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What Should Be Your Credit Score To Buy A House In 2021

Are you looking for a home loan? Worry about your credit score? Before that, let’s know about home loans?

What are home loans?

A home loan is an amount that an individual borrows from a bank or other lending companies at a certain home loan interest with the EMI every month. Lenders take the property as a security for the Home Loan.

Why are credit scores a part of concern? 

A credit score is an analysis of a person’s credit reports to show creditworthiness of a person. A credit score is majorly based on a credit report, and one can get all this credit information with the help of credit bureaus.

Credit scores can confuse most financially savvy consumers. Many people think that a good credit score boosts their chances of approval as it shows the lender the repayment capacity. But mostly, the minimum credit score varies depending on the type of mortgage or loan one applies for. 

What are the good credit scores to buy a house?

Generally, one needs a credit score of at least 620 to secure a house loan. It’s the minimum credit score most lenders approve of. But, it’s still possible to get a loan with a lower credit score, including a score in the 500. 

How can we take a loan with a 500 score?

Certain banks provide loans instantly, even with a credit score of 500. One should do thorough research as due to increasing technologies, several provisions are accessible online, including online calculators for loans, their eligibility, documents, EMI and many more.

The credit societies assemble the credit score based on the following factors:

  • Payment history (35%)
  • The amount owed (30%)
  • Length of credit history (15%)
  • Types of credit (10%)
  • New credit (10%)

Minimum Credit Score

The minimum credit score you need depends on the type of mortgage you’re trying to get. Having no credit history and score may also lead to loan rejections as the lender cannot assess your financial habits.

Most lenders need a CIBIL( Credit information (India) bureau limited) score of 750 and above for agreement. Some lenders accept lower scores, where the loan amount is lower but with high-interest rates, mostly short tenure. Defaults can also lead to rejection. 

What Else Do Mortgage Lenders Consider?

Debt-to-income ratio

Lenders consider your monthly debts, and they generally want to know your total monthly debts, including your new mortgage payment. One should see that the existing debts don’t cross 50% of the monthly income. If not, it’s difficult to pass this loan.


Lenders will always look at your income. They want to be sure you make enough money to repay.


Lenders want to ensure that you have funds available to make your mortgage payment. If your income dries up, most will want to see that there’s enough money saved to cover at least two months of loan payments.

Down payment

The bigger your down payment, the more likely it will qualify for a mortgage with a lower interest rate. A higher down payment proves to be less risky.

Employment history

Lenders vary, but they usually see that you’ve worked at the same job, or in the same industry, for 2 years. It increases their belief that losing the job won’t affect your loan. 

You can always use a home loan eligibility calculator on online portals to check whether you qualify for a home loan or not. 

Can You Get A Home Loan With no or a bad credit score?

It’s possible to qualify for a loan even if your credit score is low. A low credit score means you have been running off debts or missing your monthly payments for lenders. It makes them think of you as a riskier borrower.

To help offset this risk, lenders charge borrowers with bad credit higher interest rates. They also require these borrowers to come up with larger down payments.

How can you improve your credit score?

Fortunately, you can improve your credit score, though there are no quick fixes. It takes time to improve one’s credit score. One can improve with the help of the following:

Quicker Fixes: 

Check your credit report for errors: 

You can check online portals and get a copy of your credit reports online; after getting these reports, try to find the error. 

Maybe credit bureaus forgot to mention one of the repayments you made last year. If that’s a mistake, you must contact the bureau and make sure to correct it. Getting rid of such an error could immediately boost your credit score.

Longer-Term Fixes

Pay your bills on time: 

Paying your bills on time gradually improves your credit score.

Making certain payments late 

Credit cards, mortgage loans, auto loans, student loans, personal loans cause your credit score to fall by 100 points or more. Making timely payments each month will cause your CIBIL score to rise gradually.

Pay down your credit card dues: 

Paying down your credit card due is a way to improve your score steadily. Don’t cancel a credit card account once you pay it off, as it helps in increasing your credit utilization ratio.

Knowing your credit score and understanding what affects it before beginning the mortgage process is important. Once you understand this, you can improve your credit score or maintain it so you can increase your chances of qualifying for a mortgage.

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