A credit score is a 3-digit numeric code that represents your creditworthiness to the lending institutions. It shows that you are capable of repaying the borrowed amount as well as managing your finances well.
Having a credit score of around 750 is considered decent, thereby increasing your chances of availing loans hassle-free. Further, you can also take the benefit of low interest home loans on specific occasions.
To build or maintain a credit score that is acceptable to most lending institutions depends on numerous factors. A few vital factors are listed below –
- Timely payments
Paying your outstanding debts after the due date attracts unwanted penalties or late fees. Make your payments timely to improve your credit score.
Additionally, defaulting on your repayment and paying fines or penalties for the same directly shows on your credit report. Avoid defaults by paying your debt before the due date to increase your credit score.
- Lower credit utilisation
Spending more than the credit limit impacts your credit score profoundly. Keep the credit utilisation ratio under 50% to see a positive impact on your score.
- Avoid multiple credit applications
Applying for multiple credits at a time attracts credit inquiries. Such checks lower the applicant’s credit score. Hence, individuals should avoid applying for several credits at the same time.
In simple words, holding a healthy credit score will help you gain benefits on home loan interest rates.
