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How To Get A Home Loan When You Have Low Credit Score
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Having a low credit score can reduce your chances of getting your home loan application approved by the bank. The reason being, that most banks may feel that you will not be able to repay your loan on time. An individual gets a bad score due to several reasons. Some of the most common reasons are delayed payment of loans, over spending, unpaid bills, etc. If you are suffering from a low credit score, here are a few steps you can take to help get your home loan application approved:
Repay pending loans
One of the first things that one can do is repay any or all pending loans. This will help boost your credit score. The repayment of pending loans also eases the burden you may face in the future financially if your home loan gets approved. Hence it is vital for one to plan their finances and get all their financial matters in order before applying for a home loan with a bank.
A boost in your income level can increase the likeliness of your loan application being accepted. You can co-sign the loan with an earning member of your family. This provides the bank with evidence that the loan amount will be paid in full on time. Adding another family member’s income will also help you in future during the repayment process of your home loan.
Cancel credit cards
When a bank is looking at your credit score, they also look at the number of credit cards you own. Since a credit card is a type of a short term loan provided by banks, it can reduce your credit score. One of the best ways to avoid this is by cancelling any excess credit cards that you own. Not only must you avoid signing up for new credit cards, but you must also cancel those which you barely use. This is one of the easier steps you can take to not only improve your credit score but also manage your finances better.
Apply to a smaller bank
One can also choose to apply for a home loan at a smaller bank. Large banks and financial institutions have strict policies and are not willing to bend them for any applicant. However, smaller banks will be more willing to approve your application if you meet some of their conditions.
Loan with a high interest rate
In some cases, a bank may approve you loan but charge a higher rate of interest on it. If you see no other way you can opt for this option but always keep it as a last resort. High home loan interest rates can burden you financially in the coming years and must not be taken lightly.
Author Bio :
The author is a seasonal writer on topics of finance and the home loan sector. Through her writing, she articulates aspects that are important to people availing facility such as home loan interest rates, documents, home loan eligibility criteria that help to make the best decision.
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