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Smart Ways to Boost your CIBIL Score for Home Loan

6 min 09 May 2024
Highlights:
  • 7 Effective Strategies to Improve CIBIL Score
  • Reasons Why You Should Maintain a Good CIBIL Score

A Home Loan can be a significant financial milestone for many homebuyers, and a good CIBIL score is the key that unlocks the door to securing one with favourable terms. CIBIL, short for Credit Information Bureau (India) Limited, is a credit information company that maintains your credit history, and your CIBIL score is a three-digit numerical representation of your creditworthiness. The following table shows the credit score range and what it signifies: 
 

Your CIBIL Score 

What it Signifies 

800 - 900 

This is an excellent score range. It indicates that you have never defaulted on your EMI and credit bill payments. 

750 - 800  

This is a very good CIBIL score. You can now negotiate and bargain on your interest rate.  

625 – 750 

This is a decent credit history with very few irregularities. You may get a loan at a higher interest rate.  

300 – 625  

This score indicates high defaults in repayment. You may find it difficult to get a loan unless you improve your CIBIL score.  

So, how do you build a strong CIBIL score to improve your chances of getting a Home Loan approval?  

Here are 7 effective strategies:  

1. Pay on Time

This is the golden rule of credit management. Timely repayments of EMIs on existing loans and credit cards significantly impact your CIBIL score positively. Set up auto-debit for payments or use calendar reminders to avoid missing deadlines.  

2. Maintain a Low Credit Utilisation Ratio 

This ratio reflects how much credit you're using compared to your credit limit. A low credit utilisation ratio indicates that you are a responsible credit borrower. A high credit utilisation ratio indicates financial strain and can lower your score.

3. Build a Credit History with a Balanced Mix

Having a credit history is important, and a healthy mix of secured loans (like Home Loan) and unsecured loans (like credit cards) demonstrates responsible credit management. Don't rely solely on credit cards to build your score. Consider a small secured loan if you lack a credit history. 

4. Don't Apply for Multiple Loans Simultaneously

Every time you apply for a loan or credit card, a hard inquiry is placed on your credit report, which can lower your score. Avoid applying for multiple loans at once, especially if you're unsure of getting approved. Space out your applications and only apply when necessary.  

5. Monitor Your Credit Report Regularly

Your credit report may contain errors. Obtain a free copy of your CIBIL report periodically (usually once a year) and check for any discrepancies. If you find errors, dispute them with CIBIL immediately to ensure your score reflects your true creditworthiness.   

6. Clear Existing Debts

Outstanding debts, especially overdue payments, can severely damage your CIBIL score. Focus on clearing existing debts before applying for a Home Loan. Prioritise high-interest debts first, and consider debt consolidation strategies to simplify repayment. 

7. Maintain Old Credit Card Accounts 

 A long credit history with a good track record is beneficial. Don't close old credit card accounts even if you don't use them frequently.  

Read Also: 10 Tips to Increase Your CIBIL Score Above 800 

Reasons Why You Should Maintain a Good CIBIL Score

Building a good CIBIL score offers several advantages such as: 

  • Lower Interest Rates

A high CIBIL score qualifies you for lower interest rates on all kinds of loans. This translates to significant savings over the loan term. 

  • Increased Loan Eligibility

A strong credit score makes you a more attractive borrower to lenders, potentially increasing your Home Loan eligibility and allowing you to borrow larger amounts. 

  • Access to Better Credit Cards

With a good score, you qualify for premium credit cards with better rewards programs, cashback benefits, and travel privileges. 

  •  Improved Financial Well-being 

Responsible credit management and a healthy CIBIL score contribute to overall financial well-being. It fosters a sense of financial discipline and opens doors to future financial opportunities. 

Read Also: How to Improve CIBIL Score After a Payment Default? 

*Terms and conditions apply.  

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DISCLAIMER:

While care is taken to update the information, products, and services included in or available on our website and related platforms/websites, there may be inadvertent errors or delays in updating the information. The material contained in this website and on associated web pages, is for reference and general information purposes, and the details mentioned in the respective product/service document shall prevail in case of any inconsistency. Users should seek professional advice before acting on the basis of the information contained herein. Please take an informed decision with respect to any product or service after going through the relevant product/service document and applicable terms and conditions. Neither Bajaj Housing Finance Limited nor any of its agents/associates/affiliates shall be liable for any act or omission of the Users relying on the information contained on this website and on associated web pages. In case any inconsistencies are observed, please click on contact information.

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