It is advisable for home loan seekers to obtain a credit report before applying for a large loan, such as a home loan. This report, which provides a person’s credit score, can be obtained from any one of the four credit bureaus operating in the country – CIBIL, Experian, Equifax and Crif High Mark.
A score between 750 and 900 is considered excellent. However, if the score is below 675, one may need to improve the credit score before applying for a home loan.
Immediate measures
When it comes to improving your credit score, first check for any errors in your lender’s record books. While you may have repaid a loan, the bank’s records may still show some outstanding credit against your name. Rectifying such mistakes will improve your credit score.
Disagreements between a lender and a borrower may also be the cause of a poor credit score. Resolving such disagreements, paying the dues and closing the loan account can boost your score.
The most important thing for a good credit score is to make all payments on time.
- If you have missed a payment, clear the dues immediately to avoid further impact on your credit score.
- Consolidate multiple loans into a single one to improve your credit profile and reduce the appearance of excessive credit dependency.
Long-Term Measures
In case you have a delinquent loan against your name and you don’t have the ability to repay right away, this is a situation that can only be remedied over a period of time. If you have a high proportion of unsecured loans in relation to secured loans, you should try to alter the mix over a period of time.
Another behavioural change that you must make is to avoid shopping for loans excessively. In trying to bag the best possible deal, do not apply or make enquiries at 15-20 banks. Each time you make an enquiry, it gets registered against your name and indicates that you are credit-hungry.
Suppose that your credit card provides you with a credit limit up to Rs 2 lakh, don’t use up the entire limit as this is also perceived as a sign of credit hunger.
If you are unable to improve your credit score on your own, seek help from professional agencies like Credit Sudhaar.
- These agencies guide you in maintaining the right balance between secured and unsecured loans.
- They advise on the ideal number of credit cards based on your financial situation.
- They inform you about the maximum credit utilization limit to prevent negative impacts on your score.
Conclusion
A good credit score is crucial for securing a home loan with favorable terms. By making timely payments, consolidating debts, and maintaining a healthy credit mix, you can improve your score over time.
Frequently Asked Questions
1. What is the ideal credit score for a home loan?
A score between 750 and 900 is considered excellent and increases the chances of loan approval.
2. How can I quickly improve my credit score?
Rectify errors in your credit report, make overdue payments, and avoid excessive loan applications.
3. Does having multiple loans affect my credit score?
Yes, having too many loans, especially unsecured ones, can negatively impact your score. Consolidating them can help.