Every one of us has a dream of owning a home to provide a sense of security to our family in the form of an asset as well as a memory to our next generation. With rising economy, the prices of properties are also growing. Due to these rising rates and decreasing lending rates, we look forward to borrow or get our property financed from a Bank/ NBFC or any other financial institution.
Borrowing a home loan is a long procedure that involves many evaluations, analysis and assessments. One of the major analyzes done by every lender is to check the credit score. The credit score is an important factor that determines the credit worthiness of the borrower. It shows the efficiency of the borrower to handle the finances and the debts.
My friend Bharti, finally after a long hunt for more than a year, decided to buy a house. She is an architect with a handsome salary of 6 figures and her income is sufficient enough to repay the equated monthly installments of her home loan. But she wants her home to be a joint property with her spouse. Now she just wanted to put an application for the home loan to transform her dream into reality. She entered her details on the website of Mudra Home and met with Gaurav Gaur, Director Mudra Home, to discuss about the procedure.
Here she came to know the various factors that are evaluated to calculate the eligibility of the customer and the maximum loan amount given on the same. This is when the credit score of both (Bharti and her husband) were checked.
She realized that though her husband’s credit score was not terrible, it certainly do not fall into an excellent category too. This made her realize that how the financial and credit history of your partner affects the appraisal of home loan application.
Gaurav Gaur, Director Mudra Home, speaks about how your partner’s poor credit score can affect in home loan application proceeding even when your credit score is good.
How does a partner’s poor credit score affect the possibility of your home loan?
Marriages not only unite as two personas but also combine us as one financial unit. Even if one partner does not want to include the income of the other one to prove the income eligibility, the Banks/ NBFC’s still expect you to provide the basic KYC’s and other details to move ahead with your home loan application.
However, this doesn’t mean that Banks/ NBFC’s will merge your credit scores. Rather, the credit scores of both partners will be analyzed separately. The application is processed if the bad credit scorer is not included while calculating the home loan eligibility and other terms and conditions.
But, in case, if you decide to include the income of the bad scorer to raise the eligible home loan amount, your home loan application may get denied. The credit score is considered as the borrower’s reputation and commitment in the form of numbers.
The best way to proceed with your application is to apply for the home loan as an individual, if your partner’s credit scores are not in shape. However, if the co-applicant is also the co-owner of the property, he/she cannot be avoided on the home loan application (all co-owners must be applicants but all co-applicants may not be necessarily be co-owners). The best solution to avoid any financial stress in such situation is to handle the financial stress wisely. Both the partners must take the requisite measures to improve the credit score of your partner.
The following tips may help you and your partner to revive with your current credit score:
A big NO to fresh loans
Try not to raise your debt burden before paying off your current obligations. Your credit score is negatively affected due to too many debts and too many inquiries about your credit report. Your preapproved home loan may not get sanctioned or disbursed and this will leave a negative impact on your credit score.
Pay your debts faster
Try to increase on your EMI’s. Whenever there is a sudden increment in your salary or any quarterly/ yearly bonus, use this amount to pay more amount towards your home loan EMI’s. Lesser amount of debts helps to improve your credit score.
Make timely payments
The above statement doesn’t need much explanation. The best way to improve your credit score is to pay your dues, credit card bills and other EMI’s without any delay. Your punctuality to pay your dues on time scores a maximum weight age on your credit score. Timely payments should be the first honest step towards the credit score improvisation.
Fix errors in credit report
To fix errors you need to keep a regular check on your credit report. Understanding the report and collecting supporting documents from time to time will help you to correct the mistakes on time. For example, if you missed the EMI but paid with 2-3 days, you can ask the lender to issue a letter stating that the payment was received for the concerned month. Similarly, the credit rating agency can also be contacted by visiting the website to correct the wrong information being reflected in your credit report.