Strategies to improve CIBIL score before applying for home loans

The CIBIL score is a credit score that is rated for every individual on the basis of the individual’s ability to pay the amount on the credits taken. If the individual pays the credits on the time then the CIBIL score gets improved while if the individual does not pay the credit on time then in that case the CIBIL score gets reduced. The individual’s pan card & Aadhar card number are used to identify the individual for the identification of the CIBIL score. Crisil is a leading company in credit ratings that maintains the records of an individual’s credit score. The higher the credit score higher is the possibility for an individual to get the home loan or a credit card getting approved. The CIBIL score is a medium to identify the credit-paying habits of an individual whether the individual pays the loans EMI or credit card bills on time or not. This medium of checking the CIBIL score is widely being used by all the leading banks & NBFC’s across India before the disbursement of loans. As there is a risk involved in providing credits to the borrowers the banks are cautious about extending loans to the borrowers.

The credit payment habits of the individual are noted by the Crisil company and accordingly, the bank decides whether to approve the home loans of an individual or not. The credit score is rated on the basis of 1000 points basis. Out of which the credit score of 800-1000 points is considered as excellent, while a credit score of 600-800 points is considered as good, 400-600 as average, and less than 400 points is considered as poor. Thus maintaining a good credit score is necessary for the approval of loans. Also, the banks charge lower interest rates to borrowers who have excellent credit scores. The credit score can be checked by an individual on the official website of CIBIL or else on any other finance portal website. If the score is found to be poor the individual should try to improve the score by using various strategies to improve it. If the individual defaults on the loans then in that case it becomes very difficult for the borrower to avail future loans from any of the lenders. Thus the borrower should take care that if the loans are taken then in that case it should not default any time.

Strategies to improve CIBIL score before taking home loans:

• Repay the existing credits before availing of home loans:

The borrower can repay the credits on time which can help an individual repay the loans on time. This can help an individual increase their credit score. Also if any existing loans are running then they should be paid on time which can help an individual increase the credit score.

• Avail credits frequently to improve the score:

Availing the loans frequently is a better option that can help an individual get the credit score getting updated frequently. Timely repayments of the credits can help an individual improve credit score making it easy for an individual to improve the credit score.

• Use lesser use of credit than the actual limit:

If the borrower uses a lower credit limit on a credit card than the actual limit then in that case it can help the borrower improve the credit score. The individuals who consume an excess of credits are the ones who are less preferred by the banks.  

• Try for credit mix:

Availing different categories of credits like personal loans, home loans, car loans, credit cards & business loans can also help an individual improve the credit score.

• Consider consolidating your debts:

The individual should try to repay the existing loans before applying for the newer home loans. This can help an individual improve the credit score for the closed loans.

Thus there are various strategies through which an individual can improve their credit score before applying for home loans. The applicant should always keep the check on the credit score to ensure that the credit score does not fall down. Ensuring that the CIBIL score is appropriate can help an individual avoid rejection of home loans due to a poor credit score.