16 December, 2024 | 14:47 IST
Buying a home for the first time is an exciting new journey but requires months of financial evaluation and planning. With rising real estate prices in India, most people opt for a home loan while buying their first house.
Before you apply for a home loan, it is crucial to know how it works. One important factor about securing a home loan is that you have to have a good credit score for home loan approval at best interest rates.
A good credit score can ensure that you get better loan amounts at lower interest rates. But what is a credit score? And how much should your credit score ideally be in order to get a good home loan offer? Read on to find out.
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In simple terms, a credit score is a three-digit number that determines your creditworthiness. The score ranges between 300 and 900, with 300 being the lowest and 900 being the highest. A higher credit score guarantees you better loan offers with lower interest rates.
The importance of credit score lies in the fact that it is one of the first things that lenders look at before considering giving you a loan, be it a home loan, car loan or personal loan. They check this number to determine your creditworthiness and your capacity of repaying the debt.
Credit score comes into play as it determines whether you are eligible for a home loan and what interest rates should be charged from you. A good credit score boosts your chances of being offered a home loan without any hassle and you get better interest rates than others. A low score may lead to higher interest rates or even a home loan rejection.
As mentioned above, credit scores range between 300 and 900. Here's what each range means typically:
The range and its meaning may vary based on the credit bureau. Currently, in India credit scores are issued by four credit bureaus –TransUnion CIBIL, Experian, Equifax, and CRIF High Mark. You can check your credit score for free on the Moneycontrol app and website. If you are looking for a multi-purpose loan you can also apply for loans up to Rs 15 lakhs through the Moneycontrol app through a completely digital process.
In India, a home loan is one of the first things that come to our minds while planning to buy a house. As mentioned above, your credit score is a crucial factor when it comes to securing a home loan.
In general, a credit score above 750, which falls in the excellent category, is considered ideal for first-time home buyers. However, a credit score above 700 will also give you more chances of securing a home loan as a first-time buyer.
Having a better credit score will endear a lender that you will not be a liability for them and are unlikely to make any default on your home loan EMI. However, keep in mind that a good credit score is not built overnight and you have to put in effort to make it better.
Now that we know all about credit scores and how much credit score is ideal for securing a home loan, let’s discuss the factors that influence it.
ALSO READ: Fast Track Your Credit Score With These 7 Effective Ways
You can check your credit score and then apply for a loan through Moneycontrol, which has a partnership with five lenders. You can access loans on Moneycontrol of up to Rs 15 lakhs. Get 100% digital loans in just three steps — enter your details, complete KYC and set up EMI repayment. The interest rates start as low as 12% per annum.
Buying a home is a huge decision. Make sure you are well-prepared financially and have a healthy credit history before applying for a home loan. If it is not up to the mark yet, build on your credit score by utilising your credit card more and making payments on time.
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