by Akhilesh K. Prasad,
The first step to buying a house is to identify the property that you want to buy. Thereafter, you research and shortlist the available housing loan options. With the Indian economy moving towards risk-based lending, it has become imperative for people to become financially disciplined.
The first step to becoming financially disciplined is to know your credit score. There are three important credit bureaus; CIBIL, Experian and Equifax. Each of these uses a different scoring pattern. CIBIL scores range from 300 to 900, Equifax from 1 to 999 and Experian, from 1 to 1000.
A new loan application is first subjected to a credit score test. There is a high possibility of your loan being rejected if the credit score is below 600. If your score is between 600 and 750, it may be subjected to further scrutiny. The maximum chances of a loan being approved are when your credit score is above 750.
Further are the enlisted salient points whereby you may improve your credit score:
- You should keep an eye on your credit report. If there is any mistaken entry of a default or a delayed payment, you should call up the bank and get it rectified.
- You should pay the EMIs on-time. If EMI’s are cutting into your monthly budget, you should call the bank to restructure the loan for easier repayment.
- You should take care to not max out your credit card every month. Banks see that as irresponsible behavior. It is therefore pertinent that you use your credit cards judiciously and clear your outstanding completely and on-time.
- Taking multiple unsecured loans whimsically can make you look like an unattractive borrower for a bank. You should take a loan or credit when absolutely necessary. However, taking secured loans can add to your score. Therefore, you should keep a good balance between the two.
- When you take a joint loan with a co-applicant, you should keep a tab on the pattern of payments as it will affect your credit score as well. You should ensure that your co-applicant pays his dues on-time in order that you are not penalized for someone his mistakes.
- There are times you may get into an agreement with your bank for ‘settling’ the credit or loan amount for a lot less than the actual payment due. Although it appears a good deal at the time, it may affect your loan sanctions adversely in the future. Such settlements are recorded in the credit report.
And finally, while a CIBIL score of 700 and above is your best bet for easy approval of a loan application, it does not mean that if you have a lower score your loan will not be approved at all. You can always improve your credit score by making prompt payments in the next few months.
An MBA by qualification, Akhilesh has dabbled into various businesses. He is a keen debater, data miner and analytically inclined. His blogs tend to present a fresh perspective on any given matter