When you apply for a home loan, the lenders consider the credit score or the CIBIL score as one of the important factors to determine your eligibility. Read on to know more about how you can improve the CIBIL score before applying for a home loan.
If you compare the best home loan offers from different lenders, you may invariably come across the term ‘CIBIL’ score or the credit score. The CIBIL score is a three-digit number that reflects your creditworthiness. The home loan lenders in India consider the credit score as one of the important factors to determine your loan eligibility.
If your credit score is high, you have a better chance of getting your loan approved faster and a better offer. On the contrary, if your credit score is low or below the lender’s benchmark requirement, the chances are high that the lender will reject your loan application or charge a higher interest rate.
So, how to increase the credit score for a home loan?
If your credit score does not match the lender’s minimum score requirement, don’t worry. All is not lost yet. You can use the following tips to improve your credit score.
Tip 1 – Pay off your dues on time
If you have missed an EMI or delayed your credit card bill payment, it will negatively affect your credit score and affect your borrowing ability. To avoid such costly mistakes, it is advisable to get organised with your credit payments.
You can set a reminder for the payment and ensure that you maintain a sufficient balance in your bank account around the due date. As you continue to repay the outstanding debts, your credit score will slowly improve over time.
Tip 2 – Be wise with your credit card usage
When you use a credit card, it would be tempting to shop for things impromptu. But, you must know that such behaviour can increase your debts and affect your credit score. So, if you have any plans to apply for a home loan soon, you must be prudent with your credit card usage.
Also, it is advisable to avoid using multiple cards. Ensure that you keep track of all the credit card payments and pay off the due on time.
Tip 3 – Maintain a good mix of credit
It is better to maintain the right combination of credits like secured loans (home loan, car loan, gold loan) and unsecured loans (personal loan, credit card loan), etc. Having too many unsecured loans would reflect that you are credit hungry, affecting your credit score.
Tip 4 – Apply for a loan within your credit limit
When you apply for any type of loan, the maximum amount you can avail is to the extent of your credit limit. But, experts recommend it is better to borrow a lesser amount than the maximum limit. When you apply for a higher amount, it gives the impression that you are continuously in need of credit. It is better to apply for new credit only if it is unavoidable and choose an amount that you can easily repay.
You can use the EMI calculator home loan to know the EMI amount and choose the loan amount accordingly. The EMI of the loan should be affordable, and you must be able to repay the same without compromising on your regular expenses.
Now that you are aware of the different ways to improve the credit score, make sure that you rectify your score before applying for a home loan. This will help you get your loan approved faster and increase your chances of getting a better offer.