Importance of Credit Score in Various Loans
Last Updated : Jan. 28, 2025, 3:10 p.m.
A credit score is an essential parameter in the approval of loan applications. If you have a good credit score, your loan will get approved quickly. You will get preferential interest rates and will be eligible for a high credit limit, high loan amount, and better loan terms. If your credit score is low, then your loan application may be rejected. Let us now read and understand about the importance of credit score in various loans .
Importance of Credit Score in Personal Loans
One of the most popular types of loans amongst customers is the Personal Loan , since it helps in fulfilling both their short-term and long-term financial needs. An individual can get the required loan amount without pledging any security. That is why the importance of the credit score is high for a personal loan when compared to other kinds of loans. For personal loans, lenders face a high credit risk while providing the required loan amount. Through the credit score, lenders estimate the creditworthiness of an individual. The criteria for credit score varies across lenders. But, typically, a credit score of 750 and above is considered to be excellent.
The following are the advantages of having a good credit score for personal loans:
- The lender approves your loan application swiftly.
- The quick processing will automatically help you in getting the required loan amount in your account.
- The higher the credit score, the higher the loan amount, since it shows that you will be able to repay the loan amount responsibly
- If you have a low credit score, lenders will hesitate in giving you a higher loan amount due to your repayment history. However, eventually, the loan amount will also be based on your income and repayment potential.
The chances of getting a lower interest rate is higher if you have a higher credit score and vice versa. Also, you can negotiate with your lender to reduce it further. On the other hand, individuals with low credit scores are subject to high interest rates on personal loans .
Importance of Credit Score in Home Loans
Home loans are taken by individuals to purchase their dream home. A home loan is considered to be a secured loan, since your home will act as a collateral. But, before providing you the loan amount, lenders will check your credit score to see how well you can handle the debt by examining your past repayment track record. A high credit score will automatically indicate that you will repay your home loan EMIs on time, and this will encourage lenders to give you the loan. Also, higher the credit score, lower will be your Home loan interest rate . Interest rates also tend to change according to the required home loan amount.
Given below are the home loan interest rates of some of the top banks and housing finance companies. You can now understand how credit scores impact your interest rates.
HDFC Ltd Home Loan Interest Rates
HDFC Limited, the leading mortgage provider in India, offers Home Loans at an interest rate of 8.75% per annum to individuals with a credit score of 780 or above. This rate of interest is irrespective of the loan amount and profession. However, the general HDFC Home Loan Interest rates range from 8.75% - 9.95% per annum.
LIC Housing Finance Home Loan Interest Rates
LIC Housing Finance offers home loans at different rates to salaried and self-employed based on the credit score they have. Let’s check out their rates.
| Credit Score | Loan amount | Salaried and professionals | Non salaried and non professionals |
|---|---|---|---|
CIBIL > = 800 | Up to 5 crores | 8.50% | 8.75% |
More than 5 crores and up to 15 crores | 8.75% | 9.00% | |
Up to 50 lakhs | 8.60% | 8.85% | |
CIBIL 775 to 799 | More than 50 lakhs up to 2 crores | 8.65% | 8.90% |
More than 2 crores up to 15 crores | 8.75% | 9.00% | |
Up to 50 lakhs | 8.65% | 8.90% | |
CIBIL 750 to 774 | More than 50 lakhs up to 2 crores | 8.70% | 8.95% |
More than 2 crores up to 15 crores | 8.80% | 9.05% | |
Up to 50 lakhs | 8.90% | 9.15% | |
CIBIL 700 to 724 | More than 50 lakhs up to 2 crores | 8.95% | 9.20% |
More than 2 crores up to 15 crores | 9.05% | 9.30% | |
Up to 50 lakhs | 9.55% | 9.65% | |
CIBIL 600 to 699 | More than 50 lakhs up to 2 crores | 9.75% | 9.85% |
More than 2 crores up to 15 crores | 9.90% | 10.00% | |
Up to 50 lakhs | 10.00% | 10.10% | |
CIBIL < 600 | More than 50 lakhs up to 2 crores | 10.20% | 10.30% |
More than 2 crores up to 15 crores | 10.40% | 10.50% | |
150<=CIBIL< = 200 | Up to 2 crores | 8.75% | 8.85% |
101< = CIBIL< 150 | Up to 2 crores | 9.25% | 9.35% |
PNB Housing Finance Home Loan Interest Rates
PNB Housing Finance Limited , one of the renowned housing finance companies in India has been charging home loan interest rates based on the credit scores of applicants, regardless of whether they are salaried or self-employed. Let’s check out the table below to know that in detail.
| Credit Score | Up to 35 lakhs | Above 35 lakhs | ||
|---|---|---|---|---|
Salaried | Non salaried | Salaried | Non salaried | |
> = 825 | 8.50% to 9.00% | 8.80% to 9.30% | 8.5% to 9.00% | 8.8% to 9.30% |
> 800 to 825 | 8.80% - 9.30% | 8.95% 9.45% | 8.8% to 9.30% | 8.95% to 9.45% |
> 775 to 799 | 9.1% to 9.6% | 9.65% to 10.15% | 9.20% to 9.70% | 9.80% to 10.30% |
> 750 < = 775 | 9.25% to 9.75% | 9.80% to 10.30% | 9.35% 9.85% | 10.15% to 10.65% |
> 725 to < = 750 | 9.55% to 10.05% | 10.25% to 10.75% | 9.70% to 10.20% | 10.30% to 10.80% |
> 700 to < = 725 | 9.85% to 10.35% | 10.55% to 11.05% | 10.05% to 10.55% | 10.75% to 11.25% |
> 650 to < = 700 | 10.25% to 10.75% | 10.75% to 11.25% | 10.45% to 10.95% | 10.95% to 11.45% |
Up to 650 | 10.25% to 10.75% | 10.75% to 11.25% | 10.45% to 10.95% | 10.95% to 11.45% |
NTC CIBIL > = 170 | 10.25% to 10.75% | 10.65% to 11.15% | 10.45% to 10.95% | 10.85% to 11.35% |
NTC CIBIL < 170 | 10.15% to 10.65% | 10.55% to 11.05% | 10.35% to 10.85% | 10.75% to 11.25% |
ICICI Bank Home Loan Interest Rates
ICICI Bank gives home loan interest rates based on the credit score of an applicant. However, the rate will vary between salaried and self-employed borrowers. An interest rate of 9% will be applicable for both salaried and self-employed individuals when they have a CIBIL score of 750 and above.
Salaried
| Loan Amount (In INR) | CIBIL Score > 800 | CIBIL Score > 750 to 800 | CIBIL Score of 710 to 749 | NTC | ||
|---|---|---|---|---|---|---|
Up to 35 lakhs | 9.00% | 9.00% | 9.50% | 9.25% | ||
Above 35 lakhs to 75 lakhs | 9.00% | 9.00% | 9.60% | 9.50% | ||
Above 75 lakhs | 9.00% | 9.00% | 9.70% | 9.60% | ||
Self-employed
| Loan amount (In INR | CIBIL Score > 800 | CIBIL Score > 750 to 800 | CIBIL score of 710 to 749 | New to credit borrowers |
|---|---|---|---|---|
Up to 35 lakhs | 9.00% | 9.10% | 9.65% | 9.40% |
Above 35 lakhs to 75 lakhs | 9.00% | 9.10% | 9.75% | 9.65% |
Above 75 lakhs | 9.00% | 9.10% | 9.85% | 9.75% |
Bank of Maharashtra Home Loan Interest Rate
Bank of Maharashtra also determines home loan interest rates based on the applicant's CIBIL score, offering lower rates to individuals with higher credit scores, thereby ensuring cost-effective borrowing for eligible applicants. A strong CIBIL score enhances loan eligibility and facilitates access to competitive interest rates.
| Credit Score | Interest Rate | |
|---|---|---|
Salaried | Non Salaried | |
800 and above | 8.35 | 8.45 |
750 to 799 | 8.40 | 8.50 |
725 to 749 | 8.80 | 8.90 |
700 to 724 | 9.30 | 9.50 |
650 to 699 | 9.80 | 10.00 |
600 to 649 | 10.00 | 10.20 |
Below 600 | 10.40 | 10.90 |
-1 to 05/NTC | 8.80 | 9.00 |
Importance of Credit Score in a Car Loan
A Car Loan is one of the most suitable options for individuals looking to purchase their dream car but hampered by lack of funds. There are a few lenders who provide loan amounts up to 100% of the on-road price. Others may provide up to 80%-90%. You will need to fund the remaining amount from your sources. The primary thing that a lender checks before giving the loan amount is the applicant’s credit score.
A credit score helps them in evaluating the repayment pattern of an individual. A high score will automatically indicate that a particular person is capable of handling future debts. Individuals with a good credit score (considered to be 700 or above) tend to get their loan approval in a very short time as lenders face lesser risk in providing the loan amount. Some lenders also place a minimum credit score criteria to get the car loan , and this varies across lenders. For example, to get the Bank of Baroda Auto Loans, the applicant must have a credit score of 701 or more.
Credit score also affects your car loan interest rate . Individuals with a high credit score tend to get the loan amount at lower interest rates than applicants who don’t have a good credit score. However, Car Loan interest rates change from one lender to another.
Frequently Asked Questions (FAQs)
