It is imperative to maintain a good credit history if we wish to avail a Home loan for your second home.

Sachin Bhagwan Desmukh is a Vietnam-based engineer working for a multinational fast moving consumer goods company. He earns an impressive figure of Rs 25,00,000 per annum. While his family owns a huge house in his hometown, he wanted to buy a second home in Bangalore where he plans to return to when he relocates to India.

He found an impressive 3 bedroom flat in Bangalore and started the loan process. To his shock, State Bank of India rejected his loan. The reason: bad credit score. Sachin did not realize that a mistake he made about 5-6 years ago would hurt him so dearly. He had taken a personal loan when he was working in Jammu to the tune of 5 lakhs. He had paid most of it, except for the last Rs 50,000 outstanding.

''I did not pay it because I got out of Jammu and it sort of slipped out of my mind to pay. Today they have written it off and when I enquired to close the loan they said I have to pay somewhere around 4-5 lakhs. I think it is ridiculous to pay so much and also, I will have to go to Jammu and spend some time to close this loan. I have a very few holidays a year and I would love to spend time with my aging parents,'' said Deshmukh.

It is very important to keep a good credit score whether it is your first or second home. But in most cases people are not aware about the hassles of bad credit score because the concept is new in India. Today it is mandatory for banks to do a credit check, but that was not the case about 8-9 years ago because there was no Credit Information Bureau of India Limited (CIBIL).

To avoid such difficult situations and it is good to keep a tab on your loans. Don't miss your payments. If you think you may not be able to keep tab on equitable monthly installments, foreclose the loan and make sure you collect loan closure letter.

(Contributed by Rajiv Raj, director and co-founder at Creditvidya.com)