Your credit score impacts your home buying process in a big way. It is the reflection of your creditworthiness. When a bank or a financial institution appraises your loan proposal, the first thing it does is to look at your credit score. Through this score they determine whether you are qualified to get the loan or not.
What is a credit score?
A credit score is a number that is a representation of your credit history. It consists of the number of accounts you operate, total levels of your debts, repayment history, your credit card usage and so on. Your lender bank checks this credit score to evaluate whether you are capable of loan repayment or not.
How much credit is needed to buy a home?
The range of the CIBIL score is generally between 300 and 900. You can buy a home if your minimum credit score is 580 and above. Credit score close to 900 is extremely good. Credit score below 500 is considered very poor and the banks do not grant loans to those who have such score. People with poor credit score can buy a house with conventional fixed rate mortgage scheme with higher interest rate.
How to improve your credit score?
When you are thinking of buying a home by taking a bank loan, check your credit score. If it is good your loan will be approved immediately. If not you can improve your credit score before applying for a home loan.
Here are the ways to improve your credit score
- Keep the track of your credit report. Analyse it and identify the mistakes if any. Get them corrected.
- Pay your credit card bills on time to be financially responsible and avoid paying extra interest. Spend within your credit limit.
- Pay your EMIs regularly and in time. If you are defaulting on them it will reflect in your credit score and you will not be trustworthy for a home loan.
- Focus on your home loan. If you want to take other loans such as travel, furniture postpone them.
- Check the payment history of your co-applicants. Their credit score has to be in the correct range too.
Of course there is no need to panic if your credit score is low. Raise it up with timely payments before you apply for a home loan. This will make your home buying process hassle free and delightful.