WHAT CREDIT SCORE IS NEEDED FOR A HOME LOAN

Credit scores are one of the most important tools considered by lenders and financial institutions before approving a loan application. Credit score is a numerical measure that very accurately depicts your creditworthiness. it gives an indication to the lenders as to how responsible you have been in handling your debts. The higher the credit score the better as it will make it easier for you to get approval for your loans and at the best possible interest rates.

So what  credit score is needed for a home loan . The answer to this question depends on the type of loan program that you have applied for and the lenders rules and guidelines. Different loan programs require different credit scores. The lenders also take into account your loan to value ratio and your debt to income ratio.These ratios are key risk  factors that are used by lenders for the purpose of assessing your application for a home loan .The loan to value ratio indicates the ratio between one loan and  the property value. The debt to income ratio indicates to the lender of how well you control all your debts and makes you eligible for a home loan with even a minimum credit score at a very reasonable rates of interest..However 640 can be considered to be the minimum credit score for home loan .If your credit score is below 640,the lenders will not offer you the loan.

There are certain important factors that are used in computing your credit score.These factors are the amount of credit limit available(the percentage of credit that has been utilized by you),your credit payment history and credit mix.(the different types of credit used by you)

If your score is low below 640, try to improve your credit score and for that you need to take certain steps that can boost your credit score to a level that can easily get you qualified for your home loan.

These steps are

Make timely payments.-be very regular with making your monthly payments be it on your credit cards or your loan instalments.Because even if you miss one payment it can negatively affect your credit rating.Making prompt payments shows the lender that you are very responsible towards your debts and handle your finances well.

The amount of credit limit available-do not use too many lines of credit.try to keep only 1 or 2 credit cards .Too many debt accounts can really hamper your credit score.In case you have too many credit card accounts ,do not use more than 30% of your  available credit limit.

To sum it up-The minimum required credit score  for  home loan is 640.640 credit score can make you eligible for approval for the home loan but if you want a home loan at better terms and rates of interest,you need to improve your credit score and try to raise it to 720 .Get your credit report and look for areas that need to be worked on to increase your credit score to a higher level to easily qualify for home loan at the best possible terms