Purchasing a home is a milestone in one’s life – and to help you realize this dream, many banks and financial institutions these days are offering affordable home loans. However, qualifying for the most competitive housing loan interest rates requires you to tick off all the criteria. One such major criterion that lenders use to determine your eligibility is your credit score, also known as the CIBIL score. Read on to know what your ideal score is and check out how to improve your credit score for a housing loan.
What Is a Credit Score?
A credit score is a 3-digit number measuring your creditworthiness. The score ranges from 300 to 900 and is calculated based on several factors, such as one’s repayment history, existing debts and liabilities, credit inquiries, and so on.
Lenders usually consider a credit score above 750 good for a loan application. Such a high score implies that you are a responsible borrower and are likely to pay your dues on time. On the other hand, having a low score is an indication that you are a risky borrower and are likely to default. This lowers your chances of getting your home loan application approved. Therefore, it is essential to improve your score and credit rating before applying for a loan.
How Does CIBIL Score Affect Housing Loan Interest Rates?
Banks and financial institutions lend you the loan amount for a specific period. A poor credit score means you have a poor repayment history, which automatically puts the lender at a high risk. Therefore, lenders charge housing loan interest rate to ensure that the amount is collected over a short tenor. On the contrary, a higher score on the scale would have your lender reduce the rates owing to good repayment habits translating to lesser risk. A decrease in the rate of interest can help you save a lot of money in the long term.
Summary
Once you know the ideal credit score and its importance, you can simply refer to the tips above to boost the score and get the housing loan approved. Aim for a score above 750 for affordable rates and hassle-free application approval.
