How to Improve Your Credit Score for a Home Loan During Pandemic
Ways to Improve Your Credit Score for a Home Loan During Pandemic
The coronavirus pandemic has severely impacted people’s financial life. Many have lost their jobs or some of their income for the past six months, and consequently falling short of paying their bills or loan payments. If you are having trouble paying your bills, you may be worried about your credit reports and scores. A good credit score is essential for your future financial opportunities, as it helps to qualify for a loan with lower interest rates or a credit card that earns points or cashback when you spend. That is why you need to improve your credit score while working on your finances.
How to Improve Your Credit Score
Follow these points to improve your credit score amid the pandemic:
Pay Your Bills on Time
Missed or late payments can affect your credit history for up to seven years. Try to pay your bills on time, at least the minimum amount by their due every month, to avoid hurting your credit score. If you miss a payment, it will be assigned to a debt collector after 30 days from the due date. If you can, prioritize paying your bills on time in full to avoid late payment charges or interest. This will help boost your credit score.
Keep Your Credit Utilization Ratio Low
Your credit utilization ratio or the credit limit is a crucial factor in calculating your credit score. Make sure you keep it under 10% to avoid hurting your credit score. If your credit utilization ratio is high, consolidate a loan to pay off the debt for a better credit score.
Keep Your Unused Accounts Open
Do not close your old credit cards even if you do not use them. The age of your credit accounts and the length of your credit history will increase your credit score. Consider purchasing at least every six months to keep your card active.
Review Your Credit Report
Another way to boost your credit score is regularly review your credit reports to make sure they are accurate and have no errors. This way, you can identify any mistakes or fraudulent activity and report it immediately to the credit bureau before it damages your credit score.
Do Not Apply for Too Many Loans or Credit Cards
Applying for a loan or credit card may require running a hard credit inquiry on your report. Each hard credit check can cost you 2 to 3 credit points. Your credit score can be significantly reduced if you apply for too many credit cards or loans at a time.
Protect Your Identity
Identity thefts and scams are widespread during the pandemic, so it is essential to secure your personal information. Cybercriminals or hackers can use your personal information to open your credit accounts, make purchases, borrow money, and transfer funds. If left undetected, this activity can significantly impact your credit score. Work with your creditor to protect your identity and personal information and ensure a better credit score.
Make a Budget and Plan Ahead
Creating a budget is necessary, especially if you are earning less money or temporarily unemployed. Cut down unwanted expenses, suspend non-essential services like lawn care and cleaning, and spend less on takeout. These will help keep your credit card debt low and credit score high.
How to Deal with Creditors If You Cannot Pay
When you are under financial stress and cannot make your loan or card payments on time, contact your creditor and ask for help. Many lenders have announced proactive measures to help their borrowers affected by the pandemic, providing loan extensions, repayment flexibilities, reduction in interest rates, forbearance, etc. You can explain your situation to your lender and ask for an extended period to make payments either in a lump sum or installments.
You can talk to your creditor and know the options available to delay the payments. Generally, you may have options including:
If your loan is placed in forbearance, you do not have to make payments, and the lender also will not report late payments to the credit bureaus. An account being reported as forbearance will minimize the impact on the credit score if it is in good standing and has not had any delinquencies reported previously, eventually protecting your credit score.
Temporary Suspension or Payment Reduction
It is a hardship plan, where your creditor will give you some time to make payments and get back on track.
Your credit card issuer may agree to keep your account in positive standing if you pay at least less than the minimum.
Upon request, your creditor may waive the first late payment fee.
Lower Interest Rate
Lenders may lower your interest rate or payment amount for a few months.
Though not common, settling a debt for less than you owe may be an option if you are many months behind.
A loan modification can relieve your financial pressure by increasing your loan terms or lowering your monthly payments.
If you cannot make payments in a lump sum, ask your lender whether you can make payments in installments.
You can use any of these options to avoid defaulting on loans or being chased by creditors or debt collectors.
Where to Find Financial Help for Buying a Home
If you need financial help in buying a home, you can consider:
· Taking out a home credit cash loan
· Indian home loan guarantee program
· Programs for service members and veterans
· State housing board programs
· Pradhan Mantri Awas Yojana
· Down payment assistance programs
If you are looking for a home loan and want to invest your money in a reliable project, choose Puravankara. We have been offering quality homes since 1975.