Why is a credit score important: Credit score is considered in the home loan process. If you have ever applied for a home loan, you must have heard about your credit score. Lenders check the credit score to understand the risk involved in lending money to the borrower. But do you know about credit scores, what it is and how it works?
What is a credit score?
A credit score is a three-digit number between 300 and 900 that is assigned to credit users by information agencies. The credit score tells lenders the borrower's ability to repay borrowed money. Credit information agencies decide based on the borrower's payment history and credit utilization ratios.
Why is a credit score important?
If your credit score is between 800 to 900 then it shows that you always pay EMIs on time. If you have not made any previous loan payments, your credit utilization ratio is reduced by 30 percent. In such a situation, you have a good mix of secured and unsecured loans. In such a situation, if you apply for a home loan, your lenders will know that you can pay the loan EMI on time.
Credit score between 700- 800
If your credit card score is between 700 to 800 then it shows that you repay the loan on time. If for some reason your payment is missed but after that, you have made the payment on time, then it indicates that your credit utilization ratio is good. If your ratio is between 650 to 700 then lenders may refuse to give you a loan. Because this score can prove to be a risk for lenders.
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