Your score is the most crucial aspect when it is about borrowing any type of credit, particularly a home loan. Only holding a minimal expense and income will not assist lenders to gauge the risk linked with lending funds to you for a home loan. In case you are looking to purchase a home with a score of 500, there are specific things you must factor in before applying for the loan. Holding a home that you can call only yours is a major dream that you all tend to dream of.
Owning a home that you can call just yours is a dream that many of you often see. Purchasing a home, getting a new 4-wheeler, and going on a dream trip – are a few of the common financial goals. You all often plan to attain each of the financial goals. However, purchasing big-ticket goods like homes or vehicles requires a decent finance amount. Even while you work hard for several years to save funds for your financial goals, you may usually end up asking for some more credit to assist you to reach the goals quickly.
Almost the same is the story when you look to purchase a home. If you are going to start your journey of purchasing a home and have just begun looking for a home loan with a score of 500, you require stopping at present. The question is, why? Well, this is because, with a score of 500, it may get a little tough for you to figure out what you are searching for – the affordable rate of interest and processing charges on a home loan. Note that the CIBIL score for home loan requirement is 750 and above. Thus, may it be SBI or HDFC, SBI home loan CIBIL score or HDFC home loan CIBIL score requirement is usually 750. So, ensure to maintain this score before you approach any lender for a loan.
Let’s read on to understand the credit score concept and home loan in totality.
What’s the credit score required for a home loan?
A credit score between 750 to 900 usually is looked upon as excellent by many financial institutions and lenders. If your credit score falls within this score range, you will be able to avail loans at a lower rate of interest. This is because the risk linked with lending to an individual with a strong score is lower.
High score = low associated risk in lending and low-interest rate loan
Low score = High associated risk in lending and high-interest rate loan
So, in case you hold a score of 500 and you are looking to purchase a home – begin working on your score. Ensure to improve your score and then place an application for loans as you will avail a low rate of interest deal. Otherwise, you will require paying extremely more over the long term owing to the high rate of interest on loans.
Also Check: Experian Credit Score
How can you ameliorate your score to purchase a home?
Ameliorating your score requires effort and time. You might view your score rising by 200 points within almost a month while few may witness the score rising by 150 points within 45 days. However, in the case of a few individuals, it might take even a year. Thus, the time it takes for your score to ameliorate from 500 to 750 so that you can purchase a home through a home loan is based totally on your financial stability, behaviour and activities.
Here are some of the crucial things you must view an amelioration in your score –
Always make sure to repay your debts in full and by the due date
The initial thing you must do when it is about ameliorating your score is to ensure to timely repay your outstanding debts. Every financial adviser will recommend you repay your debts in full and on time. Failure to repay the debt in full and on time will show credit mismanagement. This means you somehow are failing to manage the outstanding debts in a responsible way. If you continuously miss the deadlines unintentionally, ensure to contact your lender or credit card provider and explain the entire scenario. They might wipe off late payment fees from your outstanding bill. However, to ensure that you do not delay or miss out on your credit card or loan payments, it is a must for you to automate your payments through auto-pay or by placing a standing instruction.
Repay the whole amount not the minimum due
Always ensure to pay the entire amount, which is due instead of paying the MAD or minimum amount due on your credit card. Paying the minimum amount due does not attract or levy any penalty on late fees. However, an interest charge may be incurred on your whole amount due even whole you have paid a few amounts. This may gather and later convert into a massive debt pile. To avoid this, which may totally ruin your score, ensure to pay the complete amount.
Reduce the credit utilisation ratio
CUR or credit utilisation ratio is per cent of credit you utilize against the overall assigned credit card limit. While you hold the right to use the complete credit card limit assigned, doing so can negatively impact your credit score. In case your credit score is 500 and you are looking to ameliorate it for purchasing a home, you will require lowering your CUR to 30 per cent or even less than this. Note that, the lower your credit utilisation ratio, the better it is.
Review your credit report periodically
Have any idea that monitoring your report periodically will assist you to ameliorate your score? Wondering how? Well, let’s understand it with an instance. Reviewing your report periodically assist you to detect financial fraud along with problems that may be leading to the reduction of your credit score. Once you detect the reason behind the fall in your score, you can plan out a strategy and efficiently work around it to ameliorate your credit score.