Minimum CIBIL Score For Personal Loan & How You Can Improve Score

Why CIBIL Score should matter to you for getting a personal loan? This is perhaps the most asked question on the Google these days. It’s pretty much clear that the poor credit history, banks and private financial lenders will hesitate to offer you a personal loan. So, what is the minimum CIBIL Score for personal loan required?

Has it happened to you lately that you have applied for a personal loan; to take your family on an international holiday. And your application get rejected because of the “Low CIBIL Score“. It is important to know your credit ranking when it comes to CIBIL before you apply for the personal loan.

Understand What Is CIBIL Score?

CIBIL Score is a 3 digit numeric summary of your credit history. The score is derived using the credit history found in the CIBIL Report also known as CIR i.e Credit Information Report. A Credit Information Report is an individual’s credit payment history across loan types and credit institutions over a period of time. A CIR does not contain details of your savings, investments or fixed deposits.

Your CIBIL score, calculated based on your credit behavior as reflected in the ‘Accounts’ and ‘Enquiries’ section of your CIR, ranges between 300-900. A score above 700 is generally considered good

Why It Is Important To Know Your CIBIL Score ?

Your CIBIL score plays a major role when you are applying for loans. The loan approvals primarily depends on your CIBIL score. Without a satisfactory CIBIL score, you may not be eligible for the loans.

After you fill and submit your loan application form, the bank or your private financial lender will be checking your credit score and credit report. If you have a bad credit history and a low credit score, the bank may outrightly reject your loan application. Only if your CIBIL score for personal loan is good; the bank consider your loan application and pass it through for approval.

CIBIL scores are the deciding factor for many banks when it comes to considering your application. The higher the score, the higher the chance your loan application will be reviewed and approved. However, the decision to approve your loan application is completely dependent on the bank; CIBIL as an institution does not play any role here.

What Are The Factors That Affects Your CIBIL Score?

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Payment history

Your payment history plays a major role in developing a good CIBIL record. Making late payments on credit cards or delaying/defaulting on your EMIs regularly can negatively affect your credit score, indicating that you are not serious about or capable of clearing your existing debts.

Increased credit limit

Increasing the current balance of your credit card may negatively affect your credit score since it is considered to enhance your repayment burden. However, increased spending on your credit card does not affect your credit score as long as you’re credit utilization is in proportion to your credit limit.

Unsecured loans

A high percentage of unsecured loans such as personal loans and credit cards may affect your credit score. A balanced combination of secured and unsecured loans adds positively to your credit score.

Multiple loans & credit cards

If you have multiple loans, credits cards and new accounts, this may affect your credit score, and banks may review your loan application more carefully.

What Is The Minimum CIBIL Score For Personal Loan?

It is generally advisable to have a CIBIL score of 750 or above to qualify for a personal loan Your credit score is a three-digit number between 300 and 900 that gives potential lenders a quick idea of your credit health. The higher your score, the better are your chances of being approved.

As a first step, lenders typically look for a minimum CIBIL score for personal loan which should be 750 or above before deciding whether to go ahead with processing your application.

CIBIL Score Between 300-599

You will not qualify for a loan. Such a low score is a warning signal to lenders that you do not have a history of good credit behavior. Most lenders will reject your application right away. It is necessary to take immediate steps to rebuild your credit health and improve your score.

CIBIL Score Between 600-749

Though it is not a high CIBIL score for personal loan, you might have a chance of being approved by some lenders. They might be willing to look at other factors that will impact your repayment ability in the future like the stability of your employment, your monthly salary, the extent of your other liabilities. 

CIBIL Score 750 and above

With this CIBIL Score for personal loan has a very good chance of obtaining a loan with such a score. There are several other advantages to a high score: the approval process will be much faster; the loan amount might be larger; you might be able to negotiate a lower interest rate. The whole loan approval process is much simpler.

How You Can Improve Your Credit Score?

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No Delayed Payments

Delaying your bill payments, be it credit card or loan EMIs could see your score dipping, which makes timely payments a key role in maintaining a decent score. While a bank may be OK with ignore the first delayed payment, repeated delays could bring unwanted attention from their part.

Never Exceed Your Credit Limit 

In times where we want to enjoy things to the maximum, there is a high possibility for us to go overboard when it comes to our credit limit. Staying within the limit is bound to build your score, while exceeding it could come at a price. This shows lending agencies that you are not carried away and are a responsible individual who knows the limit.

Limit Your Transactions When Using Credit Cards

A quick look at our wallets will show that a number of us have more cards than we need. While a problem of plenty is good in a few cases, owning too many credit cards can have its own drawbacks. Not only does it complicate credit repayment, but it also pushes us to spend more than we need, leading to debt in our life.

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