How important is your credit score in a post-Covid scenario?

How important is your credit score in a post-Covid scenario?

A credit score is an evaluation instrument for lending institutions to check the borrower’s profile to sanction a home loan. A score over 750 is viewed as useful for getting a home loan. The score has become more significant in the post-Covid-19 scenario. Moneylenders are presently pricing loans differently based on the creditworthiness of the borrower. Because of the Reserve Bank of India’s new strategies on interest rates, all banks and lending institutions are offering home loan interest rates as low as they were 15 years ago.

Why is credit score important?

The banks use credit scores to separate borrowers from riskier profiles after COVID-19; for example, the repayment capability of a borrower who has irregular cash flows in their accounts can be compromised. Along these lines, customers with higher credit scores have better chances of getting home loans faster with lower interest rates, as banks are offering varying interest rates for different credit scores. For instance, one of the biggest banks in the nation is presently offering home advances at 6.7% per year. In any case, this interest rate is simply available to those customers who have a credit score of more than 800.

Then again, customers with a score somewhere in the range of 700 and 800 might be charged an interest rate of 6.8 to 6.9%, while any borrower with a score under 700 needs to pay the standard home loan interest rate of 7–7.25%. The financing costs may likewise somewhat vary with the amount of the loan within this range. Government banks as well as some private sector banks are additionally offering competitive interest rates on home loans. Some private sector banks have decreased their home loan interest rate to as low as 6.65%; however, this rate will still be applicable to borrowers with a credit score over 800.

How do I keep a decent credit score?

In the present period, there are numerous channels of expenditure and payment, for example, credit cards, payment gateways, UPI, net banking, and so forth. These digital payment channels are directed through the bank and recorded based on the customer’s details registered with the bank. In this way, the entirety of your bill payments, EMIs, or different types of investments are under scrutiny by credit bureaus, which use your credit history to generate a credit score. Presently, the RBI has endorsed four such bureaus for credit score ratings. These offices additionally collaborate with various banks to keep a record of customers’ credit scores.

Thus, the most ideal approach to keeping a decent score is to never default on your EMIs, monthly payments, etc. Any disruptions in your financial record might affect your credit score as well as your chances of getting home loan approval at lower interest rates. A decent credit score guarantees that the borrower has a reliable history as far as financial transactions are concerned and has not defaulted on borrowings. A credit rating agency assesses the credit handling tendencies, payment history, and existing finances of a customer to grant a decent credit score rating.

Good time to purchase a home? 

Keeping a decent credit score is valuable to homebuyers, particularly first-time homebuyers with restricted reserve funds, as it facilitates the weight of having more money with them at the hour of booking. The low financing costs are additionally drawing in more borrowers to profit from home advances, as loan fees are at a multi-decade low.

To help first-time home purchasers, particularly young professionals who might lack sufficient savings to pay the initial down payment amount at the time of booking, HomeCapital offers an interest-free unsecured personal loan of up to half of the down payment. This can be repaid in 12 EMIs. So in the event that you have a decent credit score, this is an ideal opportunity to purchase your first home, as home advance loan costs, stamp obligation decreases by state governments, and offers from developers favor the purchasers.

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