.gif)
.webp)
.svg)
A credit score is a three-digit number that holds the summary of an individual’s credit profile and history. Your credit profile is based on credit behaviour that includes borrowing and repayment of loans, maintenance of credit cards, etc.Your credit score is calculated by credit bureaus in India. TransUnion CIBIL is one of the major credit bureaus functioning in the country that calculates your credit score. The three-digit number can range from 300-900 on your CIBIL report, where a score closer to 900 indicates a good credit score. But what exactly do you mean by a good credit score? Let’s see.
What Score is a ‘Good’ Credit Score?
Your CIBIL score is an indicator of your creditworthiness and therefore affects your chances of obtaining a loan.
| Credit Score | What Does It Mean? |
| 300-599 | A credit score between 300-599 indicates poor credit and reduces your chances of obtaining a loan. It conveys to the lender that the borrower has a poor credit repayment history, so the lender may reject the loan, provide the loan at a higher interest rate or against collateral. |
| 600-749 | With this score, you are more eligible for a home loan, but the interest rate can be high. The lender also may consider factors such as monthly income, stability of your job and existing loans to evaluate your application. |
| 750+ | A credit score between 750 to 900 indicates good credibility, so the chances of securing a loan are very high. |
Besides this, having a good credit score also means that your loan approval process will be quick and hassle-free. With a higher credit score, you are in a better position to negotiate the loan amount, the rate of interest and the repayment terms with lenders to receive the best possible loan offer.
What is a bad credit score?
To be eligible for a home loan, you need to have a good credit score. There are times when you may not be able to pay your debts on time due to financial issues, resulting in a lower score. A bad credit score is risky as banks are reluctant in approving the home loan. However, there are ways other ways to avail of a home loan with bad credit.
How to Get a Home Loan with Bad Credit?
A bad credit score is usually the result of not paying off debts, defaulting on a loan or credit card payment. If you have pending debt and you want to apply for a home loan, you can seek a co-applicant for the loan, someone who is a family member. For instance, if your husband or wife has a good credit score, you can apply jointly. This will improve the chances of loan sanction.In case you have defaulted on a loan or a credit card, you must pay off the settlement amount at the bank and obtain a No Objection Certificate (NOC) to get a home loan approved. If you are worried about getting the home loan rejected due to a bad score, you can approach your own bank, where you have maintained your savings or FD or RD account. Since you have been a loyal customer, there is a high probability of home loan approval.
How Can Your Score Affect Your Home Loan?
Your lender wants to know the amount of risk involved in lending you the home loan. Your credit score conveys this risk percentage. By having a good credit score, these are the advantages you will have as a borrower-
- Competitive Interest Rate You are likely to be offered a lower or a discount on your interest rate that leads to less EMIs. You will also receive more offers from banks/lenders from which you can decide on the best possible option.
- Repayment Terms With a good credit score, you can negotiate the terms of repayment of your home loan . You are also more likely to receive a loan for a higher tenure and a low amount of down payment.
- Amount of the loan Your credit score indicates how efficiently you can repay a loan. Lenders want minimum risk while lending you money. With a high credit score, you are eligible for a higher amount of home loan .
Improve Your Score!
Before applying for a home loan , don't forget to check your CIBIL report. Not happy with your credit score? Here is what you can do to improve your credit score and secure a loan that suits your needs-
- Pay your EMIS/Dues on Time If you are late on your EMI payments, it leaves a negative impression on the lenders.
- Underutilise your Credit Card Limit Do not max your credit card limit every month. You should also not carry any outstanding credit card repayment balance to the next month’s billing cycle.
- Close Existing Loans If you already have multiple loans that you are repaying, securing additional loans will not look good on your credit score.
- File for a Correction Sometimes, an error in your credit report might cause the score to go down. Spot the mistakes, if any, and notify the credit bureau along with supporting documents.
Lastly, remember to frequently review your credit score and ensure it has been updated according to your current financial conditions. Keeping the above points in mind, you can successfully secure a home loan and obtain a good credit score.
DISCLAIMER
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
