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Applying for a home loan? You must have a good credit score

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Applying for a home loan? You must have a good credit score

Owning a home is a dream come true for so many of us. However, you should have a solid blueprint in place for accomplishing this objective. You will naturally have to apply for a home loan in order to fund your purchase. However, remember that having a good credit score is highly essential if you want to get your home loan approved.

A credit score is basically an indicator of your credit worthiness as a borrower and the score is based after analyzing your entire credit history and report, including your previous payment records and debts. It also shows your repayment pattern and usage of credit earlier and lenders get an idea whether you will be able to repay the loan seamlessly or not.

A great credit score is one which is above 750 and as close to 900 as possible. Here are some ways to achieve the same:

  • Credit Knowledge- You should always know about your credit score. Get a report from CIBIL to check your score.
  • Active Credit- For having a good credit score, you should have ongoing credit activity. You should use credit accounts in an active manner and pay your bills in a timely manner.
  • Low utilization- Too many credit accounts may land you in a pile of debt or something which is known as over-utilization of your credit limit, based on your income. Cut down unnecessary expenditure and debt.
  • Multiple Credit Cards- Avoid using too many credit cards at a time no matter how attractive the offers may seem to you. Too many credit card applications shows that you are hungry for getting credit and this will impact your score negatively.

You should also scan your credit report thoroughly and get any errors or incorrect facts corrected in order to improve your credit score. Try to have a healthy balance between secured (home loan/car loan) credit and unsecured (credit cards/personal loan) credit in order to maintain a healthy credit score and never default on repaying your EMIs. Pay before the due date if required in order to avoid this harsh effect of default on your credit score.

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