The first and foremost way to ensure that your home loan application does not get rejected is to build a good credit or CIBIL score. After all, a high credit score makes you appear as a low-risk borrower in the eyes of lenders – the kind they are looking for.
There are ways to build a good credit score. Being aware of them early on and taking careful steps will ensure that your credit record is spot-free and your credit score, excellent.
Given below are few tips to build or improve your credit score for home loan eligibility –
- Timely Payment of Dues
Have you missed EMI deadlines? Delayed repayment of credit card dues? Then, now is the time to get organised. A good credit score for availing home loans requires you to have high credit-worthiness. This is only possible when you remain disciplined with your credit. Set reminders, so you do not miss out on a crucial repayment deadline.
Missing deadlines or untimely payment of dues will not only compel you to pay penalties but will also lower your credit score significantly. The result? You may be charged higher home loan interest rates or worse, may not be able to meet home loan eligibility at all.
- Maintaining a Healthy Credit Mix
There are two types of loans – secured (having some valuable object as security) and unsecured (no collateral requirements). Now, if you are in the habit of applying for too many unsecured loans, stop such a practice right away. The saying, “don’t put all your eggs in one basket” has endured for a reason. Maintaining a balance is key to building a solid credit score for availing home loans – have a variety of both unsecured and secured loans in your credit life.
Failing to do this can adversely impact your credit score, leading to either higher home loan interest or altogether disqualifying your home loan application.
- Low Frequency of Loan Applications
An often neglected yet effective way to build a good credit score for availing home loans would be to avoid applying for too many loans at a time. You do not want to come off as credit-hungry to your lender. Plus, such a practice will only leave you in a vicious debt cycle with insufficient funds to overcome it. This will harm your credit score. Before applying for another loan (be it a home loan or some other loan product), make sure that you have completely repaid the previous. Moreover, keep your borrowings to a minimum and be prudent with credit.
- Reviewing Credit History
There could be nothing worse than having a good credit score and still being denied home loan approval because of misinformation in your credit record. To avoid this, carefully review your credit history and if you find any inaccuracies, dispute the same with the credit bureau. If you have a proof for the mistake, present it so that such errors can be removed from your credit record and your home loan application may be approved.
In your race to get a good credit score and meet home loan eligibility, do not forget that your current home loan will determine how your credit score looks like in the future. Hence, you must choose your EMI wisely. Online home loan calculators such as the home loan EMI calculator will help you out in this regard. This simple tool will help you decide whether or not your chosen EMI meets your repayment ability.