Credit score is telling about the credit worthiness of applicant. The lenders normally prefer score 750 and above. However, apar from credit score lenders also interested in your overall payment habits, credit history and overall credit utilization. Even if you have poor credit score lender can approve your home loan based on satisfactory explanation from applicant with documented proof. For e.g. in case of score is less than 750 due to loan default in which you are not applicant but guarantor or Low Credit due to recent Credit Card overdue, the lender can approve your application with proper explanation.
There are four credit bureaus- CIBIL, Experian, Equifax or CRIF High Mark. Most of Indian Banks and NBFCs uses these reports while making lending decision.
Benefit of Higher Credit Score
Higher Credit score helps applicant with following benefits:
Loan Approval
Banks/NBFCs evaluate your creditworthiness though your Credit Score. A higher Credit Score makes bank comfortable while approving your home Loan application. Since Home loan is secured product and your higher credit score makes lenders comfortable your overall time for loan approval is reduced and banks/NBFC’s sanction your loan without additional enquiry.
Lower Rate of Interest
Banks/NBFCs home loan rate of interest is based on your overall credit score. Every Financial institution have their own set of rules regarding lower rate of interest based on credit score. The common practice is higher the credit score lower rate of interest as higher credit score means less risky for lender.
How to get Credit Score 750
Getting credit score 750 and above can’t happen overnight, one must follow financial discipline to achieve credit score of 750 and above. Following are some of financial discipline to improve your credit score.
Avoid Applying multiple loans in FY
One must avoid multiple loans in past one month of last one year. Some customer applies multiple loan in order to get better rate of interest or in case of multiple rejection due to ineligibility issue. One must understand when your application is processed then first your credit report is being punched by Lender & this is being recorded in your credit report. For e.g. you apply Personal Loan in HDFC BANK, ICICI BANK, Kotak Mahindra Bank & Yes Bank in last month & taken Personal loan from one bank only but you generated 4 long enquiry in past one month. This will reduce your credit score for home loan.
Avoid Defaulting of loans
Avoid defaulting of your loans as this can reduce your credit score badly. If you struggling to make your EMI payments then its better to talk your lender about various options such as increase loan tenure and reduce EMI for time being, or Debt Consolidation. Never opt for loan settlement from lender as balance amount will be shown to your credit report as balance outstanding which keep effecting your credit score badly.
Payment History
Payment history is most import factor in your credit score. Make sure that you pay your bill/ EMI on time. In case of any EMI/ Bill not paid in time ensure that you pay within 30 days of due data as to avoid your credit score to hit badly.
Wrong Information in Credit Report
Obtain the copy of credit report from CIBIL, Experian, Equifax or CRIFHigh Mark. In case any wrong information in your credit report please take up with these agencies for correction. These agencies will seek clarification from Banks/NBFC’s and deleted the information after getting positive remarks from Banks/NBFC’s.
Overall Credit Utilisation Ratio
Credit Utilization ratio is the amount of credit one utilize against the credit limit. For e.g. Your total credit card limit is Rs 2,00,000/- and your outstanding is Rs 50,000/-then your overall credit utilization ratio is (50000/200000) x 100 = 25 %. Keep your overall credit utilisation ratio less than 30 % for better credit score.