Everyone thinks about owning the house of their dreams one day. For most, this dream only comes to realization after they apply for a Home Loan. The cost of property has been on the rise for a few years now and houses have proven to be great investments as they hardly ever depreciate in value.
Home Loan Eligibility Criteria
Home Loans have definitely made it easier for people to purchase their dream homes, but at the same time there are other factors, which make it difficult for some to get their loans approved. Most banks require you to fulfil certain Home Loan eligibility criteria before they approve your application for Home Loan. Credit Risk is one of them.
Credit Risk and Credit Rating
Credit card risk happens to be one of these factors, which often leads to loans getting disapproved. Before approving any kind of loan, banks and NBFC’s give you a credit rating. This rating is based on your credit history, which involves all the past records of the transactions you made with your credit card.
Clearing your Debts on Time
When you are planning to apply for a Home Loan, it is necessary to make sure that you have cleared all or most of your past debts in order to get a good credit score from the bank. The bank will thoroughly check your credit history before it takes any further steps towards approving your application. Credit history is a wide concept and it comprises of 5 different criteria.
Components of Credit History
Your credit history comprises of the following elements :
- Credit applications or enquiries you’ve made, both personally and commercially.
- Credit accounts which are open and current, including home or car loans and credit cards.
- Personal and commercial accounts which are late or overdue.
- Past bankruptcy information.
- Court judgements or court writs.
Maintaining a Positive Credit Record
Having a bad credit report will affect your Home Loan application in a negative manner. Hence, it is extremely necessary to have a good report on your credit rating. You are advised not to seek credit right before you apply for a Home Loan, as it might create a negative impression on the bank you are taking the loan from.
Always make it a point to pay your debts before the last date. This is an indication that you are an efficient debtor. Always make sure that the credit history you submit is genuine and calculated, as forgery might cause you to end up in unnecessary trouble.
Improving your Credit Score
Before applying for a Home Loan,you can try and improve your credit score by clearing off your existing debts.
The indication of high credit risk will render you ineligible for a loan. Most of the times people with average credit risk are charged higher rates of interest. If you have no credit risk, you have a better chance at getting lower rates of interest on your loan.
To conclude, having too much of unpaid credit risk is a negative factor when it comes to getting your application approved from the bank or NBFC which you are planning to take a loan from.
It is always better to have cleared all your debts in advance, so that the bank can trust you as a loanee and they can help you get closer to achieving your dream of owning the home you have desired and longed for.