Ever wondered that how a bad score on credit report can become a barrier in applying for a loan or what does bad debt home loan actually mean. Well, when it comes to home loan, the credit score plays a vital role in maintaining a goodwill of the applicant, as it also help in assessing the creditworthiness of a borrower that whether the borrower would be able to payback the lended amount on time or not.
There are categories in which the credit score is divided into, with respect to the ease of getting a mortgage. The score varies from the least of 350 to the highest of 850. If the credit score falls in between 350 – 620, the eligibility for loan becomes the least. If the credit score varies from 620 – 700, although lending could be risky, however the chances of getting a loan increases. If the credit score is more than 700, the lender would lend the amount to the borrower, as there will a certainty that the credit amount will be paid and that too on time .
If your credit score is below 700, do not get disheartened, there are ways to improve your credit score and avail the benefits of low interest rate loan. One has to look for the best strategies that will help in getting home loan for bad debt by improving the credit score, few of the strategies have been listed below:
- Repair the bad credit history: Credit score is not stagnant, it fluctuates with every payment that is paid towards the credit taken prior. It is easy to improve the credit score by paying the credit card outstanding and balancing the delinquent bank account in good standing.
- Avoid late payments: There are many who pay all the installments, yet they have low credit score, which happens as a result of delay in the payments. It has been observed that there are many who have good payment history but bad payment habits, hence affecting the credit score by lowering it. To avoid such scenario, one should commence paying the credit amount on time.
- Less Credit Utilization: For maintaining the credit score, it is advisable to lessen the credit card usage. The less the usage, the more could be the credit score. Experts say that if the credit card usage is less than 30 percent, it demonstrates the responsive credit usage which aids in building credit score as well as trustworthiness.
- Fix bad credit report issues: Never neglect the credit report. It can not be ignored that many a times the credit report may address some unnecessary issues which have been in the report by mistake. There are many agencies that work towards fixing the issues in the credit report, hence improving the credit score. One should keep a check on the credit report and the reason for falling of the credit score.
- Large down payment: Both bad credit score and no money for down payment will definitely lead to least chances to get the loan. However, if bad credit score is combined with a huge amount of down payment, this may make one eligible for a debt.
Affordable mortgage does not only mean a good credit score, bad debt home loan is also feasible by following all or at least three above mentioned points. Once you have decided to purchase a home, start putting efforts in maintaining the credit score or start searching for a suitable lender who could even give home loan for bad debt.