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How to improve your Credit Score (CIBIL Score) to get a Home Loan?

Is your credit score low despite making timely payments? Here's a guide on improving your credit score to avail of a home loan at lower interest rates.

What is a Credit or CIBIL score?

Let's break it down in a simple way.

Credit or CIBIL score is a three-digit number ranging from 300 to 900. Imagine it's like a report card for your financial behavior.

Here's the deal: the higher your score, the better. It's like taking an exam. Nail a score closer to 900, and banks will be high-fiving you because it means you're a reliable borrower.

Why does it matter, though?

Well, when you're eyeing that dream home and need a loan, a good credit score can be your superhero. It opens doors to lower interest rates.

Furthermore, lenders consider a score of 750 or higher to be good. You're set to receive a loan at lesser interest rates. 600-700 is considered average, and the interest rate is slightly higher.

I am paying my credit card bills on time. Why is my CIBIL score still low?

Usually, when we pay our credit card bill, sometimes a minimal amount of 50-100 rupees gets left out of our notice. Due to this, our credit score keeps declining. Paying the total amount of your credit card bill is essential to maintain a good credit score. Even a tiny remaining amount can impact your credit utilization ratio, which is critical in determining your creditworthiness. Repeated instances of leaving out small amounts can accumulate and have a cumulative effect on your credit score.

Credit scoring models are sensitive to various factors; even minor discrepancies can cause fluctuations. Consistent attention to all factors that impact credit scores, including payment history, credit utilization, length of credit history, credit types, and new credit accounts, is essential for a robust credit profile.

What can you do to improve your credit score?

You can take up small loans on scooters, home appliances, and other electronics. Pay the installments timely and regularly. This will boost your credit score. This way, you can build trust in your future lender's mind.

Additional steps to raise credit score:
1. Review Your Credit Report:
  • Obtain a copy of your credit report from major credit bureaus.
  • Check for inaccuracies, errors, or any fraudulent activities.
  • Dispute and rectify any discrepancies you find.
2. Timely Payments:
  • Pay your bills on time, including credit cards, loans, and other debts.
  • Set up payment reminders or automatic payments to avoid missing due dates.
3. Credit Utilization:
  • Aim to keep your credit card balances low in relation to your credit limit.
  • Strive for a credit utilization ratio below 30% to demonstrate responsible credit use.
4. Diversify Credit Types:
  • Maintain various credit types, including credit cards, installment loans, and retail accounts.
  • Diversification can positively impact your credit score.
5. Avoid Opening Too Many Accounts:
  • Limit new credit applications to avoid multiple inquiries.
  • Opening many accounts in a short period can be viewed negatively.
6. Credit History Length:
  • Keep older credit accounts open to maintain a more extended credit history.
  • Closing old accounts can shorten your credit history, potentially affecting your score.
7. Financial Discipline:
  • Budget effectively to manage your finances.
  • Build an emergency fund to handle unforeseen expenses without affecting your credit.
8. Long-Term Planning:
  • Develop a long-term strategy for credit improvement.
  • Plan for future financial goals while maintaining a healthy credit profile.
How can I check my CIBIL or Credit score?

To check your indicative credit score for free, visit paisabazaar.com, bankbazaar.com

Additionally, you can also check it on payment apps like Google Pay. However, if you want to get your exact credit score, you can visit cibil.com. You'll have to pay a fee of around 550 Rupees for that.

We hope this article is helpful for you. If you want to buy the bungalow of your dreams, Rameshwar Developers have the most affordable options in Ahmedabad. We have only one goal: to help our beautiful homes find their beautiful family.