A credit score is a three-digit representation of the creditworthiness of a person. It ranges from 300 to 900, with a higher score indicating a better credit history. Since a home loan is a big-ticket loan, it is always beneficial to maintain a good credit score since it can help you easily get your loan application approved and get a favorable interest rate. Always check cibil score periodically to maintain fair scores and enjoy the benefits that come with it.
How to Improve Credit Scores?
If you are looking to buy a home but have a low credit score, don’t worry. There are steps you can take to improve your credit score and make yourself a more attractive candidate for a home loan. Here are some ways to improve your credit score
Check Credit Score and Credit Report
The first step to improving your credit score. check cibil score by getting a free credit report from the Credit Information Bureau (India) Limited (CIBIL) or a CIBIL Score App. This report will show you your credit score and provide details of your credit history, including any outstanding loans and credit card balances.
Pay Bills on Time
Late payments can decrease your credit score. Pay your bills on time, including credit card and loan payments. If you have trouble keeping track of your bills, set up automatic payments or reminders to help you stay on top.
High levels of debt can also harm your credit score and put a strain on your finances due to high rates of interest. If you have a lot of outstanding loans or credit card balances, try to pay them off as quickly as possible. This way, you can improve your credit score by balancing the proportion of unsecured debt to secured debt in your credit portfolio, which is known as the credit mix. You can check cibil score and report to monitor the credit mix.
Limit Credit Applications
Every time you apply for credit, the lender requests to check cibil score and credit report with the credit bureaus, which creates a hard inquiry on your credit report.
Having a high number of hard inquiries on your credit report can negatively impact your credit score as it indicates that the borrower may not be able to manage their finances well.
Keep Old Credit Accounts Open
The length of your credit history is important in determining your credit score. Keeping old credit accounts open will maintain a high credit score even if you’re not using them. If you close an old account, your credit report may experience a drop in score as the average age of your credit portfolio will decrease.
Resolve any Errors on the Credit Report
Sometimes, errors can appear on your credit report. If you spot any errors, you can dispute them with the credit bureau. It will help to ensure that your credit report is accurate and improve your credit score. You can view your credit report on CIBIL Score App.
Avoid Being a Co-Borrower or a Guarantor
When you act as a guarantor for someone else’s loan, you take on the responsibility of paying off the loan if the primary borrower defaults on it. This can also have a negative impact on your credit score, as the lender may count the loan against your liability. If you plan to take a home loan, avoid becoming a guarantor for others.
Increase Credit Limit
Your credit utilization ratio, which is the proportion of spending on your credit card to your credit limit, is another factor that affects your credit score. To improve your credit score, you can request an increase in your credit limit if it is small compared to your spending. It will decrease your credit utilization ratio.
You can improve your credit score and increase your chances of getting approved for a home loan. Remember, a good credit score takes time to build, so be patient and stay committed to working on it. Remember to check cibil score on CIBIL Score App to ensure it is increasing as expected.