Published on: August 19, 2024
Are you planning to get a personal loan? Before applying, you should check whether you meet the minimum CIBIL score requirements. CIBIL score helps determine your eligibility, interest rate and other conditions for a personal loan. In general, a higher CIBIL score increases the chances of approval and securing better loan terms.
Here we have discussed the minimum CIBIL score required to get a personal loan, how you can maintain a good score, and the factors that can affect it.
Minimum CIBIL score for personal loan
The minimum CIBIL score required to apply for a personal loan ranges between 700 and 750, depending on the financial institution. A score of 700 and above indicates a creditworthy individual who is able to meet the loan repayment terms. If your CIBIL score is between 600 and 700, you may still be able to get a personal loan, but it may come with higher interest rates and a shorter repayment period.
How can you maintain a good CIBIL score for a personal loan?
To maintain a good CIBIL score for a personal loan, you should follow the following tips:
- Make sure you pay your credit card bills and EMIs on time.
- Maintain a good credit utilization ratio.
- Do not deactivate an unused credit card.
- Avoid applying simultaneously for multiple loans and credit cards.
- Maintain a balanced ratio between secured and unsecured loans.
- Review your credit report regularly and correct any discrepancies immediately.
- Monitor your signed, secured and subscribed accounts monthly.
Factors affecting CIBIL score
Your CIBIL score determines your eligibility and loan terms for a personal loan. There are several factors that affect this outcome, including:
1. Payment history
Timely payment of EMIs and credit card bills can positively impact your CIBIL score, while missed or late payments can reduce it significantly. A consistent record of on-time payments shows that you are a responsible borrower.
2. Credit utilization ratio
Credit utilization ratio is the percentage of total available credit that is currently in use. Ideally, this percentage should remain below 30%. A higher utilization rate could indicate that you are overly reliant on credit, which could lower your CIBIL score.
3. Duration of credit history
A longer credit history provides more data points to evaluate your credit behavior. If you have maintained a good repayment history over a long period, this reflects positively on your score. Conversely, a shorter or inconsistent credit history may negatively impact your score.
4. Credit mix and diversification
Having a diversified credit portfolio, including a mix of secured loans (such as home loans or car loans) and unsecured loans (such as personal loans or credit cards), can boost your CIBIL score. It provides an overview of your ability to manage different types of credit responsibly. Relying too heavily on one type of credit, especially unsecured loans, may negatively affect your score.
5. Number of credit inquiries
Every time you apply for credit, a hard inquiry is generated to evaluate your creditworthiness. Making repeated credit inquiries over a short period may lower your CIBIL score, as it may indicate that you are seeking more credit than you can manage. It is wise to apply for credit only when necessary to maintain a healthy score.
conclusion
While a high CIBIL score is generally a prerequisite for a degree Personal loan insuranceIt is not the only determining factor. Other factors such as income, employment stability, and debt-to-income ratio also have a significant impact in determining your eligibility. It is essential that you maintain a good CIBIL score and improve it by paying off existing debts and avoiding frequent credit inquiries.
Frequently asked questions
Why do lenders check my CIBIL score before approving a personal loan?
Lenders check your CIBIL score to assess your creditworthiness and repayment ability so that they can assess the risks involved in lending you money.
What are the factors that lead to a low CIBIL score?
Factors such as missed payments, high credit utilization, multiple loan applications, and a large number of poorly managed unsecured loans can contribute to a low CIBIL score.
How long does it take to improve my CIBIL score?
Depending on your credit behavior and financial discipline, it may take several months to a year to see a significant improvement in your CIBIL score.
Do all lenders have the same minimum CIBIL score requirements?
No, the minimum CIBIL score requirements can vary between lenders. Some banks or non-banking financial companies may have higher or lower thresholds based on risk appetite and lending policies.
What role does my payment history play in determining my CIBIL score?
Payment history is an important factor in determining your CIBIL score. Consistently paying your EMIs and credit card bills on time positively affects your score, while missed or late payments can reduce it significantly.