying by cheque, make sure you send it in well ahead of the due date to allow for the approval period.
- Limit your credit utilization: Using your credit card to the full limit is one of the easiest ways to improve your credit score. Keep your credit card bill to no more than 30% of your credit limit per month. If you have a credit limit of Rs. 1 lakh per month, for example, make sure your monthly bill does not exceed Rs. 30,000. If you use more than 30% of your credit card limit, you’ll have trouble budgeting and won’t be able to save enough to pay off your debts. Your score will drop as a result of this.
- Avoid applying for several loans or credit cards in a short period of time: It is not looked at favourably if you generate so many inquiries in a short period of time. What would it look like to a lender if you applied for a credit card, a personal loan, and a home loan all in the same month? It means that you are in desperate need of credit and are looking for several sources of credit. Stopping a few new credit applications in a short period of time is one way to avoid a drop in your ratings.
- Request a credit limit increase from your credit card provider: You can call your credit card company to request a credit limit increase. Increasing your credit limit expands the amount of credit you have available, which increases your credit score.
Can I get a home loan with a credit score of 650?
A credit score of 650 isn’t poor, but it’s also not great. With a 650 credit score, you might be able to get a home loan, but the loan conditions and interest rates may not be favourable.
Taking out a home loan with a high-interest rate is not a good idea. To avoid receiving a high-cost loan, you can take the requisite steps to raise your credit score to 750 before applying for the loan.
Key Points to Remember
- Your credit score shows your credibility and creditworthiness to the lender
- A credit score of 750+ will get you the best home loans in the market
- Check your credit score before applying for a home loan so that you can take some time and work to improve it