Low Credit Score? Here's How to Get That Home Loan and Fix Your Finances

A strong score can get you better interest rates, longer tenures, higher loan amounts

- KANIKA SINGH

A credit score is a three-digit number between 300 and 900 that reflects a borrower's creditworthiness. It is based on factors such as repayment history, credit usage, number and age of credit accounts, and credit inquiries. A good score eases access to credit and acts as a snapshot of one's financial behavior and reliability.

Why your credit score matters

A good credit score plays a crucial role in determining several aspects of a home loan application, such as interest rate, loan-to-value (LTV) ratio, and tenure eligibility. Since home loans are typically large and long-term, a strong score allows borrowers to access better terms, lowering their monthly payments.

In contrast, a poor credit score can significantly hinder one's chances of securing a home loan. It signals higher credit risk, prompting lenders to tighten underwriting norms. These may include demands for more documentation, income proofs, collateral details, or even a co-applicant or guarantor to mitigate the risk suggested by the borrower's repayment history.