Thinking about applying for home loans Check your credit score first

You might be asking what the relationship between applying for a home loan and your credit score is? According to money management experts and finance gurus, the credit score has a direct connection with the availability of any loan or a line of credit. It is the single most crucial factor when it comes to decoding the creditworthiness of you as a customer. If you’re struggling to rent a home due to tight funds and poor credit check out this great guide on how to find no credit apartments

Here is how having a good credit score is essential in case you are looking to applying for a home loan. Read on to know more,

Ease of applying and granting of a home loan
Achieving a higher than the standard home loan amount
A high credit score empowers you with more significant negotiation skills

According to the FCRA or the Fair Credit Reporting Act, anyone can get a free credit report annually. Several credit score and reporting agencies charge you absolutely nothing for a copy of the free report. You can call up the reporting agencies directly at 1-877-322-8228 and get the free annual credit report mailed to your doorstep or visit the online portals or the central website at the www.annualcreditreport.com.

How to maintain a good credit score?

There are a few easy steps to ensure the maintenance of a healthy credit score. Here are some golden rules to live by,

Repay all your loans within the stipulated time
Avoid drawing lines of credit for every purchase
Prepay most of your loans when you have the opportunity and surplus cash in hand
Keep in mind to take out one line of credit at a time

More on the home loan and mortgage front

Most of us need a home loan to secure the most basic and personal asset. However, a home loan comes with a commitment of repayment as well, that too within a stipulated period. Thus the lenders and financial institutions will surely judge the merit of your application based on your ability to repay the loaned amount.

Here, are all the parameters that are considered while judging your repayment capability

The net yearly earning
Your age
Your expected savings per year
The entire expenses for the year
The employment profile and financial capability
Repayment of the last loan

All of the parameters mentioned above are taken into account while calculating your credit score for the year. A clean track record of repayment is the most critical parameter that reflects on the annual credit report. It also enables the lender to weigh your application as a liability or a secure investment.

Understand your credit report

A credit score measures how likely a loanee is to pay the amount back within the contractual and obligatory time. Here is what your annual credit report will consist of the following

The history of the transactions and repayment
Utilization level of credit
Amount of debt already incurred

When you have a high credit score, it is indicative of your comfort level when it comes to repayment. A standard score of 700-750 and over is considered to be excellent. Increase your chances of getting a home loan with proper maintenance of credit score and report.