We get lots of home loan and personal loan offers when we actually do not require them. I get a lot of calls with attractive offers and interest rates when there was no requirement and buying home/property was not in my agenda.
But when we really need a home loan from the same bank, we experience a lot hurdles to get that approved. You might have noticed that many home loan applications are getting rejected not because of insufficient income but because of the poor credit score.
Where can we check our Credit Score and how can we improve credit score?
Once you convinced your bank that you have enough income and ability to repay loan EMI, the next thing your bank will look at is your Credit score. Credit Score is one of the major factor to decide your loan approval and your loan interest rate.
Currently there are four bureaus in India that prepare credit reports and they are : CIBIL, Crif High Mark, Equifax, and Experian. However, I personally experienced that most of the public sector banks rely on CIBIL rating in the home loan approval process. CIBIL rating is considered as the most popular credit rating system by many leading banks in India.
There are many ways you can improve your credit score. Here are few easy ways to follow and increase chances to get your home loan approved.
- Pay off all your loans as soon as possible. If you have multiple loan accounts, close all those accounts at one go or at least club all loan accounts to one single loan account. This step would really help in improving your credit score.
- Do you have any credit card dues? Pay them off immediately before applying for home loan. Also check, all the payments paid towards your credit card bill or personal loan till date are reflected in your bank record. If not, resolve that issue with your bank people first.
I personally experienced this issue when I applied for a home loan. In my CIBIL report, it was showing that a certain amount of credit card payment was due in my HSBC credit card account. In fact, this credit card was actually cancelled 10 days before my CIBIL report date. All my credit card dues were paid weeks ago and my account was closed before I applied for loan! This error happened because the HSBC bank failed to update its data so the previous status of my account was kept showing up in my CIBIL report. Such things could happen with any bank so better keep a watch on it.
- Do you revolve credit card dues between cards of multiple banks? That is a very costly affair and you need to keep tab on them. Best thing that you can do is to stop all those revolving dues. At some point, you find that credit card dues are expensive than a personal loan. In that case, take a personal loan at better rate and pay off all credit card dues at one go.
- Do proper homework before applying for a home loan. Applying for too many banks at different intervals can impact your credit score adversely. Each time you apply for a loan, your bank will check your credentials with the bureau. When too many checkings are made about your account, that will signal that you are badly need of a loan and that image would eventually impact your credit rating.
- Reduce your unsecured loans and maintain a balanced credit portfolio. Having too many unsecured loans can affect your credit score. You will notice a considerable improvement in your credit score when you balance your portfolio this way.
- Last but not the least, prepare well before applying for a home loan. Take personal loan only when it is necessary. Never keep your credit card dues unpaid for long after its due date.
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Image source: CIBIL site and Google