Home is one of the most fundamental needs of an individual. Getting a home loan is essentially a stepping stone in the journey towards realizing your aspiration. The wonderful feeling to take that first step into your own new home is simply special. Today, banks are assisting you in simplifying your journey of home buying experience with their range of home loans and features.

Qualifying for a home loan requires many variables and check points to be covered. Among them, one of the biggest criteria to be eligible for a home loan is the credit score. A credit score is usually the first aspect to be considered by the financial institutions for home loan eligibility.

A credit score has become an important aspect in the financial space for an individual. Today, a good credit score is essential for more than just a credit card or a loan.

A credit score is used to assess the creditworthiness of individuals applying for a home loan and how likely will they repay their debts on time. The payment history and credit utilization ratio have a greater impact on the scores than the age of an individual’s credit accounts.

The following are the factors which are taken into consideration for evaluating the credit score:

  • Payment History: Factors the timely payments of debt in the past
  • Amounts Owed: No. of lines of credit present and how high is the balance on each
  • Length of Credit History: Duration of credit
  • New Credit: Factors if several credit accounts have been opened recently
  • Types of Credit Used: The combination of credit cards, retail accounts, instalment loans and mortgages present
     

It is essential to understand that the age of credit history influences the credit scores. If you want to establish or maintain good credit health, it’s best to focus on paying bills on time and reducing debt.

It is recommended to check the credit report and scores whenever opting for home loan. Better the credit history, the more likely it is to receive a good interest rate on the home loan. A good credit score can significantly improve your chances of obtaining the loan to acquire the home you always wanted. Timely payments are a major factor in ascertaining your credit worthiness and can make a major difference in getting your home loan.

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