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 as 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 error in your lender’s record books. While you may have repaid a loan, the bank’s records may still be showing some credit outstanding 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 the payments on time. If you have missed a particular payment, make amends right away by paying up.
Consolidating your credit will also help. You may have taken five personal loans. Consolidating all these loans, into a single one, will look better on your records, by indicating that you are not excessively credit-hungry.
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, vis-à-vis 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.
Despite your best efforts, if you are not able to achieve a good credit score on your own, then, there are professional agencies that you can turn to, such as Credit Sudhaar, etc. These agencies can help you to achieve the right mix of secured and unsecured loans. They tell you about the right number of credit cards you should own, given your economic status. They also inform you about the maximum percentage of credit on your credit card, beyond which you should not go.
