If purchasing a home is on your agenda for 2026, strengthening your credit score should be the first step. Your credit profile plays a decisive role in determining loan eligibility, interest rates, EMI burden, and overall affordability, making it one of the most critical factors in the homebuying process.

Before finalising a property purchase, financial experts advise ensuring that past loans are either fully repaid or well managed. A clean repayment history significantly improves the likelihood of securing a lower home loan interest rate.

Lenders assess a borrower's credit score to evaluate repayment behaviour and risk. Borrowers with strong credit scores, typically 750 and above, are considered lower risk and are usually offered the most competitive interest rates.

Experts also recommend keeping home loan EMIs within 40 percent of monthly take-home income. Staying within this threshold helps maintain financial comfort even after accounting for household expenses and reduces the risk of repayment stress over long loan tenures.

Those with weaker credit scores may still qualify for a home loan, but often at higher interest rates, which can substantially increase the total cost of borrowing over time.

On December 4, 2025, the Reserve Bank of India reduced the repo rate by 25 basis points to 5.25 percent, following four rate cuts earlier in the year from the earlier level of 6.5 percent. This softer interest rate environment has improved borrowing conditions for homebuyers.

To illustrate the impact, consider a ₹50 lakh home loan with a tenure of 20 years. At an interest rate of 8.50 percent, the EMI would be around ₹43,000. With a lower interest rate following the repo cut, the EMI could drop to approximately ₹39,000, delivering meaningful monthly savings and lowering the overall interest outgo.

"A credit score plays a crucial role in determining the interest rate offered on a home loan. Borrowers with strong credit scores, typically 750 and above, are seen as lower risk and usually qualify for the most competitive rates," says Adhil Shetty, CEO of BankBazaar.

Even small differences in interest rates can translate into large savings over long tenures. A spokesperson from PNB Housing Finance noted that while the gap in interest rates may appear marginal initially, over a 20-year home loan, it can result in savings running into several lakhs.

For example:

• Borrowers with a credit score of 750 or above generally qualify for the lowest rates
• Borrowers with scores in the 700-725 range may face higher interest rates
• A borrower with a score above 750 could receive a rate 50-100 basis points lower than someone with a score between 650 and 700, even if income levels and collateral value are identical
  
  

As Pramod Kathuria, founder and CEO of Easiloan, explains, over extended repayment horizons, such differences significantly impact the total interest paid, making strong credit discipline one of the most effective ways to reduce borrowing costs over time.

For joint home loans, lenders do not assess a combined credit score. Instead, each applicant's individual credit score is evaluated separately.

While having one applicant with a strong score may improve approval chances, a lower score from the co-applicant can negatively affect:

• Loan eligibility
• Interest rate offered
• Sanctioned loan amount

Although both incomes are considered together to assess repayment capacity, liabilities remain individual. As a result, both applicants should ideally maintain strong credit scores to secure better approval terms and pricing.

Improving a credit score requires consistent and disciplined financial behaviour. According to PNB Housing Finance, the most effective strategies focus on the core factors used by credit bureaus to calculate scores.

Key steps include:

Timely payments

Ensure all EMIs and credit card bills are paid on or before the due date. Even a single missed payment can impact the score.

Manage credit utilisation ratio (CUR)

Credit utilisation refers to how much of your available credit limit you use. Ideally, this should be kept below 30 percent. For instance, with a ₹1 lakh credit limit, outstanding balances should remain under ₹30,000. Paying down credit card debt is one of the fastest ways to improve this ratio.

Avoid multiple hard inquiries

Each loan or credit card application triggers a hard inquiry, which can temporarily reduce the score. Avoid applying for multiple credit products simultaneously, especially in the months leading up to a home loan application.

Maintain a healthy credit mix

A balanced mix of secured loans (such as car loans) and unsecured loans (such as personal loans) demonstrates responsible credit management. However, this should develop naturally and not through unnecessary borrowing.

Monitor and correct errors

Regularly review your credit report to identify inaccuracies such as incorrect personal details or loans that have already been repaid but still appear active. Rectifying errors helps ensure your score accurately reflects your financial standing.

As home loan affordability becomes increasingly sensitive to interest rate movements, credit scores will matter more than ever in 2026. Maintaining a strong score can unlock lower interest rates, reduce EMIs, and significantly cut the lifetime cost of borrowing. Even a small improvement in credit health can translate into substantial long-term savings, making credit discipline a non-negotiable step for future homebuyers.