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Your Credit Score Can Get You Cheaper Home Loans-Check Latest Interest Rates

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Your Credit Score Can Get You Cheaper Home Loans-Check Latest Interest Rates

The credit score is the most important factor that is taken into account when you apply for a loan. The credit score is calculated based on your present and old credit accounts, past payments, and credit history. It shows lenders your financial health status and your capability to repay the loan. Having a higher credit score not only helps in easy loan approval but also in getting lower interest rates and higher loan amounts. Thus, a high credit score can fetch you cheaper interest rates for home loans. 

What Is Considered To Be A Good Credit Score?

When you apply for a home loan, the lender will check your credit score and assess the risk of lending to you. The loan approval, the loan amount, and the interest rate are decided based on the credit score.

If your credit score is high, you will get lower interest rates. Credit scores usually fall in the range of 300 to 900. A credit score of 750 and above is considered to be good for lending by lenders.

If you want a home loan easily, then your credit score must be closer to 900. Banks and other financial institutions prefer to give loans to borrowers who have a high credit score as there is a lower probability of defaulting with them. 

How Is The Interest Rate For Your Loan Determined

Although interest rates may vary across banks, you will get a reduction on the interest rate if your credit score is high. Banks will give higher interest rates to those with lower credit scores and vice versa. For a credit score of 750, you can get cheaper and affordable interest rates on home loans.

So, it is important for you to monitor your credit score from time to time and build a good credit profile. Do a free credit score check at Creditmantri.com and download your credit report for free. 

How To Improve Your Credit Score?

These are some ways to improve your credit score. 

Review your credit reports:

it is very important to review your credit reports regularly and rectify the errors in there. Your credit score is calculated based on the information in the credit report. So, you must ensure that it is kept error free. 

Pay outstanding bills:

If you have any outstanding bills or EMIs, then pay them off to improve your credit score. Always pay your credit card bills and EMIs on time without defaulting as missing these payments will cause your credit score to dip.

You can set auto pay and alerts to avoid defaulting on credit card bills and EMIs. Also, avoid paying the minimum amount due because it will increase the outstanding balance on your card. Always try to pay your credit card bills completely. 

Aspire For30% Credit Utilization or Less:

Credit utilization refers to the ratio of the revolving credit you are using to the total amount of revolving credit available. It is also an important factor in the computation of credit score.

You should aim to keep this credit utilization ratio below 30%, as it means that the higher this ratio, the more the dependency on credit money. This may lower your credit score. If you have multiple credit scores, keep a check on how much you are spending on each of them. 

Limit Your Requests for New Credit and Thus The Hard Inquiries With Them:

There are two kinds of enquiries that can be done – soft inquiries and hard inquiries. A soft inquiry might include 

  • You checking your own credit
  • Giving permission to a potential employer to check your credit
  • When a financial institution checks your credit to give you a preapproved loan offer
  • When people with whom you are already doing business check your credit.
  • When credit card companies check your report to determine if they should send you pre approved card offers.

Soft inquiries do not affect your credit score. A hard inquiry can include applications for a credit card or any other form of credit. Occasional hard inquiries do not affect your credit score.

But, doing many hard inquiries in a short period of time will have a negative impact on your credit score. This is because financial institutions will think that you have some financial problem.

Thus, if you are trying to raise your credit score, avoid applying for new credit for sometime. 

Do not remove old accounts from the report:

Some people remove old or deactivated accounts or accounts with negative credit history from their credit report. This may not be wise as negative things automatically get removed from the report.

Removing deactivated or old accounts may eliminate accounts with good repayment history, which will harm your credit score. Also, accounts which are closed after paying your debts should not be removed as they will improve your score and show your creditworthiness.

Not just this, removing old accounts from your report will decrease the length of your credit history. 

Compare and Choose The Best Lender According To Credit Score 

Some banks give pre-approved home loans to borrowers with good credit scores and repayment history. You should maintain a good credit score and must not borrow beyond your repayment capability. Some banks offer home loans at cheaper interest rates to borrowers depending on their credit scores.

The interest rates per annum provided across financial institutions and banks for different credit scores are given in the below table. You can compare them.

Do a credit score check and compare which lender can give you the best home loan interest rates for your credit score.

Banks/Financial institutions Interest in % per annumfor credit score <700Interest in % per annum for credit score >=700 to < 750Interest in % per annum for credit score >= 750 < 800Interest in % per annum for credit score > = 800
Bank of Maharashtra 8.00 to 9.207.70 to 7.857.40 to 7.657.30 to 7.55 
PNB 7.70 to 8.707.65 to 8.10 7.40 to 7.907.40 to 7.90
Indian Bank 7.907.75 to 7.907.55 to 7.75 7.40 to 7.70
SBI 7.75 to 8.057.75 7.65 7.55
BOI 7.60 to 9.257.50 to 7.607.40 to 7.507.40
Union 7.85 to 9.10 7.70 to 7.957.50 7.40
PNB Housing 8.95 to 10.758.00 to 10.457.55 to 8.907.50 to 8.35
LIC Housing 7.80 to 8.757.50 to 8.007.50 to 8.007.50 to 8.00

Conclusion

You have to aim towards improving your credit score, especially if you have to apply for a loan to make a big ticket purchase or a rewards credit card. It will take days and even months to improve your credit score and it does not happen overnight. 

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