5 tips to improve your CIBIL Score and get the best home loan deal

By Admin |
Jun 01, 2023 |
1 |

You like the property you visited this morning and the dream to have a home of your own now seems closer to reality than ever. The next big step is to arrange for finances – probably and preferably through a home loan, just like the majority of the buyers.

Securing a home loan is a battle you require an effective firearm to win. And your CIBIL score is the best weapon one can have.   Home loans involve huge amounts of money and banks need the surety they are lending it to the right person – one with a good credit history. And the Credit history is mirrored and quantified as CIBIL Score. The higher your CIBIL Score, the more trustworthy you are to return the money, and the more loan amount you are worthy of getting.

What is a CIBIL Score?

CIBIL Score is a 3-digit number profiling how desirable a borrower you are to financial institutions. It ranges from 300-900 and is calculated based on factors such as your credit history, rating, and report.

The closer your score is to 900, the better your credit rating is, and the more likely you are to receive a home loan at favorable conditions. A CIBIL score of 750 or above is excellent but you are good to go even if you lie between the ranges of 650-750.

If it’s lower, try to improve the score first before applying for a home loan. Banks might even lower your interest rate if you have a CIBIL Score high enough. So having a higher CIBIL Score is a great advantage.

How a CIBIL Score is calculated

It is calculated based on your complete borrowing details including repayment history, repayment pattern, number and type of loans, outstanding debts, and default instances (if any). A high credit score (a score closer to 900) indicates a greater likelihood of receiving a loan from banks or other financial institutions in India and is crucial for easy loan approval. Conversely, a low score near 300 indicates past repayment pattern defaults or other borrowing discrepancies.

Nevertheless, different banks and financial institutions have their own eligibility and approval standards for home loans. Your CIBIL score is the first thing that banks consider when you apply for a credit card or loan, and it’s one of the most significant factors in determining your eligibility.

How to improve your CIBIL score?

A poor CIBIL credit score makes it more difficult for you to obtain credit and loans. The process becomes lengthier, more complicated, and costlier. Even if you succeed at getting a home loan, the interest rates are much higher than those with higher CIBIL scores. If you are stuck with a poor and not-so-good CIBIL score, please follow these tips to improve it.

Make it a point to repay loans on time: It’s essential to make your credit card bills and utility payments on time. If you have any unpaid bills, be sure to pay them off as soon as possible. You can use tools like online payments or automatic deductions from your account to ensure that you never miss a payment. Timely repayment helps your CIBIL Score improves and be in good condition.

Limit your Credit Card Usage: Credit card/s is a blade that cuts both ways. Though it serves as the easiest way to obtain credits, using it frequently – or having too many of it – can go against you. It can be deduced that you are overly reliant on credit and that is never a good sign for debtors. So make sure you neither own multiple credit cards nor use them too frequently to settle your needs.

Use your Credit Card sporadically and sensibly: To begin with, limit your desire and expenditure as per your income. Use your Credit card only when it’s either the last resort – stuff you are buying is compulsory – or the best option available (you are getting a hefty discount). Even when it’s necessary to use a credit card, utilize only up to 75% of the limit. Never exceed your credit limit as a thumb rule. Those who follow these guidelines are considered responsible spenders, which is viewed favorably by banks and lenders.

Don’t seek loans from each and everyone: The more loans you apply for or enquire about, the more hits your credit score will take. Shocking but true! The thing is every time you apply or inquire about a loan with a bank, a request is sent to CIBIL. And the agency (CIBIL) will view you as a credit-reliant person negatively influencing your credit score. So avoid applying for too many loans or making multiple loan inquiries.

Monitor your Credit Report regularly: Review your credit report regularly to ensure that all information is accurate. As errors or discrepancies will adversely affect your credit score. Should you find any errors, report them to CIBIL immediately and get these corrected. To view your credit report, you can visit the CIBIL website.



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