04 JULY, 2022

When buying a new home, the focus should be on securing a home loan with a low interest rate and an Equated Monthly Instalment (EMI) that suits your budget. This begins with applying for a home loan and here comes the role of your credit score.


Your credit score is one of the most important factors that determine your eligibility for affordable home loans. It is kind of like a report card of your credit behaviour. Lenders will use your credit score to check your home loan eligibility and analyse how risky it is to loan money to you, and this can determine the interest rate they offer you on the loan as well. Kotak offers one of the most affordable housing loans, if you have a good credit score. Read on to the importance of your credit score in securing affordable housing loans and tips on how to improve your score.

  • Role of your credit score in getting affordable home loans

Your credit score is a number that lenders use to analyse your creditworthiness - in simple words, how likely you are to repay a loan on time. The higher your credit score, the higher your home loan eligibility is and the lower the interest rate you would be offered. Additionally, a good credit score can also help you to qualify for a Kotak housing loan with better terms and conditions. For example, you may be able to secure a home loan with a lower down payment.


In contrast, if you have a poor credit score, you may still be able to get a home loan, but you may probably have to pay a higher interest rate. Borrowers with poor credit scores are seen as being more likely to default on their loans as they have poor financial habits and a poor history of repaying debt. So, to get the best home loan interest rate possible from Kotak, it is important to check your credit score range and take steps to improve your credit score while you apply for a home loan.


While there are multiple factors that determine what interest rate you get, generally, if your credit score is 750 or higher, you can get the lowest interest rates. On the other hand, the lower your credit score is, the higher your interest rates would be. You can use Kotak’s home loan affordability calculator to estimate how much you can afford and find out what your credit score needs to be to qualify for the best interest rates.

What hurts your credit score?

Here are some poor financial habits that negatively impact your credit score:


  • Paying your credit card bills late
  • Filing for bankruptcy
  • Ignoring your EMI dues
  • Applying for multiple loans within a short duration
  • Closing a credit card with an outstanding balance
  • Not checking your credit report occasionally and failing to fix errors. Sometimes credit reporting bureaus may also make errors while creating credit reports. So, it is advised to check and correct the report to avoid any problem in the future.

To sum up

It is no secret that having a good credit score can save you money on your housing loan by reducing your overall interest outgo. Hence, by understanding what impacts your credit score and how to improve it, you can be better prepared when applying for a home loan with Kotak.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.