Buying a home is an important decision. Financially also it is a big decision, as one may need to finance it and bear the burden of loan repayment over the next decade or so. Once you have made up your mind about buying a home, the next step is to research the best possible deals available on home loans. It is here that your CIBIL score comes into play. A good CIBIL score for home loan is important as it shows the lender your seriousness about repaying the loan and can help you get loans at lower interest rates. Here we will discuss how to increase your CIBIL score easily.
What is CIBIL Score?
Your CIBIL Score or credit score is a 3-digit number lying between 300-900 that is created based on your past credit history and includes all credit taken in the past and the payment patterns for the same. The higher the CIBIL scores, the higher your financial credibility in the eyes of the lender leading to attractive interest rates for loans and other credits. A low CIBIL Score shows the borrower’s past repayment history in poor light and makes them risky borrowers. The lenders often do not approve the loan application of such borrowers or they may be charged higher rates for loans.
How to Increase Your CIBIL Score?
While a high credit score indicates your financial credibility and makes you an attractive borrower, a low score, on the other hand, is unlikely to increase your chances of getting a home loan approved. So, follow the given ways to improve your CIBIL Score and creditworthiness to get attractive offers and loans.
- Be Disciplined with Repayment
Delayed payments and outstanding debt are the ones that damage your credit score the most. So, if you use credit cards or have taken a loan, ensure that you pay the bills and loan EMIs on time. Late payments not only attract penalties but also pull down your credit score. Set reminders so that you never miss any due dates and make timely payments for credit card bills and loan EMIs. This will enhance your credit repayment history and increase your CIBIL score making you more trustworthy in the eyes of the lenders.
- Avoid Too Much Debt at One Time
Availing of a loan is one of the easiest methods to get funds during an emergency. But borrowing more than what you can repay may lead to late payments or defaults which reflect poorly on your credit score. Thus, one of the best ways to improve CIBIL score is to borrow only what you can repay. Although while loans are now easily available, you should never borrow more than what is required. Remember the more you borrow, the higher will be the EMI and the higher the chances of defaulting. So, while taking a loan, make sure that you select the loan tenor and EMI very carefully for easy and comfortable repayment of monthly EMIs.
- Keep a Mixed Bag of Credit
Never go for one type of loan only! It is advisable to keep a balance between secured and unsecured loans. Auto loans and home loans are considered secured loans while a credit card is an example of an unsecured loan. Having a high number of only one type of credit can negatively impact your CIBIL score if payment is not done on time. Thus, a healthy mix of different types of loans having long and short tenors gives lenders the confidence that you can handle all types of loans with ease and make timely repayment without defaulting.
- Do Not Make Multiple Credit Applications
Before you apply for a home loan or a credit card, the lenders check your past credit history by looking into your credit or CIBIL report. These are known as hard inquiries. Sending out multiple applications for a loan or credit will lead to multiple credit inquiries by lenders which may impact your credit score negatively. Multiple enquiries, thus, make you look hungry for credit. It is thus best to wait for some time if your loan application is rejected once before reapplying for a loan.
- Check CIBIL Report and Rectify Errors
The CIBIL report presents a detailed record of your current and past credit history and accounts. Checking your CIBIL report from time to time may be a good idea to keep away any discrepancies occurring there. Having errors in your report can hamper your CIBIL score. Any errors in your report must be rectified immediately. Checking your credit report and approaching the bank and CIBIL to correct any errors promptly can help you get the right CIBIL Score thus enhancing your credibility. So, keep an eye on your credit report from time to time to maintain a healthy CIBIL score.
Summing Up
A CIBIL score is a numeric expression of your credit history. It shows a trend of your past credit repayment and how you have managed your debts and loans. You can enhance your CIBIL or credit score by making all debt payments on time, taking more secured loans as compared to unsecured loans, and never forgetting a credit card payment. The score will improve gradually as you keep following the given points. The CIBIL agencies usually update the report once a month. So, keep a look out for the report to monitor your CIBIL score and manage any discrepancies. Remember your CIBIL record is of utmost importance while applying for a loan, so maintain it and enjoy benefits of quick loan approval at attractive rates.
