How to Build Your Credit Score and Get a Better Home Loan

An individual's credit score is a three-digit number between 300 and 900 that plays an important role in getting them approval for a loan. The credit score is important as it tells a lender the risk involved in lending money to a borrower. A high credit score reflects a positive attitude towards credit and a high repayment capacity. Thus, borrowers who have a high CIBIL score get approved for a loan quickly. Such borrowers are also able to negotiate with lenders for better loan terms and conditions. They can ask for a low-interest rate, higher loan sanctions and a loan tenor that works best for them. A bad credit score, on the other hand, reduces one's chances of availing of a loan. In conclusion, anyone applying for a home loan must have an excellent credit score, i.e. anything in the range of 750 to 900. So, let us look at what borrowers can do to build their credit score and get a home loan easily.

Simple Tips to Help You Improve Your Credit Score

1. Your repayment history plays a crucial role in building your credit score and helping your lender understand whether you can be trusted with timely loan repayment. So, if you want to build a strong credit score, build a clean repayment history. This means never miss a loan EMI or credit card bill due date. Set up reminders or auto payments to stop you from missing your EMI due dates. If you do miss an EMI, clear it as soon as you can.

2. The second thing that will help you build a strong credit score is your credit utilization ratio. Credit information bureaus study how you use your credit cards as it helps them understand how reliable you are with credit. So, use your credit cards cautiously. Never exhaust the limit on them. Clear the entire amount due each month and not just the minimum amount due. This will help you build a strong credit profile and a good credit score.

3. Lenders like giving money to borrowers who have managed both secured and unsecured loans in the past as this convinces lenders of a borrower's ability to handle all kinds of debt. So, have both secured and unsecured loans and pay them both with equal responsibility.

4. Do not apply for a loan or a credit card until and unless you need money. Borrowers who have too much debt are seen as high-risk individuals by lenders and therefore, lenders do not like giving money to such individuals. Therefore, maintain a low debt-to-income ratio. Apply for loans only when you need money. Borrow what your income allows you and what you can easily repay. Refrain from making more loan or credit card applications if you already have too much debt as this will make you come across as excessively dependent on credit.

5. Lastly, check your CIBIL report from time to time for errors. It is not uncommon for CIBIL reports to have errors that cause a person's credit score to come down for no reason. Such errors must be immediately reported and corrected.

Doing these simple things will help you build a solid credit score over time.

To know more about How to improve cibil score dont forget to read our article:- Quicker Way of Improving CIBIL Score