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How credit score can determine your home loan EMIs

  • 2 min read

  • Highlights

  • Good credit score means lower EMIs

  • Lenders prefer borrowers with good credit score

  • A credit score over 750 can get you low interest rates

  • A low credit score leads to higher EMIs

Credit score is one factor that can directly increase or decrease your home loan EMIs. If your credit score is above 750, you will pay less EMIs on your home loan but if your credit score goes below 750, your home loan EMIs might be higher than the others.

Check your cibil score for free

Does a good credit score mean lower home loan EMIs?

Certainly! The most influential factor for deciding your home loan interest rate is your credit score. A credit score of 750 or above can get you the best interest rate from most of the home loan lenders.
As, you get a good interest rate, it automatically brings down your home loan EMI amount.

What lenders look for?

Credit score have the ability to affect a lender’s decision of approving or declining your home loan application. Most of the lenders use cibil score as the parameter to approve your home loan.
It isn’t impossible to get a home loan with a low credit score, but it can be difficult. The following factors affect your home loan application:

- Your credit score
- Your income
- Your employer
- Your age and nationality
- Your relationship with the lender
If these factors are in alignment with the lender’s requirement, they will work in favour of your application and you might get the home loan easily.

Tips to Improve Home Loan Eligibility

How much does credit score affect the home loan interest rate?

A person with a good credit score and a person with a bad credit score can both get a home loan, but the interest rate might vary from 0.25% to 1.5%.
Now, the difference in interest rate percentage might look minor, but it can affect the home loan EMIs a lot.
Look at this illustration to understand the difference in monthly EMI amount with the change in interest rate, keeping everything else same.
A monthly EMI for a fixed home loan of Rs.30 lakh for 20 years:  

Interest rate Monthly EMI
9.5% Rs.27,964/ month
10% Rs.28,951/ month

Almost a difference of Rs.1,000 every month.

How to improve your credit score?

You can work on improving your credit score to get a better deal on your home loan. If you don’t have the ideal score, here’s how you can improve it:

1. Repay the existing debts: If you already have too many debts in your name, it will be reflected in your credit score. Repay the existing loans before applying for a fresh home loan.
2. Try increasing your income: An increase in your repaying capacity will have a positive impact on your credit score. Try shifting your job or asking for a hike in income to improve your credit score.
3. Check the report for errors: Sometimes, the credit report is not updated with your latest income and debt information. If you have paid a credit card bill or a loan recently, check if it is reflected in your credit score.

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