How to Improve Your Credit Score for a Home Loan During Pandemic
While the world is still trying to cope up with the pandemic crisis, the real estate market has faced a lot of transformation. For the benefit of homebuyers, banks have reduced interest rates, builders are coming up with affordable housing solutions, relaxations have been given for loan repayments, etc. People are now considering property investment as a reliable asset, especially because of the prevailing uncertainty. Owning a house is much safer than living in a rental house, as you can ensure financial stability in the future. There are many convenient EMI plans which help you to avail home loans for buying a property. But to avail a home loan, you need to have a good credit score.
What is Credit Score?
A credit score is a numerical measure of a person’s creditworthiness or the ability to repay a loan. The number can range between 300-900. In India, there are 4 credit information companies licensed by RBI, namely Credit Information Bureau India Limited (CIBIL), Experian, Equifax and CRIF High Mark. When you apply for a home loan, the lender or bank assesses your credit score to know whether you are capable of repaying your loan amount. Credit score is calculated based on the credit bill payment history. If your credit score is above 750, you are likely to get a home loan at attractive interest rates.
Are you planning to take a home loan? These tips are for you! Read on to know ways to improve your credit score and avail a good home loan deal from your lender.
Pay Your Bills On Time
The first thing you need to do to improve your credit score is to pay your monthly credit bills on time. Prompt payment of bills and loan EMIs can help you earn a higher credit score. Even if your savings are less, try not to delay your outstanding credit payments. You should also be mindful of your spending habits and try to avoid overspending on clothes and accessories during this corona season.
Keep Other Credit Cards Active
You may not be aware that your credit score also depends on the duration you have kept a credit card. So during this time, don’t cancel or close those extra credit cards you may have in your wallet. You can keep them active by using them once in a while to pay a mobile bill or an electricity bill.
Check Your Credit Report
Analyze your credit report at least once a year to know where your score stands. You can request a free credit report from any of the credit bureaus. Keeping track of your score helps you to take the necessary actions to improve it. Generally, a credit score between 740-799 is considered very good and if it's above 800 it is considered excellent.
Reduce Your Fixed Obligations
FOIR or Fixed Obligations to Income Ratio is a parameter used by banks to determine a person’s loan eligibility. FOIR refers to the amount of monthly income which is being used to repay your regular EMIs and other instalments. Decreasing your FOIR will help you improve your credit score and chances of getting a loan. Repaying your existing debts is the best way to increase your credit score. A higher credit score will allow you to get a loan at lower interest rates and make you eligible for many other repayment benefits.
A home is not only a shelter but a secure financial investment for the future. Buying a new home is much easier nowadays, with plenty of flexible loan plans and credit subsidies offered by the government. Be careful to choose a reliable builder as it increases your chance of getting a pre-approved loan. So if you too are dreaming about owning a new home, start following these tips to improve your credit score. Keep analysing your financial status every month and make informed decisions before buying a property.