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 post-Covid - 19 scenario. Moneylenders are presently pricing loans differently based on the credit worthiness 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 back. 

Why credit score is 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, the customers with higher credit scores are having 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 annum. In any case, this interest rate is simply available to those customers who have a credit score of more than 800.

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

How to keep a decent credit score? 

In the present period, there are numerous channels of expenditure and payments, 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 customer’s details registered with the bank. In this way, the entirety of your bill payments or EMIs or different types of investments are under scrutiny by credit bureaus, which use your credit history to generate a credit score. Presently, RBI has endorsed four such bureaus for credit score ratings. These offices additionally have collaboration with various banks to keep a history of customers’ credit score. 

Thus, the most ideal approach to keep a decent score is to never default on your EMIs or monthly payments, etc. Any disruptions in your financial record might affect your credit score as well as the 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 repayments on borrowings. A credit rating agency assesses 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 home advances, as loan fees are at a multi decade low. 

To help first time home purchasers, particularly the young professional 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 reimbursed 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 decrease by State governments and offers from developers are favouring the purchasers.