How to Build Your Credit Score for Availing a Home Loan
Are you tired of receiving rejections on your home loan applications? Take a look at your credit score. A low credit score may be the cause of your worries. However, there’s good news! You can improve your credit score within a few months.
Check out the various ways you can use to build your credit score.
Why is your credit score important?
One of the factors that lenders consider while checking your home loan eligibility is your credit score.
If you have a high credit score of 700 or above, you can receive a higher loan amount, a flexible tenure, and attractive home loan interest rates. In contrast, a low credit score will fetch you higher interest rates. Thus, your credit score can be the determining factor between affordable home loans and an expensive one.
How to build a high credit score?
A low credit score or no credit history is not a deal-breaker. You can improve it over time with these handy tips.
#1 Make timely payments
Credit bureaus receive your repayment history from the lenders regularly. Whether it is your credit card bill or EMI repayments, making payments on time can improve your credit score. This is because your credit history factors in when calculating your credit score.
A good repayment history shows your lender that you can repay the home loan EMI on time, thus giving them the confidence to approve your application.
#2 Track the repayments by your co-applicants
When you co-sign for a loan, the EMI repayments affect all the applicants involved. This means that while you may be making repayments on time if your co-signer delays instalments or defaults, it can lower your credit score. That is why it is crucial to track your co-signer’s loan repayment history as well.
#3 Don’t apply with multiple lenders
Sure, you need to conduct extensive research to find a suitable lender. However, you shouldn’t apply with multiple lenders simultaneously. Because when you apply for a loan, the lender sends a request to the credit bureaus to access your credit history. Each of these hard enquiries to the credit bureaus lowers your points and brings down your credit score.
So, research your options before applying for a loan, but don’t make too many applications at once.
#4 Check your credit report
Your credit report indicates how well you handle your expenses and debts. So, it would be best to review your credit score before you apply. If there is an error or the report isn’t updated, you can contact the credit bureau and rectify the mistakes.
Improving your credit score takes time. Whether you want to build your credit history or increase your existing score, the steps mentioned above can help you. Once you have a favourable score, you can use a home loan EMI calculator to check the EMI for the applicable interest rates and get a clearer understanding of your repayment obligations.