When you apply for a home loan, the lenders consider credit score as one of the critical factors to determine your eligibility. And, it always helps to maintain a good credit score; it helps you get the loan approved faster.
However, if your credit score is low or does not meet the lender’s minimum score requirement, your loan approval process can be delayed. In the worst case, the lender may charge a higher interest rate or even reject your loan application.
Today, all financial organisations verify the home loan applicants’ credit score as it reflects their creditworthiness. If your score is low, you need not lose hope, there are many ways to improve your score for a housing loan. In this write-up, we discuss a few tips that will come in handy.
Pay off your dues on time
If you have missed an EMI or delayed paying your credit card bills, then it is time to get organised with your finances. Make sure that you set a reminder or an alert for the payment and clear your dues on time. As you pay off the outstanding amount, your credit score will automatically improve.
A delay in the payment even by a single day will affect your credit score. Also, you may have to pay late payment fees. So, if you are looking to apply for a home loan, be financially disciplined, and pay off the dues on time to rack up the credit score.
Be careful with using credit cards
If you have a credit card, you may be tempted to purchase things impromptu. While this may give your momentary happiness, it can have a massive impact on your finances as you risk racking up your debts.
So, it is advisable that you use the credit card prudently; avoid taking too much credit at once. This will affect your repayment capacity and your credit score at the same time. Also, when you avail of too many credits, the lender will believe that you are credit hungry and would categorise you as a high-risk customer.
When you have no credit, you cannot default on the payment and maintain a healthy credit score.
Review your credit history frequently
If you want to apply for a home loan in Bangalore and are looking to improve your credit score, it is imperative to review your credit report for any inconsistencies or errors. At times the credit bureaus may commit mistakes while updating your records, and it can affect your credit score.
For example, the loan you have repaid may not be updated in your credit report. If you notice any such errors, you must immediately report the same and get it rectified at the earliest.
Maintain a good mix of credit
Many financial advisors recommend maintaining a combination of secured and unsecured loans of long and short tenure to build a credit score. If you have availed too many unsecured loans like credit card loans or personal loans, it can affect your financial credibility and credit score. As you repay the secured loans consistently, your credit score will automatically improve
Now that you are aware of the tips to improve your credit score for home loans, do your due diligence and ensure that you maintain a healthy credit score up to 750 or more to avoid any hassles in the home loan application process.