Credit Score similar to Aadhaar Card nowadays is your identity card, in this case, the identity card of your financial-self. As the digital medium attempts to accumulate the key credential data of India’s 1.3 billion people, it also attempts to make our daily lives simpler by streamlining this data.
In one way or another, we all are part of the country’s economy, especially if we own a bank account. Being in the country’s financial database via using bank’s services such as credit cards, secured and unsecured home loans etc. prompts Credit Information Companies (CICs’) to collect and maintain your financial information.
To determine that if you borrow money what shall be the probability of you paying it back on-time, these CICs’ enter info about your past fiscal activities in a statistical algorithm. The result, a three digit figure, is called a Credit Score. An average Credit Score for the Indian market is about 750 and the factors which go in calculating it are your former financial decisions and deeds i.e. your past Home Loan EMIs’credit card payments and defaults etc.
Armed with the government’s emphasis on digitization and all-round development, the online revolution is determined to bring everyone into the system. Just like the Aadhaar Card is used to map every individual’s identity seamlessly, a Credit Score is used to determine everyone’s financial capability.
Moreover, by facilitating a reduction in bank home loan interest rates, the government is encouraging people to own a home by applying for easily available home loans which are, at this moment, offering cheapest interest rates of the past six years. To avail good home loans and other benefits from Pradhan Mantri Awas Yojna (PMAY) and similar Affordable Housing schemes, it’s crucial to maintain a good Credit Score.
Just like your Aadhaar Card acts as a single-window to many of your government identities – like your Permanent Account No. (PAN), Biometric Info, Name, Date of Birth, Mobile No. & Residential Address details, Income Tax Details, Bank Account details etc., your Credit Score acts as a key factor in deciding the interest rates of your home loan and the higher-side eligibility limit of your loan amount.
When a person applies for a home loan, the lender/credit institution asks their CIC for the applicant’s Credit Information Report (CIR) which contains the applicant’s Credit Score. The lenders then analyze the CIR to decide whether they will grant the applicant a home loan and if yes, what will be the interest rate.
To avail these financial monitoring services, almost all lenders and credit institutions like banks including Co-operative Banks and Non- Banking Financial Institutions except those involved in investing are a member to the CIC information-sharing agreement which doesn’t require them to ask for your consent before sharing your financial info.
It isn’t that a poor credit score bars you from securing a home loan or that you can’t improve your Credit Score ratings through a few simple solutions but it is imperative for you to know that when applying for a home loan, you shall have a good Credit Score to get lower interest rates and higher eligibility limits. These lower interest rates shall amount to huge savings over a longer period of time.
Conclusively, maintaining a good Credit Score is essential for your Financial Identity which matters a lot these days as the more you are financially stable, the more you are financially capable of buying your dream home.