Before applying for a home loan, it is important to review your credit score. All banking sector loans require good credit. For better rates and terms, a CIBIL score of 750 is a minimum requirement. Fortunately, maintaining a high credit score is fairly easy. Make sure all your payments are on time, and you should be able to obtain a mortgage loan. To improve your credit score, follow these simple tips.
Reducing debt burden
Taking a home loan can increase your monthly expenditure and increase your debt burden. While the interest rates on home loans are high, you can reduce your debt burden by making a few lifestyle changes. For example, you can eliminate credit cards and start making one payment per month instead of making several smaller ones. If you want to lower your debt, you should consider investing in mutual funds. You can even use the maturity proceeds from bonds to pay off your debt.
Choosing the right tenure
There are two main factors to consider when choosing the tenure of your home loan. First, your income determines the tenure you should choose. In other words, if you earn INR 60,000 per month, you can choose a tenure of 15 years and reduce your interest burden by INR 9,73,808 by choosing a shorter tenure. Second, the longer your loan tenure, the higher the EMI, so make sure it is within 60 percent of your monthly income.
Maintaining a good credit score
A high credit score is almost always good. However, it can also cause you to use your credit more often, which can drag down your score. Paying your bills on time and keeping your credit card balance low are two of the best ways to maintain a high credit score. Keeping these three habits in mind will help you take advantage of the many benefits that come with having good credit. Here are a few tips to maintain a good credit score when taking a home loan.
Avoiding multiple enquiries
Aside from the obvious benefits, avoiding multiple enquiries when taking a home loan can help your credit score. Every time a mortgage lender or broker makes an inquiry on your credit, this information is recorded on your credit report for a certain amount of time. Each inquiry has its own impact on your credit score, so it’s better to research different lenders and products before you apply for a loan. This way, you’ll be able to see which ones suit your needs best and save money at the same time.