What is the Minimum Credit Score Required for a Home Loan?

When you apply for a home loan, one of the first things a lender checks is your credit score. This three-digit number reflects your past repayment behaviour and is a measure of your creditworthiness. A good score can make the process of getting a loan smoother, while a low score can delay or even derail your home-buying plans.

Your credit score impacts two key aspects:

• Home Loan Eligibility – Whether you qualify for the loan amount you want.
• Home Loan Interest Rate – The rate you’ll be charged for borrowing.

Understanding how this works will help you prepare better and increase your chances of getting your dream home financed.

What is the Minimum Credit Score for a Home Loan?

In most cases, lenders prefer a credit score of 700 or above for a home loan . A score in this range (maximum is 900) signals that you are a responsible borrower and can handle regular EMIs.

• 750 and above: Considered excellent – you are likely to get quick approvals and competitive rates.
• 700–749: Good score – you may still get a loan but might need to negotiate rates.
• 650–699: Fair score – some lenders may sanction a lower amount or charge higher interest.
• Below 650: Risky – you may find it challenging to get approval and may need to improve your score first.

Smart Tip: Even if your score is slightly lower, some lenders, like IIFL Home Loans, offer flexible eligibility norms for first-time buyers, making it easier to access credit compared to traditional banks.

How Credit Score Affects Home Loan Interest Rates

Apart from determining whether you get a loan, your credit score also affects how much you’ll pay overtime.

• Better score = Lower home loan interest: A high credit score assures the lender that you are less likely to default, so they may offer you a lower interest rate.
• Lower score = Higher interest: A low credit score increases risk for the lender, so they may charge you a higher rate to offset that risk.

Example:
Let’s say you apply for a ₹15 lakh home loan for 15 years.

• With a good credit score, your interest rate could be around 10% per annum, making your EMI close to ₹16,119 per month.
• With a lower score (and hence higher rate, say 11.5%), your EMI might rise to ₹17,523 per month. That’s almost ₹1,400 extra every month or nearly ₹2.5 lakh more over the entire tenure.

Naturally, the higher the loan amount or the interest rate, the higher your EMI amount. This is why improving your credit score before applying can save you a significant amount in interest costs.

Smart Tip: Use a Home Loan EMI Calculator to compare rates and plan your monthly cash outflow better.

Impact of Credit Score on Home Loan Eligibility

Your credit score can also affect how much loan amount you are eligible for. Lenders usually check:

• Your repayment history – Timely payments increase trust.
• Your existing debt obligations – Too many loans or high credit card usage can hurt your chances.
• Your credit mix – A healthy mix of secured (home/car loans) and unsecured credit (credit cards/personal loans) works in your favour.

A higher score can help you get a higher sanction amount, letting you buy a bigger or better home without facing funding gaps.

Smart Ways to Improve Your Loan Credit Score

If your score is on the lower side, don’t worry — there are steps you can take:

1. Pay EMIs and Bills on Time: Timely repayment is the single biggest factor influencing your credit score.
2. Keep Credit Utilisation Low: Try to use less than 30% of your credit limit to show financial discipline.
3. Avoid Multiple Loan Applications: Too many inquiries in a short period can negatively affect your score.
4. Monitor Your Credit Report Regularly: Check for errors and get them corrected immediately to avoid rejections.
5. Close Old Debts: Clear any pending small loans or dues to boost your repayment history.

Benefits of a Good Credit Score Beyond Home Loans

A healthy credit score doesn’t just help with home loan eligibility; it also benefits you in other ways:

• Faster Approvals: Lenders process your application quicker.
• Lower Processing Fees: Some lenders offer discounts for high-score applicants.
• Better Negotiation Power: You may negotiate terms like tenure, prepayment charges, etc.

This is why maintaining a good credit score should be a priority, even if you are not actively seeking a loan right now.

Ready to Apply for a Home Loan?

If your credit score is good and you’re planning to buy a house, this could be the right time to explore options. With IIFL Home Loans, you can benefit from quick processing, transparent charges, and customised solutions for first-time buyers.

Check your Home Loan eligibility today and plan your EMIs using the Home Loan EMI Calculator.