Among the various credit bureaus in India, CIBIL is the most popular and widely recognised by Indian lenders. CIBIL evaluates a borrower’s credit repayment history and issues a score, known as the CIBIL score. Indian lenders check the CIBIL score to analyse a borrower’s creditworthiness and determine the home loan interest rate they are eligible to get. In some cases, a low CIBIL score leads to a rejection of the loan application.

This article shows you the top-5 ways how to improveyour CIBIL score, as it plays a crucial role in determining the home loan eligibility. 

Reduce Outstanding Debt and Avoid Defaulting

When you have an unpaid loan or credit card dues, it reflects on your CIBIL report. Every time a borrower defaults, they have to pay a penalty and their CIBIL score tumbles. A nice way to deal with this is to set payment reminders or opt for the Electronic Clearing System (ECS) facility. Hence, to improve your home loan eligibility with a high CIBIL score, you should clear your outstanding debt first and avoid defaulting in future. 

Refrain From Debt-Overloading 

Debt-overloading happens when you apply for too many loans in quick succession. When you frequently apply for loans or other forms of credit, credit bureaus like CIBIL assume that you cannot handle your finances efficiently and the same reflects in your credit score. A low credit score impacts home loan eligibility negatively. Hence, before scanning how toavail a new loan, close the existing ones and improve your CIBIL score. 

Balance Your Loan Portfolio 

In case it isn’t easy to shed off a few loans from your portfolio, consider having a healthy mix of unsecured and secured loans. Personal loans and credit cards are unsecured credit types, and loans like home loan and loan against property are secured. When your portfolio is loaded with unsecured loans, the lender decreases your home loan eligibility, and home loan approval might be difficult. Hence, to increase your CIBIL score, evaluate your loan portfolio and rebalance it if needed.

Maintain a Low CUR

CUR or Credit Utilisation Rate is the ratio that displays your credit limit vis-a-vis the actual usage. For example, if your credit limit is INR 1 lakh, and you are borrowing INR 30,000 every month, your CUR is 30%. If you want to increase your home loan eligibility, and improve the CIBIL score, try to keep the CUR below 30%. A low CUR is a concrete answer to the question, ‘How to improve CIBIL score?’ 

Keep a Tab on the CIBIL Score

Your CIBIL score may sometimes be a victim of misinformation or the lack of information. For instance, your CIBIL score may take a nosedive if your lender forgets to report a payment you made to CIBIL. To avoid such anomalies, it is better to keep checking your CIBIL score once in a while. Lenders like PNB Housing allow you to check your CIBIL score for free. If you spot any anomaly, bring it to the notice of CIBIL, and they will quickly rectify the error.

Conclusion

If you are looking for ways to increase your home loan eligibility, you should know how to improve the CIBIL score. Without a healthy CIBIL score, it might be challenging to get the best interest rates. Additionally, a low CIBIL score increases the odds of rejection. Hence, before applying for a home loan, you must improve your credit score.