Published on: August 19, 2024
Are you considering getting a personal loan? Before applying, you need to check if you meet the minimum CIBIL score requirement. CIBIL score helps in determining your eligibility, interest rate and other conditions for a personal loan. Generally, a higher CIBIL score increases your chances of getting approved and getting better loan terms.
Here we have discussed the minimum CIBIL score required for a personal loan, how you can maintain a healthy score and the factors that can influence it.
Minimum CIBIL score for a personal loan
The minimum CIBIL score required to apply for a personal loan varies between 700 and 750, depending on the financial institution. A score of 700 and above means a creditworthy person, capable of meeting the loan repayment conditions. 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 tenure.
How to maintain a healthy CIBIL score for a personal loan?
To maintain a healthy CIBIL score for a personal loan, you need to follow the tips below:
- Make sure you pay credit card bills and EMIs on time.
- Maintain a good credit utilization rate.
- Do not deactivate an unused credit card.
- Avoid applying for multiple loans and credit cards at once.
- Maintain a balanced ratio between secured and unsecured loans.
- Review your credit report regularly and correct any discrepancies immediately.
- Monitor your co-signed, guaranteed and joint account monthly.
Factors Affecting CIBIL Score
Your CIBIL score determines your eligibility and loan terms for a personal loan. Several factors influence this score, including:
1. Payment history
Paying your EMIs and credit card bills on time can have a positive impact on your CIBIL score, while missed or delayed payments can reduce it significantly. Consistent record of on-time payments shows that you are a responsible borrower.
2. Credit utilization rate
Credit utilization rate is the percentage of total available credit currently in use. Ideally, this ratio should be kept below 30%. A higher utilization rate may indicate that you are too dependent on credit, which can lower your CIBIL score.
3. Length 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 of time, this reflects positively on your score. Conversely, a shorter or inconsistent credit history can negatively impact your score.
4. Mixture and variety of credits
Having a diversified credit portfolio, including a mix of secured loans (like home or car loans) and unsecured loans (like personal loans or credit cards), can improve your CIBIL score. It provides insight into your ability to manage different types of credit responsibly. Relying too much on one type of credit, especially unsecured loans, can hurt your score.
5. Number of credit requests
Each time you apply for credit, a thorough inquiry is generated to assess your creditworthiness. Making frequent credit applications over a short period of time can lower your CIBIL score, as it may suggest that you are seeking more credit than you can handle. It is wise to apply for credit only when necessary to maintain a good score.
Conclusion
Although a high CIBIL score is generally a prerequisite for get a personal loanit is not the only determining factor. Other factors such as income, job stability and debt-to-income ratio also have a significant impact on determining your eligibility. It is essential that you maintain a good CIBIL score and improve it by repaying existing debts and avoiding frequent credit applications.
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 capacity so that they can assess the risks of lending money.
What factors lead to a low CIBIL score?
Factors such as missed payments, high credit utilization, multiple loan applications, and a high 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 before you see a significant improvement in your CIBIL score.
Do all lenders have the same minimum CIBIL score requirement?
No, the minimum CIBIL score requirement may vary between lenders. Some banks or NBFCs may have higher or lower thresholds depending on risk appetite and lending policies.
What role does my repayment history play in determining my CIBIL score?
Repayment history is an important factor in determining your CIBIL score. Consistently paying your EMIs and credit card bills on time positively influences your score, while missed or delayed payments can reduce it significantly.