Getting a loan is consistently subject to a significant variable by and large named CIBIL score. CIBIL represents Credit Information Bureau (India) Limited and is the primary Credit Information Company (CIC) in India that stays up with the latest records of an individual’s installments and credits in terms of loans and credit cards. However, there is no particular ‘fortunate or unfortunate’ score but higher the score represents higher creditability and vice-versa.
A decent credit rating for home loans has now been made compulsory by the government. A credit rating between 750 to 900 addresses excellent creditability with a perfect record of past repayments while a score less than 550 diminishes the chances of getting the loan and if obtained will attract a higher rate of interest.
How to improve credit score for home loans? Only a bit of paying attention can have a significant positive impact on your credit ratings. Hence, the following are the tips that will help you to makeover your existing credit score and needs to be followed before approaching any institution for applying for a loan:
Get Through with your Credit Report
Considered as one of the critical variables for acquiring an loan, you need to check the revolving credit you have against how much you are having. The lower the rate, chances are high to acquire the require loan. Secondly, it will highlight the various instances of default and delayed payments at your end that can negatively affect your loan application. Thirdly, it will let you know the information recorded in the credit report thus fixing the credit score. As if there is some negative information, you can approach the Bank and CIBIL to get the situation in your favor.
Avoid Applying for Credit, if Rejected
After getting rejected for a loan or a credit card from one bank, don’t try to apply for something similar from another bank. As the score in one bank is already recorded in your credit record, the other bank will likewise dismiss your application considering your present low credit rating as well as the rejection by your previous bank. This scenario will further pull down your credit score and will affect it adversely.
Avoid Multiple Applications for Loan in a Short Span of Time
Every time when you apply for a loan the bank will ask CIBIL for your credit report and this request pulls down your credit rating. So this recommends your ‘credit’ hungry behavior, but also affects your credit score adversely by questioning your capabilities of paying back the loan on time.
Pay off your Liabilities on Time
You need to be prompt in paying back your liabilities based on loans and credit cards. Not just the minimum amount due on your cards, try to pay at least a sizable amount and if possible pay off the entire amount in due time. In case you are struggling to pay your current EMI, you can get back to the bank to restructure your debt so that you can pay your outstanding easily.
Avoid Joint Applicants
In case you are a joint applicant for a loan procured by someone else then you may suffer even if you are not at fault. In case of default of payments by them, your credit score will also get affected adversely. So in case, you are planning to apply for a loan, try to avoid being a co-applicant for the loans procured by others or if obtained, ensure that the repayments are done within stipulated time without any default.
Try to Keep the Credit to the Minimum
Make sure to apply for loan only in the case of necessity as procuring too many loans brings down the credit score. Ensure to not to get close to the credit card limits as such activities again displays a credit hungry behavior thus chances of obtaining further loans get diminished.
Avoid Loans and Credit Card Settlements
Settling a credit card or a loan means paying an amount nless than that actual amount due against the respective loan and credit card. Banks often acknowledge such requests but these activities get noted down in your credit report and bring down your credit score. Thus prior to obtaining any loan, ensure not to settle down your previous loans or credit cards balances.
However, after taking above precautions if still your credit score is low, then you have something more to help in this direction as follows:
Graph of your Repayments
Thinking about how repayments can pull down your credit rating for a home loan? Taking care of your loan unsteadily i.e. a hefty amount in one go which is due since long ago may adversely affect your credit score. However, in case you make your repayments consistent on scheduled time, it will help you to boost up your credit score.
Utilization of your Credit
Credit Utilization Ratio is a comparison of the amount of credit you have used to the amount of credit you have as a balance which amounts to 30% of your actual score.
These are the ways how you can improve your credit score for home these can actually help you to escape the complications associated with obtaining home loans easily.