How to build and maintain a strong credit for a favourable home loan

financialexpress.com:

Renowned American business journalist, Jean Chatzky, once said, “If you default on an unsecured debt, you won’t lose anything (except points on your credit score).”

This sums up the relevance of a credit score. It’s the report card of your credit history and creditworthiness that proves your credibility when you approach a lender for a home loan. It shows your track record of repaying a loan or paying off a credit card bill and works as a passport to an easy loan or a credit facility.

The Reserve Bank of India’s Financial Stability Report, released in July 2023, said the share of residential housing loans in total advances in the last 11 years jumped to 14.3 per cent as of March 2023 from 8.6 per cent in March 2022.

With such a high rise in home loan demand, and keeping in mind that home loans are high amounts and long-duration, it’s the prerogative of lenders to check a loan applicant’s credit history. No tool is better than the credit score to gauge it.

A higher credit score helps you get a home loan quickly and at a favourable interest rate. The range for the credit score is 300–900.

A credit score below 600 is considered low; 650–699 is rated satisfactory or fair; 700–749 is good; and 750–900 is excellent. With a credit score of 750 and above, you have the best chances of getting a home loan at favourable terms.

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The credit score is calculated on the basis of your repayment history, which contributes 35 per cent of it; credit balance and utilisation forming 30 per cent; duration of availing of credit making 15 per cent, and new credit and credit mix making 10 per cent each of your score. You need to maintain all