It’s a known fact that CIBIL score will always impact your home loan. Hence, your credit score should be good; otherwise, you’ll face problems while applying for a home loan. Plus, a high credit score can significantly improve your chances of obtaining a big money loan to acquire the home you always wanted. Banks are quick to deny the loan if credit scores do not meet their prescribed limits. Generally, banks and other financial institutions are ready to give you a loan if your credit score is 700 or above. However, if your score is below this, your loan application might get rejected.
We have mentioned a few reasons for low CIBIL score:
1. Too many loans/credit cards: If you apply for loans or credit cards frequently, it is counted as a hard enquiry. Too many hard enquiries can reduce your credit score.
2. Outstanding credit card balance: If you fail to pay your total credit card bills every month and only pay the minimum amount due, it can negatively affect your credit score.
3. Delay in repayments: If you do not pay your loan EMIs on time, it will be noted on your credit report and will reduce your credit score. Repayment is one of the essential factors that are considered while calculating the credit score.
4. High credit usage: If you use over 30% of your credit limit, then your score will reduce as it shows your dependency on credit is high.
How to improve your credit score?
Now that we know why the credit score is important, let us take a look into what you can do to improve your score. Here are a few things that you can do to improve your score:
Don’t keep applying for credit if rejected: If you have applied for a loan or a credit card and your application has been rejected, the information will be recorded in your credit report. If you apply with another bank immediately, then they will check your previous rejection and may reject your new loan application. In such situations, it’s better to wait for the score to improve and then apply again.
Check your credit report periodically: You should keep checking your credit report at regular intervals. This will help optimize your credit management capability and keep you aware of any fraudulent activity on your credit card or loan account. Also, if you find any error, get them rectified immediately or else it would affect your score negatively. There are multiple leading online aggregators such as MyLoanCare that provide FREE credit report in just a few clicks.
Have a good credit mix: You must have the right mix of credit accounts. A personal loan, car loan or any other such debt installment could work. If you have only one type of credit account, your score may decrease.
Pay your EMIs and credit card bills on time: Not paying your loan EMIs or credit card bills on time can surely mess up your credit score. Remember, the lender reports every late payment or default on payments to CIBIL. Hence, always stick to paying your credit monthly bills/installments on time and in full.
Hence, to get home loan approval with ease, you need to have an excellent credit score. If your score is low or poor, you can improve it by following the steps mentioned above. So, hurry up and apply for a home loan now.