How your credit score matters in a home loan

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.

Latest Comments

Leave a Comment

200 Characters


Read Next

what-is-a-credit-score-CIBIL-score

What is a credit score (CIBIL score)

ways-to-make-your-personal-loan-work-harder-for-you

How to Make Your Personal Loan Work Harder for You?

If you are expecting some liquidity needs in the near future, ...

debunking-the-myths-associated-with-your-credit-cards

Debunking credit card myths

When you start using something new, you could fall into ...

Load More

Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.