Those who are planning to get a home loan for funding their big purchase are generally on their toes about CIBIL score. And if you are doing everything right to keep your CIBIL score good and still facing problems, there are still a few more things you can do. Bad credit behaviour regarding card limits and repayments isn’t the only thing that affects your CIBIL score. Your credit choices also impact your credit score and here are the areas you should look into for maintaining a good CIBIL score.
Credit usage
You must always consider the Credit Utilization Ratio when you are opting for credit. This ratio is calculated as per the credit you have used against the credit balance you have and it amounts to around 30% of your CIBIL score. So, if you have 6 credit cards with a combined 11 lakhs of credit limit and you use only 2 of them actively, you must close other 4 cards because under-utilization of those 4 cards will impact your CIBIL score negatively.
Multiple loan enquiries
When ready to purchase a home, the first thing buyers do is check for home loans with several banks or lending institutions to find the perfect deal. Every time you make a loan enquiry, it gets recorded with CIBIL and too many enquiries in your name impact your credit score badly. Lenders get skeptical of providing you with the credit. So, if you want to apply for a home loan of 75 lakhs and contacted 4-5 different lenders for getting the right deal, chances are you will be eligible for only 60-65 lakhs even if you have a flawless repayment history.
Pre-scheduled repayments
Repaying all your dues in one go doesn’t improve your CIBIL score, but dramatically lowers it. But how can that be? Well, let’s say you came across a fortune from a deceased relative and decide to pay off all your credit card dues in the hopes of better credit score. But on receiving a large sum of money, your card issuer will report the suspicious transaction. Sudden payment of credit cards bills with a large amount of money makes your credit record look unstable, which results in a lower score. So, when paying your dues, ensure that you are doing that on time and with preset amount every time. This will have positive impact on your CIBIL score.
