A good credit score is of optimum importance when you apply for a home loan to buy that house you always dreamed of living in. If you want a hassle-free home loan approval, you must have a credit score of 700 and above. Since a good credit score reflects a responsible credit behavior, most lenders offer home loans at great interest rates. However, a bad credit score is viewed as a red flag and lenders steer clear of such applicants whereas some lenders offer them home loans with high interest rates. Here are some common mistakes you should avoid making if you want a good credit score.
Overusing one credit card
If you are someone who uses only one credit card to pay all your monthly dues, you should stop doing that right now. Just one credit card for all your transactions every month will have a negative impact on the credit score. This happens because of the high utilization, which is the percentage of credit being used and often seen as an out of control spending. Therefore, you should improve utilization by getting another card and distribute payments on both of them.
Making too many enquiries
When you are trying to avail a loan, the best approach seems to be enquiring with every good lending institution out there. This shows a credit hungry behaviour of the applicant and is seen negatively by banks and lenders. It doesn’t mean that you should enquire with only one lender, but maintain a healthy gap of at least a couple of months between two or more enquiries.
Don’t opt for settlement
When it comes to payment disputes, most people choose the option of settlement, which is marked as settled by the financial institutions. While it doesn’t seem like a huge thing, it affects the CIBIL score negatively for sure. So instead of settlement, choose the closure of account by making 100% payment.
Get an NOC from card provider
When you close a credit card, insist on taking an NOC (No Objection Certificate) from the credit card provider because it is completely closed only when an NOC is issued. Often, people opt for closure of credit cards but never follow up to find out if in fact it is completely closed.
Other than that, you should also check your CIBIL report at least a year to ensure that there aren’t errors. If so, you can register a complaint online to smooth the path towards availing a home loan.