SOURCE : NEW18 NEWS
Last Updated:May 18, 2025, 13:16 IST
Your credit score is a primary factor that lenders consider when evaluating your loan application. It reflects your creditworthiness based on your past credit behavior.
Your credit score is a primary factor that lenders consider when evaluating your loan application. (AI Generated)
Authored by Amit Agarwal, CEO and Co-founder, NoBroker: Buying a home is one of the most significant financial commitments you’ll ever make. While choosing the right property is crucial, securing the best possible home loan is just as important. Your financial preparation before applying for a home loan can significantly impact your chances of approval and the interest rate you’re offered.
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Here are the key steps to take before you apply:
- Check Your Credit Score
Your credit score is a primary factor that lenders consider when evaluating your loan application. It reflects your creditworthiness based on your past credit behavior.
Before applying, download your credit report from the official TransUnion CIBIL website and any other officially approved rating agency and review it carefully. Pay special attention to any open transactions or discrepancies that might negatively impact your score. Rectifying them in advance can save you from unpleasant surprises later.
- Clear Outstanding Dues Promptly
Ensure you’ve cleared any outstanding dues, whether credit card bills, EMIs, or other loans, within their due dates. Even a small delay can affect your credit score and may raise red flags during the lender’s assessment. Financial discipline speaks volumes to lenders about your reliability.
- Keep Credit Card Utilisation Low
If you own credit cards, try to keep your utilisation ratio below 50% of your credit limit. High utilisation indicates credit dependency, which lenders may interpret as a sign of financial stress.
Tip: If you’re nearing your credit limit often, consider requesting a credit limit increase from your bank. This reduces your utilisation ratio without needing to cut down expenses.
- Reduce Fixed Obligations Where Possible
Lenders look at your Fixed Obligations to Income Ratio (FOIR) to determine your repayment capacity. If you have ongoing personal loans or other EMIs, try to prepay and close them before applying. This frees up your income and improves your loan eligibility.
- Avoid Pulling Your CIBIL Report Multiple Times
Each time your credit report is pulled by a lender, it counts as a ‘hard inquiry’ and can negatively impact your score if done too frequently.
When you’re ready to apply for a home loan, avoid logging into multiple bank portals or applying with too many lenders simultaneously. Be selective and strategic.
- Avoid Changing Jobs Before Applying
Lenders typically ask for salary slips and job continuity proof over the past 3–6 months. Switching jobs during this period may lead to delays in documentation or raise questions about income stability. If possible, hold off on any career changes until your loan is sanctioned.
- Add an Earning Female Co-applicant for a Lower Interest Rate
If you have an earning female family member, consider adding her as a co-applicant. Many banks, including SBI and Canara Bank, offer a 0.05% concession in interest rates for women borrowers. This not only improves your eligibility but also helps reduce the total cost of the loan.
It is authored by Amit Agarwal, CEO and Co-founder, NoBroker.
The views expressed in this article are those of the author and do not represent the stand of this publication.
- First Published:
May 18, 2025, 13:16 IST
