Do liquid assets play a part in helping improve my credit score?

Yes. The more liquid assets that can be verified by a lender, the better. Accumulation of liquid assets such as stocks, bonds, life insurance policies etc, showcase the financial stability of the applicant.

Does my employment status have an effect on acquiring a home loan?

An applicant with a few years of steady and consistent employment, which shows a steady inflow of funds or an improvement in remuneration over a course of time, is more likely to be looked upon favourably by banks when it comes to granting home loans.

Will applying with different lenders hamper my credit score?

Applying all at once gives lenders an impression of financial instability and can severely dent your chances of obtaining a big loan. Instead of applying for loans at a variety of different banks within a short span of time, space out your loan applications over a broader time period. When a lender checks your credit score it leaves behind a credit application search 'footprint' on your score. This tends to result in a negative impact on your credit score.

Will paying off an outstanding collection amount help increase my score?

Paying off a collection amount is definitely advisable, but remember that it will stay on your credit report for a period of up to seven years. However, ensure you do not have any outstanding dues over a period of at least six months prior to applying for a home loan.

Will applying for multiple loans within a short duration have a negative impact on my credit score?

Yes, applying for multiple loans within a short duration will have a negative impact on your credit score. Multiple loan applications will project you as credit hungry and financially irresponsible, thus, bringing down your credit score.

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Tips to Improve Credit Score For Home Loan

Credit score is basically the numerical representation of your creditworthiness. A higher credit score shows that you are financially responsible and pay your dues on time. That is why a strong credit score is one of the most important factors checked by the lenders when approving any type of loan.

When you are applying for a home loan, a high credit score not only increases your chances of getting your loan approved but also helps you secure a better rate of interest and favourable loan terms. If you are planning to apply for a home loan soon, here are some tips to improve your credit score.

How to Improve Your Home Loan Eligibility?

If you have a low credit score, it won’t improve overnight. However, if you consistently take positive steps, clear your dues on time, it will boost over time. Some of the effective tips to improve your credit score are given below:

Clear your dues on time: Paying your EMIs and credit card bills on time is one of the simplest ways to boost your credit score. To ensure that your credit card bills are cleared on time, you can set up ‘Autopay’ instructions on your account.

Keep your credit utilization ratio below 30%: Credit utilization ratio is basically the amount of credit you have used from the available credit. Having a high credit utilization ratio projects you as credit hungry and has a negative impact on your credit score.

Avoid multiple loan applications: Applying for too many loans at the same time or within a short span of time has a negative effect on your credit score. Each new loan application creates a hard inquiry and can bring down your score. It is advisable to apply for loans only when necessary and do keep a gap of few months between your applications.

Check your credit report regularly: It is advisable to regularly check your credit report for errors. At times, a wrong entry on your credit report like a wrong late payment entry, a loan you never borrowed, can bring down your credit score. If you find any discrepancy, report it immediately and ensure that it is resolved.

Avoid closing old credit card accounts: Credit score is also affected by the length of the credit history. If you have an old credit card account, especially the one where you have cleared your dues on time, avoid closing it.

Maintain a healthy credit mix: Having a healthy credit mix has a positive effect on your credit score. Lenders prefer borrowers who can handle different types of credit responsibly. A healthy credit mix includes both secured loans like home or car loans and unsecured loans like credit cards or personal loans. Having a balanced combination shows lenders that you can manage various credit products well.

Clear your existing debt: It is important to clear your existing debt or outstanding credit card balances. Consistently and actively reducing your debt by paying off EMIs on time and clearing credit card balances helps improve your credit health. Having lower debt levels also reduces your credit utilisation and makes you appear more creditworthy to lenders.

Avoid Loan Settlements: ‘Loan Settlement’ is basically a case where you pay the partial loan amount, and lender accepts it and closes your account. This type of loan repayment is marked as ‘Settled’ on your credit report. Settling your loan may provide temporary relief, but it severely damages your credit score and stays in your report for years. That is why, avoid loan settlements and repay your full loan.

To Know More Visit: CIBIL Score for Home Loan

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A good credit score can help you secure lower interest rates on loans and credit cards.

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FAQs on Credit Score When Applying for Home Loan

Do liquid assets play a part in helping improve my credit score?
Yes. The more liquid assets that can be verified by a lender, the better. Accumulation of liquid assets such as stocks, bonds, life insurance policies etc, showcase the financial stability of the applicant.
Does my employment status have an effect on acquiring a home loan?
An applicant with a few years of steady and consistent employment, which shows a steady inflow of funds or an improvement in remuneration over a course of time, is more likely to be looked upon favourably by banks when it comes to granting home loans.
Will applying with different lenders hamper my credit score?
Applying all at once gives lenders an impression of financial instability and can severely dent your chances of obtaining a big loan. Instead of applying for loans at a variety of different banks within a short span of time, space out your loan applications over a broader time period. When a lender checks your credit score it leaves behind a credit application search 'footprint' on your score. This tends to result in a negative impact on your credit score.
Will paying off an outstanding collection amount help increase my score?
Paying off a collection amount is definitely advisable, but remember that it will stay on your credit report for a period of up to seven years. However, ensure you do not have any outstanding dues over a period of at least six months prior to applying for a home loan.
Will applying for multiple loans within a short duration have a negative impact on my credit score?
Yes, applying for multiple loans within a short duration will have a negative impact on your credit score. Multiple loan applications will project you as credit hungry and financially irresponsible, thus, bringing down your credit score.