If you are trying to get a loan to help you finance your dream of buying a home, nothing can be more worrisome than a low CIBIL score. A CIBIL score is a number between 300 to 900 that is based on your credit history. Banks use your CIBIL score to determine whether or not you are a reliable candidate for a loan. A high CIBIL score indicates that you have paid all your loan installments on time and have no unpaid dues left. A low CIBIL score (usually below 750), on the other hand, tells a bank that you have defaulted on past payments and therefore, might default on future ones as well. If you are trying to get a loan but are being held back by your low CIBIL score, there are a few techniques you can use to speed up the process of buying your home. With these five effective steps to increase CIBIL score, nothing has to stand in the way between you and your goal of becoming a homeowner.
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Clear All Your Outstanding Dues
The first step to increase a CIBIL score is to clear up all your unpaid dues. If you still have old credit card bills that have been left unpaid, it’s best to complete your payments before you apply for a home loan. Your CIBIL score can also decrease if you haven’t been regular with your loan repayments. If this is true in your case, you can pay the remaining amount and ensure that no loans have been left unpaid. As a precautionary measure, one of the top tips to apply for a home loan is to limit the number of credit cards you have. If you have more than two credit cards, it becomes easy to spend more than you realise and lose track of all pending payments. This can ultimately decrease your CIBIL score and hurt your chances of getting a loan.
Check Your Credit Report for Errors
Sometimes, even if you have been diligent about all your payments, administrative errors can still result in a low CIBIL score. You should go through your entire credit report and check for inaccuracies if you’re trying to learn how to increase your CIBIL score. Sometimes, loans that have been repaid or accounts that have been closed can still show up as open on your report. If you spot any inaccuracies, then you can register an appeal on the CIBIL website. It will take a maximum of 30 days for your appeal to be looked into and corrected. Once the correction has been made, your CIBIL score will immediately show an improvement.
Be Regular with Your EMI Payments
Many people mistakenly believe that they will not get an approval for a home loan if they are already paying previous loans. However, this is not the case. The most important factor is not whether you are currently paying back loans, but how regular you are with these payments. If you have been paying your Equated Monthly Installments (EMIs) on time every month, then your CIBIL score will be high. This tells the bank that you are very likely to be punctual with your EMI payments even for future loans. If you have not been regular with your payments, then clear up any remaining dues and try to be more punctual with future monthly payments to increase CIBIL score.
Don’t Exceed Your Credit Limit
While not exceeding your credit card limit is very important for a high CIBIL score, it can also be helpful to stay well below the limit. Try not to spend more than 50 percent of your total credit card limit every month. If you consistently spend close to your entire credit card limit, it gives banks the impression that you are a careless spender and might run into debt easily.. Another helpful tip to improve your CIBIL score would be to keep old credit card accounts open. If you have a good credit history with a certain account and haven’t made any big purchases with it, this can significantly improve your CIBIL score.
Don’t Apply for Too Many Loans at a Time
You might require multiple loans for different purposes, but it isn’t the best idea to apply for all of them at the same time. If your bank can see that you have made multiple requests for loans, it might make you appear unreliable and desperate. This is exactly the opposite of the image you want to give your lender. Apart from applying for many loans, you should also restrain yourself from applying for multiple credit cards at the same time. Taking out too many loans simultaneously can make it easy for you to lose track of payments and overshoot your budget. Try to spread your loan applications over a period of a few months to help increase your CIBIL score.
A bad CIBIL score is far from permanent. In most cases, just 4-12 months of diligent repayments and clearing outstanding dues can dramatically increase your CIBIL score. Now that you know how to increase your CIBIL score, you can finally spot your dream home and buy it. If you are searching for the perfect home to invest in, make sure you explore Lancor. Our beautifully constructed homes have all the required certifications in place, making it easier for you to secure a home loan.