Your credit score or CIBIL score has a significant impact on your home loan interest rate. This is because the score reflects your credit history as well as showcases that you have been a responsible borrower. Today, most lenders reject home loan applications if the applicants do not meet their prescribed credit score limit. Therefore, you must improve your score before approaching a lender.
So, if your credit score is less or is not high enough to meet the lenders’ requirement, here are a few tips to help you enhance your CIBIL score:
If you have any unpaid dues like a credit card payment or a loan, make sure that you focus on the repayment and try to try to pay off the full amount at the earliest. To avoid missing any payment, you can set reminders for the due date. As you repay the dues consistently on time, over a period, your CIBIL score will improve.
A definitive way to avoid defaulting on the repayment of the loan is to be prudent with your borrowings and avoid taking a high loan amount or multiple loans at once. If you have an existing loan and wish to apply for a home loan, it is best advisable that you use a home loan EMI calculator to know precisely the premium you can afford the repay every month and apply for a loan accordingly. Apply for a smaller loan amount so that it is easy to repay, and once you repay the amount, your credit score will surely receive a boost.
It is better to maintain a combination of secured loans like home loans as well as unsecured loans like a personal loan of different duration to build your CIBIL score. If you have too many unsecured loans, it can harm your CIBIL score.
One of the significant factors that affect the CIBIL score is the credit utilisation ratio. If you utilise a high credit as per the limit, it will have a negative effect on the credit score. But, on the other hand, if you keep the credit utilisation ratio to 20% or 30% of the maximum limit, the better it will be for you to repay and build the credit score.
When you apply for any loan, it is better to opt for a loan with a longer duration, especially if you are trying to build your CIBIL score. This will ensure that the EMIs is low, and you can repay the amount on time. When you don’t default, your credit score automatically improves overtime.
In some cases, the CIBIL report may have a few mistakes, which in turn can affect your credit score. So, it is paramount that you carefully review the credit score report. If you notice any incorrect information, you must immediately notify the concerned authorities and file a CIBIL dispute resolution form. Once the credit report is rectified, your CIBIL score will improve.
Apart from the above tips, being disciplined with your finances, avoiding unnecessary expenses, taking too much credit can significantly help you improve your CIBIL score. If your CIBIL score is high, your chance of getting your home loan approved will be high.
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