Before applying for a home loan, obtaining your credit report from credit bureaus is crucial. This report contains your credit score. CIBIL is the preferred credit bureau for most companies. CIBIL score is a three-digit number calculated after analyzing your credit files. This score represents your creditworthiness.
Home loan companies use this credit score to determine whether you are qualified for a loan. The score ranges from 300 to 850. A score above 700 is good, and above 800 is considered excellent. CIBIL mentioned on their own website that 79% of loans are approved to people with a CIBIL score higher than 750.
In this article, we’ve discussed a few ways to improve your CIBIL so that you get a better offer when you apply for a home loan. The lender gives you priority.
Ways to improve CIBIL for your home loan
● Keep an eye on your credit report.
A home loan is a big amount to be sanctioned. Therefore, companies check the credit report thoroughly. They look for steady income, timely repayments, credit utilization, and the number of secured and unsecured loans.
Review your credit report from time to time. If you see any error in the report that you think can hurt the credit score, contact the lender to rectify the error.
If you see a loan account not opened by you or any late payment even when you are paying on time, send an email to CIBIL customer support to resolve the issue.
● Clear the credit card dues on time
Credit cards are important nowadays. It is helpful in our day-to-day purchasing. But it is also the most common cause of negative impact on the credit score. This is because people often forget to clear credit card dues or max out the credit limit.
This mistake reflects on the credit report, which shows you as an irresponsible person and hinders you from getting a home loan.
● Make timely repayment
Timely repayment of monthly installments is very important to maintain a good credit score and eventually get a real simple home loan. Each month, when you pay the EMI on time or make late payments, your lender reports that to CIBIL. Hence, even after a negative impact for some reason, you can still improve your CIBIL score by making timely payments for EMI and credit card bills.
● Track co-applicants payment patterns
If you have a loan account with another person. Their payment patterns may affect your credit score. You should save yourself from a joint loan with someone not in your direct network.
Review your co-applicants payment history regularly. And tell them if there is any late payment, defaults, or dues, so it doesn’t harm your credit scores.
● Limit the credit usage
You can have a large credit available in the credit account. But the credit utilization should be under 30% of the overall credit limit, as it greatly impacts the credit score.
However, if keeping it under 30% is not possible for you, it is advised not to go over 50%. If you are considering taking another loan, clear the previous loans before applying.
● Don’t apply at too many places at once
If you apply in too many places, you appear credit hungry. That behavior impacts the CIBIL score negatively. The loan companies see you as desperate and either deny you or offer a loan with high interest.
To get better deals on loans, take advice from an expert. They’ll tell you how much to apply for and where you should apply. If you get rejected, do not apply to another company. Instead, take some time to work on the credit report to make it stronger, and then apply after a few months.
● Balance secured and unsecured loans.
Secured loans are the ones that require some asset in exchange for the loan, like property or gold loan. The unsecured loan includes a personal loan, car loan, etc., where you don’t have to give any collateral to the lender.
There should be a balance between both. Credit cards, microloans, and personal loans are all unsecured loans, and too many unsecured loans in the credit report don’t look good and affect the CIBIL score.
Summary
Even if you have never applied for a loan, it is crucial to create a credit history before applying for a home loan. You can start by taking a small personal loan or applying for a credit card. And make timely payments.
This shows you are a responsible person and make you an attractive borrower. If you maintain a good credit score, companies approach themselves to offer you better deals.
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