Seven Ways To Boost Your CIBIL Score
Anand Verma, 34, who works as a manager at an IT company, owns four credit cards. While he uses these cards to meet his lifestyle requirements, he also has a running personal loan. Due to some financial difficulties, he defaulted on his debt payment. He did not mind it much till his home loan application was rejected by a public-sector bank because he had a credit score of 600.
MakaanIQ tells you seven ways to avoid loan application rejection by boosting your credit score.
According to the Credit Information Bureau India Ltd (CIBIL) rules, non-payment of the entire loan has to be reported to the agency. This means that if you make the loan settlement against your debt, instead of making full payment, CIBIL gives you a low credit score. But that is better than paying nothing at all.
While the bank issues you a no-objection certificate (NOC) if you get your loan settled with it, CIBIL marks you settled for five-seven years. You have to work hard to get a home loan during this period, but your chances of getting a loan improve if you fulfil the bank's other parameters of eligibility. Providing a good primary and secondary collateral can also make your case strong.
Credit card bill payments
Even if the amount that you owe is small, it is crucial that you make payments on time. Do remember that with credit cards you are permitted to pay a minimum amount every month regardless of your actual bill. However, paying only the minimum amount is a mistake you must avoid. In fact, the debt on credit card is the most expensive way of debt, and it affects your credit score significantly. In addition to this, minimise the outstanding debt and refrain from applying for any credit unnecessarily. Use your ongoing credit to your advantage by making timely payments of bills due, thereby improving your CIBIL score.
Access your CIBIL report on a regular basis
Banks and financial institutions provide credit information of applicants to CIBIL on a monthly basis which takes around three months to get updated with the agency. You might, at times, find a loan/debt enquiry in your CIBIL report which you never applied for. Now, if you get to know about this during the processing of your home loan application, updating the correct information on the CIBIL platform can take three to six months. This is why accessing your CIBIL report regularly is important. In case of a fake enquiry, you can get the issue addressed by putting a request on the 'Dispute Resolution' page on CIBIL's website, www.cibil.com.
Closing unsecured loans
A good credit score also depends on a healthy mix of credit. A couple of secured loans along with one unsecured, for example. A delay in payment, even of a day, can affect the credit score significantly, if one has only the unsecured loans running – in Anand Verma's case, for example. The chances of secured loans also get reduced if there is a high number of existing unsecured loans. Also, if you have too many credit cards, consider closing some.
Ask for options
If a delay in a past bill payment was due to a genuine reason and not because of lack of funds, you must ask your loan officer or a financial expert for solutions. Keep the repayment track of your loan handy to prove that the payment of the loan was made immediately after the delay was reported. The applicant may ask for a clearance certificate from the lender too. That can be presented as a proof.
Proof of stable income
You can get you supervisor at work to sign a statement on the company's letter head, stating your current job profile, salary package, length of employment, bonus earned, etc, to avail of loans. Lenders are more favourable to borrowers who have worked in the same industry or company for long. This way, it is easier to convince the lender to fund you, despite your low credit score. Focus on your strong points and present their proof to improve your chances of getting a loan.
Avoid being a partner in crime
Avoid becoming a joint account holder or a guarantor in a loan or credit card facility, as any default would lower the quality of your credit score, too.