Five ways to improve your Credit score before applying for a Home loan?

First, let us understand what Credit Score really is and why it is so important to get any type of Home Loan!. A score that can be expressed in number and helps in evaluating the creditworthiness of the individual based on his/her credit history is known as Credit Score. Lenders use this credit score in decision-making by scrutinizing the creditworthiness of an individual, and the score is calculated between 300 to 900. Credit Score plays a vital role in determining the approval of a Home loan. There are number of ways to improve your credit score as discussed below:

Ways to improve your Credit Score

• Checking your Credit Report – Checking your credit report once in a year is really a good habit. It will not only help you to track and maintain a good score but also help you to raise a dispute if you find one in the report. To view or obtain a credit score report, all you have to do is to visit CIBIL Union Official Website and pay a little amount. Moreover, if you are using the CIBIL website for the first time, you can download the free annual credit report for one time only. All the credit transactions made will be reflected in CIBIL every month and some transactions take time to reflect.

• Making timely Payments – Always ensure that you make payments on time without any delay. This is the first and important aspect of improving your credit score. Paying minimum balance every month on time and paying the remaining balance later can also impact your CIBIL Score. Use your card wisely and pay all the dues on time. If you are unable to pay the amount easily, Speak to the Customer Care & Convert your outstanding amount to EMI. By paying the installments on time, you will have better chances of improving your score. You must be extra cautious if you have multiple credit cards. Try setting payment reminders in your email or a phone.

• Never close your Credit Cards – Do not close your old credit cards. The older is your credit card the higher are the chances of getting good scores. Also, under unavoidable circumstances, close your credit cards only after completing atleast one year of its usage.

• Responsible Credit Usage – It is the vital aspect that will help you to get a Home loan. Sometimes if your credit score is not up to the mark, don’t get panic. Try to pay off your pending bills that which will help you in getting your home loan. Moreover, Do not keep your credit cards idle. Make small purchases in a month by credit card even though you have cash in hand and try to pay the Credit Card bills in small amounts on time. It is said that for maintaining good score you must use 30%-40% of your credit limit monthly. Very Less or More usage may affect your score.

• • Loans on Assets – Timely payments of Loans taken on Assets such as Car Loans and Houses increases your CIBIL Score than paying the timely payments of Credit Cards and Personal Loans. They have the highest impact on the Credit Score. This is because banks have an asset as surety with them.

Miscellaneous Issues

• Cheque Bounces A single cheque bounce will make you ineligible for any form of loan application. Imagine what will happen if you have multiple cheque bounces. Even though you have very high score, there are chances that you will not get the desired amount of Loan if you have check bounces recorded. Electronic Clearance System (ECS) must be your Top Priority. Take some time for clearing all your Cheque related dues and apply again after one year if needed.

• Blocked Credit Cards Blocked Credit Card issues must be dealt carefully. Talk to your personal banker or go to your home branch and pay the entire debt amount for once. If you wish to close the Credit Card, Take a letter from the bank stating that all your dues have been payed off. This is useful for resolving the disputes if any with the CIBIL.

• Maintaining Mimimum Balance Maintain a minimum balance of atleast Rs. 10000 to Rs. 15000 in your salary account untouched. This is also an important point to consider as there are cases where loan was unapproved for the failure to maintain minimum balance in the account.

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