When buying a home, the most important factor determining your Housing Loan's terms is your credit score. Banks use this number to assess your financial reliability and decide whether you are a low-risk borrower. A high credit score can significantly affect the interest rates you are offered. Let us understand how you can increase your chances of securing a better Loan:

Check your credit report

Before improving your credit score, you need to know about it and its impact. Your credit score ranges between 300 to 750, with anything above 700 considered good. A score above 750 is excellent and helps you secure the best Home Loan interest rates. You are entitled to a free credit report once a year. It allows you to check for errors or inaccuracies that could hurt your score.

Dispute any errors

If you find mistakes on your credit report, such as incorrect late payments, accounts that do not belong to you, or outdated information, dispute them with the credit bureau. Having these errors corrected offers an instant boost to your score. Taking these steps in advance ensures that your Home Loan application is not rejected.

Pay your bills on time

Your payment history is the most significant factor in your credit score. Delayed payments can have a long-lasting negative effect. Set reminders or automate bill payments to ensure you never miss a due date. The longer your bills are paid on time, the more your credit score will benefit.

Reduce Credit Card balances

The primary factor impacting your credit score is your credit utilisation ratio. It compares the total balance you owe to your total available credit. Clearing off your Credit Card balances will help lower your credit utilisation and gradually improve your score. Start paying off a high-interest Credit Card first to save on interest payments.

Do not open new Credit Accounts

Every time you apply for new credit, a proper inquiry is placed on your credit report. It can temporarily lower your score. If you are preparing to apply for a Housing Loan, avoid applying for new Credit Cards or Loans, as these can negatively impact your chances of getting approved.

Keep old accounts open

The length of your credit history is another factor that influences your score. Avoid closing old accounts, even if you no longer use them. The longer your credit history, the more reliable you appear to banks. Keeping old accounts open can also increase your available credit, which is a very important factor in helping you lower your credit utilisation.

Conclusion

A decent credit score is essential for securing the best Housing Loan terms. Remember, your credit score reflects your financial spending and can significantly impact your ability to purchase a home through a Loan. Take the steps now to improve your score, and you will be in a stronger position when it is time to apply for a Home Loan.