Once you decide upon the house you want to purchase, your next step is to research the best possible deals available on home loans. However, banks in India are now taking into consideration your credit score or CIBIL score before approving your application for a loan.
CIBIL stands for Credit Information Bureau (India) Limited with CIBIL or TransUnion CIBIL Limited being one of the oldest companies in the country that maintains a record of the loans and credit cards taken by Indian residents from a bank or a Non-Banking Financial Company (NBFC).
Your credit score or CIBIL score is a 3-digit number - ranging from 300 to 900 - that is created based on your credit history, which includes the credit taken in the past and the corresponding payment patterns for the same.
While a high credit score indicates high levels of trustworthiness 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. Read through for some tips on planning and financial management that can help improve your credit score.
Keep an eye on your credit report
Go through your credit report periodically to get a sense of any defaults or delayed payments that can be rectified after contacting your bank.
Pay your loans on time
To maintain a good credit score, it's mandatory to pay your EMIs on time. If you are delaying payments on your EMI as it seems to be cutting into your monthly budget, then ask your bank can to help restructure the same for ease of payments.
Pay your credit cards on time
Banks see it as irresponsible behaviour when you max out your credit card every month, so be conscientious with your usage and make it a point to pay the entire amount on time.
Avoid too many unsecured loans
A multitude of unsecured loans like personal loans or credit cards can make you appear as an unattractive borrower for a bank, so take these only in times of absolute necessity. However, taking a secured loan like a car loan can add to your credibility, so it's a good idea to stick to a fair mix when it comes to borrowing.
Track the payments of your co-applicants
When you are a joint applicant for a loan taken by someone else, then their patterns of payment are likely to affect your credit score as well. Make sure your co-applicant clears her/his dues on time to avoid being penalised for mistakes made by someone else.
Don’t ‘settle’ your loan or credit cards
There are times when customers get into an agreement with their bank for ‘settling’ their credit cards or loans for an amount that is lesser than the original payment due. What might seem like a boon at the time, might prove to be a curse in the long run as, such activities are recorded in the credit report and are unlikely to support your case, the next time you apply for a loan.
Though a CIBIL score of 700 and above is your best bet for getting easy approval on an application for a home loan, don’t be disheartened if your score’s low. All you need to do is manage your payments promptly and give yourself a few months for your credit score to climb.
This article is contributed by RoofandFloor , part of KSL Digital Ventures Pvt. Ltd., from The Hindu Group
