Jun 15, 2023Home Ally

The Influence Of Credit Scores On Mortgage Approval In India

by Godrej Properties Limited

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Credit Scores & Mortgage Approval

In India, credit scores have a significant impact on the approval process for mortgages. A credit score is a numerical presentation of an individual’s creditworthiness and is based on their credit history. It helps lenders assess the risk involved in granting a mortgage loan to a borrower.

Ways In Which Credit Scores Affect Mortgage Approval In India

1. Assessment Of Creditworthiness 

In India, lenders assess creditworthiness using credit scores from bureaus like CIBIL. These scores reflect past repayment behaviour and financial obligations. A higher credit score enhances mortgage approval prospects by indicating responsible borrowing.

2. Loan Eligibility

Credit scores are used to determine an individual’s eligibility for a mortgage loan. Lenders have minimum credit score requirements that borrowers must meet to qualify for a loan. Generally, a higher credit score increases the likelihood of being approved for a mortgage and may also provide access to more favourable loan terms, such as lower interest rates and higher loan amounts.

3. Interest Rates

Credit scores directly impact the interest rates offered by lenders. Borrowers with higher credit scores are considered less risky, and lenders are more likely to offer them lower interest rates. Conversely, individuals with lower credit scores may face higher interest rates or even be denied a mortgage loan.

4. Loan Amount

Credit scores can influence the loan amount that a borrower can secure. A high credit score may enable borrowers to obtain a larger loan amount since lenders perceive them as more financially stable and trustworthy. Conversely, a low credit score might limit the loan amount a borrower can access or result in higher down payment requirements.

5. Faster Loan Approval

A good credit score can expedite the mortgage approval process. Lenders tend to prioritise applications from borrowers with higher credit scores, as they are perceived to be lower-risk and more likely to repay the loan on time. Thus, having a good credit score can increase the speed of loan approval and provide a smoother borrowing experience.

Wrapping It Up 

It is important for individuals seeking a mortgage in India to maintain a good credit score by making timely repayments on existing loans, avoiding defaults, and keeping credit card balances low. Regularly checking and monitoring credit reports from credit bureaus can help identify and rectify any errors or discrepancies that might negatively impact the credit score.

 

Frequently asked questions

1. What is considered a good credit score for mortgage approval in India?

Ans. In India, credit scores range from 300 to 900, with 750 and above considered good for mortgage approval. Lenders consider various factors, including income, employment stability, and property valuation, alongside credit scores during the approval process.

2. Can a low credit score lead to mortgage rejection?

Ans. Low credit scores can reduce mortgage approval chances in India. Lenders view low scores as higher default risk. If below the lender's threshold, your application may be rejected. Improve your credit score before applying to increase approval prospects.

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