How does your credit score impact your home buying process?
What is a credit score?
A credit score is a three-digit number used as an indicator of your creditworthiness. It ranges between 300 to 900, with 900 depicting the maximum creditworthiness. The evaluation is performed based on your previous credit repayment data and overall credit management.
The four RBI licensed credit information companies in India who can provide credit score are:
- Credit Information Bureau (India) Limited (CIBIL)
- Equifax and
- Crif High mark
How does it affect the home buying process
Whether you are buying a new property or constructing a house, the process usually starts with a home loan application. A home loan provides you with tax benefits, secured financing, and the ability to purchase the property you like without squeezing up your hard-earned savings. But not if you have a low credit score. Lenders, nowadays, pay close attention to your credit score before lending money for home buying.
So if your credit score is low, the loan can be rejected or approved even if it’s for a smaller amount and, if approved, still fetch a higher rate of interest. Due to which it may directly impact the home buying process, as you will now have to adjust with a small property or cancel the purchase entirely.
Whereas, if the credit score is good, your loan will be approved quickly for the required amount. The interest rates for you will be lower, and the entire home buying process will be swift and hassle-free.
Minimum credit scores and loan types
How can you improve your credit score
- Pay bills on time
- Track your EMI deadlines and make payments on time
- Take loans for a longer tenure and make regular on-time payments.
- Create a credit history if you don’t have any. Start by getting a credit card.
- Improve credit history by proper management of all credit cards. Always pay the minimum payment due on time.