Learn how your CIBIL Score can be your home loan game-changer, and explore the advantages of Bajaj Finserv Credit Pass.
Your dream of homeownership rests precariously on your three-digit credit score. This number, ranging from 300 to 900, influences every step you take in the world of finance. Nurtured and maintained well, your credit score can be a guiding force, taking you through the twists and turns of home loans, and leading you to the treasure chest of favourable interest rates. It isn’t merely a number, it’s your golden ticket to a smoother, more cost-effective journey towards your dream abode. So, let’s explore how this seemingly small number can affect the interest rate on your home loan.
What’s a good credit score?
Your credit score represents your money reputation, showing lenders how trustworthy you are with finances. The higher your score – think 750+ – the better your reputation. A lower score, on the other hand, makes lenders hesitate because it suggests you’re less likely to pay them back on time. Your credit score is calculated based on numerous factors linked to your financial behaviour: such as payment history and credit utilisation, among others.
Home loans and interest rates
Home loans can help you turn your dream home into reality. However, when you borrow money from lenders like banks and NBFCs to buy a house, they don’t give it for free – there’s a cost involved called ‘interest’. This rate of interest you pay can make or break your borrowing adventure. That’s where your credit score comes into play.
Credit score and home loans
Imagine a coach picking players for a football match. She’d want the best players on the team, right? Lenders also want the best borrowers for their loans. Lenders consider your credit score when deciding whether they can trust you to pay their money back. It also plays a huge role in deciding the rate of interest and other terms you’re offered. Just like the coach would assign positions to team members based on their performance.
When lenders see your credit score is high, they view you as a reliable player in the game of credit who’s likely to pay back on time and reward you with lower interest rates. Not only that, you can even ask for a larger loan amount or a longer term because lenders trust you more.
Applying with a low credit score
There’s a higher chance of your loan application being rejected if you apply for a home loan with a low credit score. This is because a low credit score indicates that you might have a history of late payments, defaults, high credit utilisation, and other credit behaviours that might prove risky for lenders.
On the off chance that your application is approved, you must be prepared for less favourable terms lenders might offer to compensate for the risk to themselves, such as:
● Higher interest rates to offset the increased default risk
● Shorter loan tenure, with resultant high monthly payments
● Smaller loan amounts that might limit your purchasing power
● Additional fees and charges
● Harsh loan conditions, including providing collateral or a guarantor/ co-signer
It’s always recommended that you check your credit score before applying for a home loan and take measures to improve it if required. This will help you get approved with favourable terms.
Boosting your credit score
Here are some simple actionable tips that can help you get your credit score in shape so that you’re always in a favourable position when applying for a home loan:
● Pay your bills and EMIs in full on time, every time.
● Avoid using all your available credit at once and maxing out your credit cards.
● Keep old credit accounts open and in good standing.
● Limit the number of credit applications you make. Only apply for credit when you need it and remember to space them out over time.
● Consider diversifying your credit profile to show that you’re a balanced borrower.
● Review your credit report and score regularly to catch any errors or discrepancies that might be harming your credit health.
If your score is less-than-ideal and you’re struggling to build and maintain your creditworthiness, consider signing up for the Bajaj Finserv Credit Pass. This unique offering, powered by India’s oldest and largest credit information company, TransUnion CIBIL, equips you with all the tools you’ll need to regularly monitor your credit health report and credit score, track and control your credit factors, and make informed decisions when it comes to applying for credit. Sign up today for free access to the Credit Pass toolkit for a full year*.
Remember, a high credit score is your ticket to lower interest rates, more loan choices, and a smoother journey towards your dream home. Nurture it well and reap the benefits without breaking the bank!
*Limited period offer.
