What is a Credit Score?
A Credit Score is a three-digit number ranging from 300 to 900 that denotes your creditworthiness. In other words, it indicates your ability to repay the loan on time. Credit bureaus evaluate important factors such as credit utilisation ratio and repayment history and assign everyone a Credit Score based on that.
What are the different credit bureaus in India?
Credit bureaus gather and analyse financial data, including loans and credit card repayments, to generate Credit Scores for individuals and businesses. They assist lenders in assessing creditworthiness. The leading credit bureaus in India are CIBIL (Credit Information Bureau India Limited), Equifax, Highmark, and Experian, providing reliable credit history insights to lenders.
Why should you have a good Credit Score?
When you apply for a Home Loan and have a high Credit Score, i.e., more than 750, you can expect the lender to reward you with special benefits like:
- Enhanced Home Loan eligibility: You can borrow a higher amount (if required).
- Faster loan processing: The lender may process your loan application faster and disburse the amount quickly.
Other benefits: Because of your high credibility and good repayment history, the lender may offer a Home Loan at a lower interest rate as well as discounted processing fees and other charges.
How to improve your Credit Score?
- Pay your Credit Card bills or loans on time.
- Make sure that you settle your bills in full.
- Maintain a good balance between secured and unsecured loans.
- Always check your credit report for mistakes. If you find any unsolicited transactions, report them immediately to the credit bureau and get them rectified.
- Use your Credit Card carefully and try not to utilise more than 50% of the credit limit.
- Avoid applying for too many loans at the same time. This will reflect that you are credit-hungry.
Frequently Answered Questions
Anything above 700 is a good Credit Score for a mortgage loan. If the score is lower than this, expect either loan application rejection or loan approval at a higher interest rate.
The Credit Score required for Home Loan approval at an affordable rate is between 750 and 900. However, in addition to this score, ensure a consistent income flow and a stable occupation.
Yes, a Credit Score of 750 is regarded as good and can help you negotiate better deals on borrowings.
While different lenders have different benchmark Credit Score requirements for approving Home Loan applications, scores in the range of 700-750 are regarded as fairly good. A higher score closer to 900 means you stand a better chance of getting your loan approved. You can also expect to enjoy other benefits, such as faster loan application processing, better pricing, lower interest rates and a discounted processing fee, and a larger loan amount.
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