Wonder Home Finance - Home Loan In Bhopal

Introduction

Getting your home loan approval can be quite a long process. Lenders like consider various determinants before sanctioning your home loan amount. These factors include age, employment status, monthly income, home loan amount and tenure. As you will notice, many of these factors are related to money or income. But why? The answer is, to determine whether you are capable of repaying your home loan and one of the factors that assure your creditworthiness is your credit score. A good credit score is a three-digit numerical value, that reflects you as a trustworthy and responsible borrower as it paints your overall financial picture. The better your credit score, the more your chances of getting your home loan approved with cost-effective benefits like affordable home loan EMI, attractive home loan interest rate, flexible repayment plans, etc. In this blog, we will dive into what credit score is all about and its various dimensions. We’ll break it down and help you understand why it’s so important. You will come to know how it is calculated, the factors that determine it, and how to improve it along with other related information. 

What is a Credit Score?

The three-digit score that determines your creditworthiness is known as your credit score which varies roughly from 300-900. Generally, a good credit score is considered better and favorable as it asserts the borrower’s repaying capability. Also, a decent credit score entitles you to other perks like convenient home loan interest rates, higher home loan amounts and flexible home loan tenure. The RBI has licensed four agencies that provide authentic credit scores. It is advisable to regularly keep a check on your credit score to maintain a good credit history and start maintaining it if you are planning to take a new home loan. Wonder Home Finance also provide authentic credit score check in a few simple steps.

Wonder Home Finance free credit score check

Who Computes Your Credit Score

Now you have a fair idea of what a credit score is. But who calculates it? Many lenders provide credit score check by connecting to their preferred credit score reporters as soon as a home loan is applied. This helps them filter out potential defaulters. RBI has given authority to four main agencies to carry out credit score check. All these agencies collect and aggregate analytics of your finances and ensure that you get authentic and accurate credit scores. 

Factors Determining Your Credit Score

A credit score is an essential part and one of the initial phases of getting a home loan. Each authorized agency has its criteria for evaluating a credit score. In general, there are roughly a few main domains that are scrutinized for credit score assessment. They are as follows:

1. The Use of Available Credits 
2. Your Payment History
3. The Types of Credit
4. Your Credit History Length
5. Multiple New Credit Applications 
6. The Total Number of Inquiries on Your Credit Card

Why do You Need a Good Credit Score

Till now, we have established what is credit score and what determines it. Let us get more in-depth with why we need to have a good score. It is very important for all credit types which includes home loan and their associated products. Each lender sets its minimum credit score based on their target group. This benchmark is according to the norms set by the RBI in association with the credit score agencies. Along with getting an affordable and hassle-free home loan, you also get benefits in refinancing, and buying houses like attractive home loan interest rate, getting your home loan application approved quickly, flexible tenures, and many loan repayment options. A good home loan credit score can help you bargain your way to these attractive and convenient facilities.

How to Improve Your Credit Score

After knowing what is credit score, you might think of ways to improve it as a strong credit score is essential in securing approval for a home loan. The following are the ways to enhance your credit score:

1. Timely Payments of Bills and Monthly Dues: Regular and punctual payments of credit card bills, home loan EMIs along with any other financial commitment have to be made. A minimum of six months of judicious payments must be there to see an observable and positive impact on your credit score.
2. Keep Mixed Forms of Credit: If there has been no credit borrowed from your side, then there will not be a credit history, which will lead to a lowered credit score. To have a balanced credit history, you should have a decent amount of secured and unsecured loans. This will reflect your strong financial planning.
3. Make Sure that Your Credit Score has been Updated: Fully repaying the home loan is an inexpressible joyous feeling. But it is not the complete end. If your credit score doesn’t reflect so, then your home loan repayment is still considered incomplete, thus lowering your credit score. You must ensure that your credit score has been updated by continuously following up with your financial lender. 
4. Keep Note of Credit Limit: You must maintain your credit utilization as it has a direct influence on your credit score. One way to do this is to avoid closing a credit card as it mirrors your poor financial planning. Paying off your bills and sustaining your credit line must be strictly followed
5. Look for any Mistakes in your Credit Score: If you find any faulty transactions or errors in your credit score then you must bring it to your lender’s notice. 
6. Refrain from Applying for Multiple Home Loan: Too many lined-up home loan applications do not leave a good impression on your credit score. It will lead to multiple credit inquiries, known as hard inquiries. This lowers your credit score by a few points and having multiple of these will substantially impact your credit score.

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Conclusion

Credit score forms an integral part of the home loan process. From understanding what is a credit score to knowing ways to improve it, you have understood its importance. It not only confirms your creditworthiness but also allows you to make note of your overall financial status and allows you to maintain it if it is going down poorly. A good credit score gets you an affordable home loan interest rate and other perks which have a considerable effect on your overall home loan. To know how to build your credit score, and calculate and sustain it, you can always contact us for unending support and guidance.

FAQs for More Insight

How is credit score calculated?

A credit score is calculated based on your payment history, credit utilization, credit history length, new credit accounts, and credit mix.

Which credit score is good?

A credit score of 650 and above is generally considered good by lenders. This credit score range indicates that potential customers are eligible for loans as there are no or minimal issues in their previous credit history.

Will credit score increase?

With constant effort and determination, your credit score can improve gradually. It usually takes some time for your improved credit score to be reflected in your credit report.

Does frequent credit score check lowers it?

Regularly checking your credit score through soft inquiries will not harm it. Therefore, you can use Wonder Home Finance - Home Loan In Bhopal's free credit score check to evaluate your credit score frequently. However, when financial institutions perform credit score checks or hard inquiries, such as home loans, your credit score may decrease slightly.

Disclaimer
The information provided in this article is for general reference purposes only and should not be construed as professional financial advice. We explicitly disclaim any liability for any decisions made or actions taken based on the information provided in this article. Users are solely responsible for verifying the accuracy and applicability of the information before relying.