5 simple steps to improve your credit score before applying for a home loan | Mint
Source: Live Mint
As a home loan in India requires a good credit score, which takes into account the loan amount and allows it to sanction as well as fix the interest rate along with other associated terms. Here are key ways to improve your credit score before availing the loan:
Pay on time
Payment of your existing loans and credit card bills on time is extremely crucial. Late payments damage your credit score. Instead of paying late, automate the payments or leave a reminder so that you never miss any due date.
Clear outstanding dues
Pay off the outstanding dues, if any. Issue a notice to the creditors and pay off any overdue dues, which would cause your status to change from “default” to “closed,” thereby ensuring you continue to have a good credit score.
Watch your credit utilization ratio
Your credit utilization ratio is a proportion of total available credit currently utilized by you. Try keeping it below 30%. As an example, if your combined credit limit stands at ₹1 lakh, set a target for keeping your running balance below ₹30,000. A lesser ratio reflects better credit management. This is extremely important for proper credit profile management and keeping your records clean.
Monitor your credit report
Regularly review your credit report for errors or inconsistencies. If you find inconsistencies, report the inconsistencies to the credit bureau immediately. Errors can boost your score more quickly.
Minimize new credit inquiries
Each new credit inquiry lowers your score in the short term with a hard inquiry on your report. A hard inquiry generally stays on your credit profile for years together. Avoid applying for multiple credit cards or loans at the same time to prevent keeping your score low.
Hence, consistent effort and time are required daily to obtain a good credit score, but these simple ideas will lead you to that good home loan with improved terms.
It is crucial to remember that a good credit rating not only enhances the chance of getting your loan approved but also allows you to bargain for a better interest rate, saving you a great deal of money in the long term. Make use of these tips today for a better tomorrow.
(Note: Raising a loan comes with its own risks. So, due caution is advised)
