A CIBIL score is a vital parameter that determines your credibility. It is considered by lenders when you place the application for a personal loan, home loan and other credit options. A personal loan is a kind of unsecured loan which comes with short- or medium-term periods. This loan can be availed for various reasons like paying off your debts, vacation, medical expenditures, wedding expenditures and others.
As a personal loan by nature is unsecured, you do not require providing any security or collateral to lenders for availing this. However, lenders require checking your credit health and ensuring you have the potential to repay the borrowed amount.
How much CIBIL score do you require for your personal loan?
CIBIL score ranges anywhere from 300 to 900. You must ideally have a credit score that is nearer to 900 because it assists you in getting a better deal on credit cards and loans. Usually, a credit score equaling 750 and above is ideal for most lenders. You can avail a personal loan with a score of 750 and above.
According to CIBIL, 80 percent of the loans are approved if your credit score is over 750. Lenders like SBI require being sure that you hold the potential to easily repay the borrowed amount. Based on this, they approve your loan approval. Your score also assists them in evaluating your default risk. If you hold a good credit score, it suggests you are a disciplined borrower who ensures to repay the loan EMIs and credit card dues on time. A lower credit score enhances your default risk on a loan. Thus, for SBI personal loan CIBIL score checking is crucial. This is true for other lenders too.
Avail personal loan for credit score below 550
Most lenders turn down your personal loan application if your score is below 550. A low score indicates that you are unstable financially and will think it to be tough to repay the personal loan. Few lenders do offer personal loans for low scores. However, the rate of interest is high. Thus, it is crucial for you to check the conditions and compare rates and charges before availing of the personal loan.
Parameters impacting the credit score
There are various parameters that impact your score either negatively or positively.
∙ Parameters that impact your credit score in a positive manner
✔ Making payments in full, timely towards credit cards and loan EMIs
✔ Paying loan EMIs by the due date
∙ Parameters that impact your credit score in a negative manner
✔ Late payment or nonpayment of loan EMIs and credit card bills
✔ Paying just the minimum due on your credit card and the remainder is still thought to be overdue
✔ Possessing a lot of credit lines, particularly unsecured forms
4 important ways your score impacts your personal loan
Your score plays an important role in providing loan application approval. Let’s check out your credit score for free to understand its power –
✔ Important role
When you apply for a loan, your score is necessary as your salary, employment history and various other eligibility parameters. Ensure your score is above 750.
✔ Past matters
One of the criteria for personal loan approval is the applicant’s repayment history. How do they exactly find this? By checking the credit score. Excellent repayment history equals a good score.
✔ Loan with low or no credit score
This might be possible but ensure to be prepared for a higher processing time because lenders will put some additional checks. Moreover, you may not always get a good deal.
✔ Error-free credit report
At times errors may be visible in a spotless credit report that mars your score. Ensure to give your credit report a glance before placing the loan application.
3 major things you must do before placing the application for a personal loan
✔ Check out your credit score
It is crucial to learn about your credit score and financial health before placing the application for a personal loan. You must check your credit score as it endows you with an idea of where you exactly stand in terms of credit history and past repayment. If your score is low, you must take your time to work over it and gradually enhance it by taking the correct measures.
✔ Get your credit report for free
You can simply visit the official site of the CIBIL to claim your report if you have not already availed it this year. RBI or Reserve Bank of India has made it necessary for all credit bureaus in India to offer 1 report for free each calendar year. Additionally, you can even purchase your credit report for 1 month, 6 months and 1 year.
✔ Browse & shortlist lenders
Once you have zeroed on availing of the personal loan, you will require looking for lenders that are providing good deals on loans. It is better for you to browse for deals and choose the one that is extremely favourable for you. Owing to such high competition, many lenders are providing a competitive rate of interest on personal loans. Read on to know the best deal that may offer you maximum benefits in terms of repayment tenure, rate of interest, and fringe benefits like processing fee waiver.
✔ Apply just with a few lenders
After you have shortlisted the lenders that are providing the personal loan suitable to your requirements, you must apply with a few lenders. You must be thoroughly careful and avoid going for multiple personal loan applications in a short time span as it would trigger several hard inquiries. Various hard inquiries usually have a negative impact on your credit score.
What is an ideal credit score you must-have?
An ideal credit score for a credit card or loan usually ranges anywhere between 750 and 900. A strong score ensures a higher chance of a loan or credit card application. A strong score of over 750 is considered favourable if you are looking to avail a personal loan, car loan, home loan or credit card. May it be HDFC, Axis, or SBI credit score is an essential parameter for checking your loan or credit card eligibility.
What are the fees for checking credit score through CIBIL?
One report per year from CIBIL is completely free. The fee is levied on CIBIL thereafter.