HomeBusinessThe Credit Score You’ll Need To Apply For A Personal Loan

The Credit Score You’ll Need To Apply For A Personal Loan

A CIBIL Score is essentially an individual’s creditworthiness for availing loans and the likes from financial institutions. The score plays a critical role in the approval of Personal Loans. The higher the credit score, the better the odds of getting a seamless loan approval as lending institutions will be positive on the likelihood of an applicant repaying the loan EMI during the loan term. A Personal Loan tenure with NBFCs is flexible and ranges up to 60 months. 

Minimum Credit Score Requirement for a Personal Loan 

A minimum CIBIL score for a Personal Loan is a primary requirement of lending institutions. Credit bureaus assign these scores to individuals. This score is based on the credit information of an individual. In India, credit score ranges between 300 (lowest) and 900 (highest). The minimum CIBIL score for a Personal Loan is 750 with most lending institutions. To maintain a high credit score, you must build a healthy and spotless credit history. 

  • 0 score means you need to build a credit history. To do so, take a loan or use credit cards. 
  • A 300-500 score is considered a poor credit score. It shows that the borrower has not made timely EMI or credit card bill payments. In this case, there is a low possibility of getting approved for Personal Loans online
  • 500-700 shows that an individual has a credit history but is not spotless. It means there are flaws. But the lender can trust you to offer a new loan.  
  • A range of 700-900 is an excellent credit score that indicates seriousness in clearing previous debit or credit payments. Such a high score can get you a high loan amount or even pre-approved offers from your existing lenders. 

The lenders hesitate to approve a loan application if there is a low credit score. They can even reject a loan application due to a lower credit score. Such rejections impact the credit score negatively. So, it is best if you could keep the creditworthiness sound to avoid such rejections. 

How to Improve Your Credit Score?

– Scan Your Credit Report 

You must review the credit report before applying for Personal Loans online. Many consumers find clerical mistakes in these credit reports. It can be a misspelt name or loan account opened even after clearing all EMIs, and others. A credit report with such an error makes the loan application riskier unnecessarily. After finding such errors request the credit rating bureaus to rectify the mistake if any.

– Avoid Frequent and Multiple Loan Applications 

You should avoid making multiple loan applications, especially if you keep getting rejections. One should utilise credit availability for urgent financial needs only. It is always good to make a loan application with a lender you already know and enjoy a lower interest rate due to your good relationship. Applying for multiple loans increases the chances of loan disapproval. 

– Keep Your Credit Utilisation Ratio Low

Most individuals do not know about this effective way of raising their credit score. An individual should limit credit utilisation. Financial experts suggest utilising a 30% or lower credit limit. 

– Consider New Credit Cards 

An increased limit on your credit card signifies your eligibility to repay your credit card bills. If your bank offers you an increased credit limit on your existing card or offers a new credit card with a high credit limit, consider accepting as it will improve your score. You should not close your old credit card accounts because the longer the credit history, the better it is. The duration of your credit history also matters for lenders. You can impress the lender with a longer credit history.

– Manage your credit card payments

The credit score is assigned as per your repayment history. Therefore, it is necessary to repay your loans and credit card bills promptly. It will make the lender trust you with strong creditworthiness with a spotless credit history. Do not ever default on any loan or credit card EMIs or bills.
Thus, a good credit score is vital to approve your Personal Loan application, and you can make efforts to improve your credit score. Maintain a minimum CIBIL score for Personal Loan, generally 750+.  If the lender has an issue with your credit score, you can consider a co-signer to get a Personal Loan. Get a loan amount as high as ₹30 Lakh.

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