Credit Bazaar provides complete credit assistance to their clients, helping them to increase their credit score, and also providing loan assistance for getting their loan approved quickly and easily. There may be various factors involved in getting a home loan or for renting an apartment, credit score and credit history being very significant among them. The financial institutions, leading banks, and landlords mostly consider these two criteria, before giving the loan or renting out their place. Therefore, you must have a good credit score and a reliable credit history for getting things your way. Let us see what credit score is accepted by the banks, and other factors considered by the financial institutions, lenders, banks, and landlords, explained in detail below:
Which Credit Score Do Banks Use?
So, you want to get a home loan? It is very important to understand how you stand in the eyes of the lenders. There are various financial institutions and banks in the country. The repayment track record of a customer may be clean with one specific lender while has defaulted on loans given by another lender. In such a situation, the first bank might not know this defaulting tendency of the customer. It is also possible that a loan applicant may not have borrowed from a specific lender in the part. In such circumstances, the lender may find it complicated to assess the payment history of the applicant. Given such challenges, financial institutions and leading banks have collaborated to share information on the repayment track record of consumers concerning loans and other such dues. This information is collected and maintained by credit agencies. It acts as a library for lenders, maintaining detailed records of the loans and repayment history of the individual. This data is processed for creating a credit score for each customer. The banks and other financial institutions will determine your creditworthiness depending on your credit scores. By getting to know your credit scores, you can ensure that you know the type of loan offers you should be receiving before the banks present you with numbers. Through the credit score, the banks determine the interest rate that you will be charged and your credit risk. The credit score can be derived from any of the three credit agencies, namely TransUnion, Equifax, and Experian. Every score is based on the information the credit agency has on file about you. With the change in this information, your credit score seems to change as well.
Which Credit Score Is Most Important?
If you don’t think that your credit score is important, it’s time to think again. The rate of interest you can expect to give for a loan is based on these scores. If your credit score is 600 and 780, the difference can mean a lot of money throughout the life of your loan. A low score can cost you a lot of money every month or even cause the house you want to become unaffordable. Basically, the higher the credit score, the lesser you are expected to pay for your loan. The interest paid every month can vary a lot depending upon your credit score and if you take the total of it over the years, you might spend a lot of money on interests by having a low credit score. Therefore, it is essential to increase your credit score if it is low, and maintain them if they are high. The simple reason to evaluate your credit history when you are trying to buy a home is because it is an indication of risk. A lower score indicates a higher risk in the eyes of most lenders. However, being perceived as a high risk based on your credit score is not a total roadblock for getting a mortgage. But you should be ready for how that may lead to an increase in the cost of borrowing while buying a house. Most importantly, when you have a lower than average credit score, it will have an impact on the interest rates, and more importantly, the total amount of interest paid over the total life of a loan. Normally, lenders view credit score as a prime indicator of the borrower’s likelihood of repaying the loan, and therefore, will ask a borrower having a lower credit score to pay a higher interest rate, all other factors being equal. Even a small difference in interest rate can make a dramatic change in the interest you pay over time. It will lead to the higher monthly payment, which can in turn test what you can realistically afford to buy. The other effect of buying a home when you have a low credit score is that your choices for getting a mortgage might be limited.
Credit score plays a significant role in the processing of home loan applications. Primarily, it is a chief criterion depending on which a bank decides whether or not to process the home loan application. When you submit a home loan application by filling it, the bank initially checks your credit history and credit score. If you have a bad credit history and a low credit score, it will most probably reject the application. On the contrary, if you have a high credit score, your application for the home loan might be processed quickly. While there is no common score, each bank has a minimum credit score which acts as an indicator or a cut-off for accepting or rejecting applications.
What Credit Score Do You Require For A Home Loan?
Whereas various banks and lenders have distinct standards, scores ranging from 700 to 750 are normally regarded as fairly good and 750 above scores are noted to be excellent. While applying for a home loan, your chances can be quite high for getting your home loan approved if your credit score is above 700. So, you have got the score required and you think you can go ahead with the application, but wait because even if you think have a pretty decent credit score, there may be mistakes or errors in your credit report that you would want to clear up before applying for your home loan. It may be annoying to address the errors before beginning the process but to deal with them while you are trying to purchase a home will be downright infuriating. Most banks use credit scores from all three credit agencies when evaluating your home loan application. Your score might be different for every credit agency and there may be mistakes on one that does not appear on the other reports. Hence, when you apply for a loan, make sure you do it with peace of mind and being aware of how you will be viewed by the lenders and banks.
So, we see the various valuable advantages we receive when we have a good score, such as getting a home loan easily, can you just imagine how smoothly things can go if the application for a home loan is approved instantly? Also, receiving a higher loan amount may take so much stress off your head. Moreover, you can confidently negotiate when your credit score is high. But how can you get a good credit score? Well, by repaying loans on time, avoiding excessive usage of credit, prepaying loans with surplus funds, and avoiding multiple loan inquiries, you can be successful at having a pretty good credit score.
One must agree that a home loan is a significant step to building a personal asset, your home. Concurrently, it needs a striving commitment to repay the loan within the stipulated period. It is, therefore, very crucial for lenders to assess your capacity to repay the loan. This is mainly judged depending on your age, expenses, earning, work profile, repayment history of loans, financial capability, savings, and other dues. Primarily, repayment history is an important indicator of your loan servicing discipline. While financial capability and earnings indicate your home loan eligibility, repayment history represents your willingness and intent towards repayment of housing loan.
Will Credit Score Affect Renting?
If you are surprised to hear this, don’t be, as renting a house is affected by your credit score. However, the credit score required for renting a house can vary from landlord to landlord. Although you can expect it to be a minimum of 600. If your score is lower than that, you might be face denial as the landlords assess their risks. The property managers and landlords are legally allowed to screen you as a potential renter, and this process usually involves a check on your credit. However, you should give your permission in writing about this. Your sign on the rental application might count as a written permission, or you might be asked for signing a separate credit screening document. If you have late payments, garnishments, or unpaid items on your report, you might send up a red flag. This indicates that you might not pay your rent on time or reliably each month.
So, in case you have bad credit, you might be wondering if you could rent at all now! Well, not to worry, just because your credit score is low does not mean that you will not pay timely rents. Some companies help you to increase your credit score by paying though a portal online. Landlords are well aware that many times the renters do not have perfect credit. Normally, their biggest worry is if you will pay your rent on time. Previously, the rental information was not included in the standard credit reports and to confirm that the rent payments by a person were made timely was a tedious process as the former landlords had to be contacted. Although recently few rental payment histories have started appearing on some credit reports, and some companies can assist the people to build credit through trackable, on-time payments. These rental online platforms report the payments made by tenants to the credit bureaus. However, many times, it is required that you and your landlords sign up for one of these services for including your rent payments in your credit file. Remember, that if you had unpaid rental payments that were ultimately turned over to a collection agency, this collection account will be seen on your credit report. Also, these accounts can severely decrease your credit score, making it very difficult to rent another place in the future. Hence, be prepared to describe your situation if necessary and take essential steps for paying off those accounts to demonstrate that you are pretty much dedicated to meeting your financial responsibilities.
What if you have no credit history? There might be many people who have no credit history, particularly if you are a recent immigrant, a student, or newly divorced. You might face hardship while renting for the first time, particularly if you have not established your credit history. But in case you finally find a place, consider paying rent through a rental payment reporting portal to build your credit. Also, a landlord may rent you, if you have a co-signer with good credit, even if you have no credit of your own. For increasing your chances of approval, you can also give a higher security deposit or offer to pay the first and last months’ rent. If none of these methods work, just look for a cheaper place where there are fewer credit requirements posed by the landlord.
Conclusion: On the whole, for a home loan or even for renting, a credit score is of utmost significance. The landlords, banks and financial institutions make decisions about renting out to you or approving your home loan application based on your credit score. This is because, through this, they understand if you will be paying your loan or rents on time reliably or not. Credit Bazaar provides you with various Bazaar Improvement Plans such as Classic, Gold Elite, Imperia and Insignia for increasing your credit score and also providing you loan assistance with some of the plans. With such expert assistance, your credit score and home loan worries may be solved easily!
For any queries regarding Credit Score improvement or Loan contact Credit Bazaar CR Arcade 2nd Floor, Opposite Delta Garden, Next to Shree Mahalaxmi Restaurant, Mira Road East, Thane: 401107