Long before you start thinking of a home loan, you have to ensure that you have a great credit score. A good credit score can work in your favour while a bad credit score can hamper your chances of getting a home loan. We take a look at what credit score means and then look at why it is important when you are considering a home loan.

What is a Credit Score?

A credit score is a numerical measure that grades an individual’s ability to pay back their outstanding credits. This is calculated by the credit bureaus in the country based on several factors like the length of the credit history, and repayment records among others. Normally, the credit score is a 3-digit number that falls in the range of 300-900, the higher your score, the better.

What is a Home Loan?

A home loan, in simple terms, is a lump sum amount of money borrowed from a bank or a financial institution to purchase or construct your dream home. Normally, it is a loan against property mortgaged to the lender as a security till the period of repayment of the loan.

Credit Score & Home Loan

A home loan is your best friend if you are investing in your dream home. And when you apply for a home loan, the bank or the finance company will assess your repayment capacity. Your earnings, age, expenses, savings, work profile, financial capability, and repayment history of loans and other dues will be considered. It is here that the credit score comes to play. A high credit score indicates that the customer can comfortably repay the home loan. It enhances your loan eligibility, thereby enabling you to avail of a slightly larger loan amount in case you require it. A healthy credit score also gives you better negotiation power. You can thus expect lower interest rates and waiver of processing fees and other charges.

All these factors make it mandatory for you to maintain a good, healthy credit score. You need to check your credit score and if it is not healthy enough, work on improving it before you venture out to invest in a home.

Why Favourite Homes?

At Favourite Homes, we help you make the process of availing a home loan very easy. Call us to know the details.