August, 2018
The two parameters that define the credit worthiness of a borrower are one's ability to pay and the intention to do so. Hence, by building a good credit score, you can negate the chances of your home loan application ever getting rejected
It's been six months since Harsh Shetty, a working professional, has been scouting for his dream abode. And finally when he zeroed in on his house, there was another speedbreaker awaiting him, which he did not foresee. “My loan application was rejected as my credit score was weak, thus costing me my home,” mentioned a dejected Shetty.
Have you been in a similar situation before? Or do you fear that you could also land in a soup like Shetty and lose on the opportunity of securing your ‘home sweet home’? If yes, let the experts guide you along – as building a good credit score is definitely in your hands.
It's been six months since Harsh Shetty, a working professional, has been scouting for his dream abode. And finally when he zeroed in on his house, there was another speedbreaker awaiting him, which he did not foresee. “My loan application was rejected as my credit score was weak, thus costing me my home,” mentioned a dejected Shetty.
Have you been in a similar situation before? Or do you fear that you could also land in a soup like Shetty and lose on the opportunity of securing your ‘home sweet home’? If yes, let the experts guide you along – as building a good credit score is definitely in your hands.
Credit : pixabay.com
What is a credit score?
The credit score of a borrower indicates the credit worthiness of the applicant. In short, it is a numeric rating, which signifies the certainty of you repaying the loan. So, a high score means that a person has the capacity to repay the loan and shall do so well within the specified timeframe. Likewise, a low credit score raises concerns about the financial credibility and management skills of the borrower.
WHAT INFLUENCES AN INDIVIDUAL’S CREDIT SCORE?
An individual’s credit score is determined by the credit behaviour and performance of the borrower. Hence, the factors contributing to the credit score are:
- • The loan or card dues repayment history;
- • For how long have you had the credit;
- • The credit limit of the borrower and how he is faring along the repayment line;
- • Enquiries on the credit report;
- • The banks and financial institutions would also look at other parameters like demographics, employment profile and in a few instances, the saving habits and assets owned by the individual.
- - Sachin Chaudhary, COO, Indiabulls Housing Finance
FACT FILE
The banks and financial institutions generally source the credit score from the credit bureaus calculated by Credit Information Companies (CICs) like CIBIL, Experian, Equifax, High Mark, etc who have the repository of all borrowings along with the repayment history of an individual.
MY CREDIT SCORE IS LOWER THAN EXPECTED…WHY?
Lack of any repayment trends. For instance, you have never borrowed in the past;
Too many attempts to avail a credit line in the last few months;
Missed payment in your utility bills like electricity, telephone, mobile, etc.
Too many attempts to avail a credit line in the last few months;
Missed payment in your utility bills like electricity, telephone, mobile, etc.
HOW CAN AN INDIVIDUAL BUILD A GOOD CREDIT SCORE?
Honour your debt obligations on time i.e. within the due date assigned by the lender; Build a credit pattern by availing a few credits (some of which are not interest bearing). For example, if you fulfill your payments before the due date, there is no interest outflow, but still builds a strong repayment behaviour for the borrower. However, be wary that you do not revolve the credit;
Maximise your payment for your expenses through banking channels;
Improve your savings and exhibit consistency in the form of SIP, recurring deposits, fixed deposits, etc;
One should also avoid making needless enquiries for credit, as multiple credit queries will have an adverse impact on one’s credit score.
- Rajaram Manian, risk head, Aspire Home Finance Corporation Ltd
Maximise your payment for your expenses through banking channels;
Improve your savings and exhibit consistency in the form of SIP, recurring deposits, fixed deposits, etc;
One should also avoid making needless enquiries for credit, as multiple credit queries will have an adverse impact on one’s credit score.
- Rajaram Manian, risk head, Aspire Home Finance Corporation Ltd
Impact of a good credit score:
There is a higher probability of getting the home loan sanctioned
The scope for negotiating a competitive rate of interest increases for borrowers
The bank would not seek a security/ guarantor when you apply for the home loan
The scope for negotiating a competitive rate of interest increases for borrowers
The bank would not seek a security/ guarantor when you apply for the home loan
Consequences of a bad credit score:
The chances of your home loan being rejected increases
A higher rate of interest may be charged over and above the normal
The financial institution could seek credit enhancement like personal guarantee and/or additional collaterals
A higher rate of interest may be charged over and above the normal
The financial institution could seek credit enhancement like personal guarantee and/or additional collaterals
In conclusion:
An individual should always borrow within his repayment capacity; considering his expenses and income flow. And if he maintains financial discipline by meeting all his credit obligations on time, not only would his credit worthiness improve; but also his credit score shall remain strong.
Any score above 600 is considered good enough if you wish to qualify for a home loan application.
Any score above 600 is considered good enough if you wish to qualify for a home loan application.
Also read: PMAY Home Loan – Pradhan Mantri Awas Yojana
To Know More Information About Home loan on Affordable properties in Thane Visit Squarefeet Group in Thane Website
Source - propertytimes.in
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