Before you buy your dream home, check your credit health.

One of the most important steps in this journey is ensuring you have a strong credit profile. A healthy credit history not only increases your chances of getting your home loan approved but can also help you secure lower interest rates and better terms, making your home more affordable over time.

For instance, long-standing accounts indicate reliability. So, if you know you intend to borrow soon for a house purchase, don’t close old credit cards or loan accounts. Long-standing credit helps enhance your profile.

For home loans, a higher score usually translates into better approval chances as lenders see you as a lower-risk borrower, lower interest rates—which can save you lakhs over the loan term—and potentially a higher loan amount.

Here are a few steps you can take to understand your credit report and prepare your profile before applying for a home loan.

Check early, plan ahead

It is advisable to check your credit score regularly and aim for a score of 750 or above. Review it several months before applying for a home loan—this gives you time to make improvements or raise disputes in case of errors.

With disciplined use of credit, such as timely repayments and prudent borrowing, gradual and meaningful improvements can often be achieved within a few months.

The first step is on-time payments. They protect your credit score and show discipline. Even a single missed due payment can leave a significant impact. Automating payments can help ensure consistency.

Look beyond the score

A credit report lists all current and past loans, accounts, and credit card transactions. Errors—such as a closed loan still appearing as open, or inaccuracies in your personal information—may adversely affect your credit score.

Reviewing the report early allows you to identify errors, raise a dispute, and correct inaccuracies by notifying lenders and bureaus. An accurate credit report goes a long way in convincing lenders of your financial discipline and may help you get a home loan at a better rate and a more favourable tenure.

Pause new credit lines

Multiple loan or card applications in a short time may make you appear credit-hungry. Avoid new credit lines close to your home loan application to present a stable financial picture.

Also, having a high credit balance may impact your loan eligibility. Paying off smaller debts or decreasing credit card balances can enhance your borrowing ability.

Co-applicant advantage

Adding a co-applicant, such as a spouse, can improve eligibility by combining incomes and spreading liabilities. This may lead to a higher loan amount or better terms.

Along with this, check how much of your existing credit line you’re using. Using too much of your available credit can signal financial strain. Maintaining prudent utilization levels demonstrates to lenders that you can manage credit responsibly.

The cost of a low score

Many applicants underestimate the impact of a low score. Not only can it result in outright rejection, but even if approved, the interest rate offered may be significantly higher.

For example, on a ₹50 lakh loan over 20 years, a 1% higher rate can cost you over ₹6 lakh extra in interest.

Your credit report is not just a document for lenders—it’s a mirror of your financial habits. By taking proactive steps to improve your score, you are not only enhancing your loan eligibility but also setting yourself up for long-term financial health.

Buying a home is a proud moment. Enter the process with a strong credit profile, and you will unlock lower interest rates, higher approval chances and a smoother borrowing journey.

By Manish Jain, country managing director, Experian India