What credit score I need to get personal loan?

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cibil score

cibil score

What credit score I need to get personal loan?

What is CIBIL Score?

CIBIL Score is a measure to judge your credit worthiness, which is derived on the basis of your credit summary and other financial data and is prepared by Credit Information Bureau India Limited (CIBIL). This is a 3 digit score that ranges from 300 to 900. The higher your credit (CIBIL) score higher will be your creditworthiness and thus more chances of getting your loan approved including a personal loan at a relatively lower interest rate.

Why CIBIL Score is Important?

The CIBIL Score plays a vital role in the loan application process. When a prospective borrower fills an application form for a loan and submits it, the lender first checks the CIBIL score along with the report of the lender. If the score founds to be low then the lender may not even consider a loan application for further approval. This score is considered by banks and other financial institution for personal loan, home loan and other credit offerings.
Personal loans are unsecured loans so it doesn’t require much documentation. Further it also not requires any mortgage or collateral as a security. However the lending bank or financial institution will check your credit soundness and ability to repay the loan amount along with the interest component. At this phase, apart from other general eligibility criteria credit score of the applicant is checked with the help of your credit summary score prepared by the Credit Information Bureau (India) Ltd.

Factors Affecting Credit Score:

Positive Factors:
  • Timely Payment of credit card dues
  • Payment of loan EMI on time
  • Payment of not only minimum current due but the entire amount before time.

Negative Factors:
  • Possessing too many credit lines especially in the form of unsecured loans
  • Non- payment or late payment of bills on credit card or loan EMIs
  • Consistent use of credit card limit up to 75%.

How much credit Score should you have for Personal loans?

You should ideally have a credit score close to 900 in order to increase chances for getting a better loan and its approval. Majority of the lenders usually consider a credit score above 750 as ideal for lending. Therefore you can get a personal loan easily above this. However you can get a loan at a much lower interest rate prevailing in the market if your score is between 800-900.As per a report by published by Economic Times, 80% of loans get approved if the score is more than 750.

Credit Score Range:
NA or NH: It means that you don’t have a credit history. This may be for the reason you have not taken any loan or not used any credit card yet.
350 to 549: A CIBIL score in this range indicates a bad credit score. This implies that you have been late in paying off due bills on the credit card or the loan EMIs. You have higher chances of being a defaulter and hence it will be difficult for you to get a personal loan.
550 to 649: This is the fair range of CIBIL Score. However not every lender would consider this score to offer a personal loan. Most of the lenders charge higher interest rates to offer a loan at this credit score range.
650 to 749: This is the right range of credit score for the lending banks and financial institutions. There are chances that you will get a personal loan however at this range you may not get the best deals.
750 to 900: This is the ideal and excellent range so there are many chances that you will be able to secure best deals from the top rated banks or NBFCs.

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