A credit score plays an important role when securing a loan. These scores are three-digit numbers that display your creditworthiness to lenders. It conveys how you have handled your finances in the past and your likeliness to repay the borrowed funds. Lenders use this score to assess the risks related to giving you money. Understand what score you need to be eligible for a personal loan.
A good credit score gives you a favorable interest rate for loans and many other benefits. Calculate personal loan EMI using the interest rate to see the difference caused by your credit score.
Credit Score Requirement for Personal Loans
Credit score requirements are different for each lender. But a good score begins from around 750 or more, considerably higher in the 300 to 900 CIBIL scale. A high credit score means a low credit risk and a better personal loan interest rate. Having a credit score below 750 but 600 does not mean it’s a bad score, but it means you may not be eligible for a personal loan in some places. However, some lenders give loans to people with low credit scores but a high interest rate.
Most lenders prefer individuals with a minimum credit score of at least 600 when availing a personal loan. It is challenging to qualify for a traditional unsecured loan with poor credit scores. Explore other alternatives in these cases, such as getting a loan with a co-signer or secured personal loans.
Factors Affecting Your Credit Score
Comprehend the factors that control your credit score to take the right measures for improving it. Below are the most significant factors that make all the difference in your score.
Lenders always consider your repayment history when analysing your creditworthiness. It displays your consistency with repaying your previous loans. Calculate personal loan EMI to ensure you can continue a good future repayment history.
Your credit score is positively affected if you have a diverse mix of credit accounts such as mortgages, loans, and credit cards.
Credit utilization is the amount of credit you use compared to your available credit. Have a healthy credit score by keeping your credit use below thirty percent.
New Credit Enquiries
Your credit score is reduced if you apply for many credit accounts quickly.
Length of Credit History
Your credit score remains in good condition if you have credit accounts in perfect standing for a long time.
Ways to Improve Your Credit Score
Improving your credit score is imperative for getting a good personal loan interest rate. Implement the following ways to increase your credit score.
Check your Credit Score Regularly
Identify any discrepancies or errors in your credit report by checking your credit score regularly. Visit the official CIBIL platform to make a free credit score check and evaluate all the other information in your report.
Make Timely Payments
Sustaining a positive credit score begins with making prompt repayments. Make consistent loan repayments after you calculate personal loan EMI to ascertain your credit score keeps improving. Any default or late payments will negatively affect your CIBIL score.
Split Your EMI Payments
Distribute your EMI payment throughout the month into two to three parts to simplify the repayment process. Reduce the burden of making a large payment and manage your finances better.
Autopay for EMI Payments
Do not miss out on any repayment by setting the autopay option for your EMI payments.
Maintain a Low Credit Utilisation Ratio
Maintaining a low credit utilization ratio is important for getting a good score. Ensure to use the least amount of your credit limit as possible.
Do Not Make Multiple Credit Card Applications
Your credit score can be adversely affected if you request many credit cards within a specific timeframe. Refrain from making such an application one after another, and wait for some time before making another inquiry into a new credit card.
Become eligible for personal loans by having a good credit score. Calculate persona loan EMI and make your payments in time to have a good score from beforehand. Do not wait for the last moment to start improving your credit score. Work on it constantly for a high score when applying for a personal loan. Your CIBIL score is your key to getting a good interest rate that will make it easier for you to repay.