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How Lenders Use Your Credit Score For Approving Mortgage Loans

How Lenders Use Your Credit Score For Approving Mortgage Loans

You wish to apply for a Home Loan to buy your dream home. You are wary of asking for one because you have recently faced rejection for a Credit Card application. On inquiry, you find out the reason for denial is a low credit score. How do you deal with the matter now? You need not worry because the banks have a different way of looking at credit scores while coping with mortgage loan applications. Let us not look at how lenders use the credit score for approving Home Loans. You can use the following tips to improve your credit score.

Get your Credit Report and go through them

You can procure your credit report free of cost from any of the four credit bureaus. Mostly banks refer to the TransUnion CIBIL reports. Hence, it is better to obtain your credit report from CIBIL and go through it.

The first thing to look at in a credit report is your credit score. Remember, banks stipulate a minimum credit score of 750 while processing Personal Loans and Credit Cards. At the same time, a score of over 600 is acceptable for a Home Loan. Why is there such a massive difference in the outlook? The reason is straightforward. The Credit Cards and Personal Loans are unsecured loans whereas adequate collateral secures the mortgage loans.

What do the Lenders look for in a Credit Report?

The lender looks for three main things while processing a mortgage loan application.

There are other factors in the credit report that play a role in the Home Loan approval.

How do you improve the Credit Score?

Ascertain your Debt to Income Ratio

Your repayment capacity is the primary requisite for the approval of any loan. Banks follow the concept of take-home pay. The take-home pay is the net payment you have in hand after accounting for all your loan instalments and other mandatory liabilities. The appropriate take-home pay should be in the region of around 50%. Banks are liberal with mortgage loans as they go up to even 40% if your other credit parameters are okay.

Note that banks do not give importance to factors like performance bonuses, increments, and so on. They are income of a variable nature. Check out your eligibility before you Apply for a Home Loan. You can make a more substantial down payment and reduce your Home Loan burden. You caneven consider closing some of the high-cost loans. It can have a positive effect on your credit rating.

To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit, the leading online lending marketplace that offers financial products from 60+ Banks and NBFCs. We have served 2 million+ happy customers since 1989.

Talk to our Loan Specialists toll-free at 1800 103 4004 to know more about our products and offers.

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