Buying a home is a huge investment - it can’t be emphasized enough. It is a wonderful feeling to be able to own a valuable asset like a house. For most people in India, it is the main acquisition they will ever make, considering the real estate prices nowadays. Homeownership is something that almost every Indian – urban or rural - dreams of and banks have come up with loans suited for that very purpose!
Before you decide on a housing loan, you need to make sure you are prepared so that your application is not rejected. Do your research thoroughly and do a home loan comparison in order to apply for the home loan with the best rate. Of course, the best rate would depend on a variety of factors like your credit score. You need to have a good credit score in order to land an attractive loan offer having the lowest interest rates. Even a .5% reduction in the rate can mean significant savings in interest payments for the entire tenure of the loan, stretching for 10-30 years.
Do you know your credit score?
Before applying for any kind of loan, you should obtain a copy of your credit report from the credit bureaus. If your credit score is low (below 750), then it is unlikely that you will be approved for a home loan. If your loan application is approved with a low score, you might have to face unattractive terms like a high interest rate. Make sure you improve your credit score before you apply for a home loan since the interest rate and other repayment terms will affect you for many, many years.
I want to apply for a Home Loan but have bad credit. What should I do?
- First, avoid applying for any kind of loan if you have a bad credit score. There is a high chance that your loan application would only get rejected. Rejection of a loan application has a negative effect on your score, and your rating will only be knocked further down.
- Obtain your credit score and a copy of your credit report: Do obtain a copy of your credit report from the bureaus and take a fine comb to it. Check for any inconsistencies or errors. If an error is present, file a dispute and get it corrected immediately, as these mistakes can drag your credit score down.
- Improve your credit score, if required: What you need to do is concentrate on improving your credit score to at least 750. This can take an average of 4-12 months, depending on the seriousness of your credit situation.
- Pay your bills: One of the main reasons why a credit score gets knocked down is the payment behavior. Pay your dues every month, on time, every time. This will increase your credit score considerably. Do not default on any payments.
- Convert any ‘Settled’ accounts into ‘Closed’ accounts. This will also help your loan application.
Once you improve your score and credit profile, you will be in a position to have your loan application approved and avoid the chance of rejections. As mentioned before, a higher credit score means you can avail of more attractive terms that will lighten your repayment burden.
Having a good credit score is one of the main prerequisites to obtaining a home loan at attractive interest rates. Do you think you need help with improving your credit score or improving your credit health so that you become loan-eligible? CreditMantri can guide you on how to improve your score in the most efficient and effective way so that your loan application is approved and also match you with the most suitable loan offer.