CIBIL Score Required for Personal Loan

A CIBIL score is a numerical value that actually represents your creditworthiness. Your CIBIL score is evaluated by the Credit Information Bureau (India) Limited. It is also sometimes referred to as your credit score. When you apply for a loan, lenders need to know whether you have taken loans in the past and how you repaid them. They also want to know the history of your credit card usage and how you manage other credit products.Instead of looking at each and every aspect of your credit history, one look at your CIBIL score can give them a good idea about your credit repayment history. This especially comes in handy when you apply for a personal loan. A personal loan is an unsecured loan, so you need not furnish any collateral or security. So the only thing that the lender can rely on is your income and your CIBIL score for personal loan .

A CIBIL score has a range between 300 and 900. For a successful personal loan application, your CIBIL score ideally must be as close to 900 as possible. Such an excellent CIBILscore would also get you much better deals and interest rates on your loans. However, most lenders sanction personal loans for CIBIL scores of 750 and above. Recent data suggests that 80% of personal loans were sanctioned when CIBIL scores were above 750.A higher CIBIL score suggests that you paid your past credit dues like EMIs, credit card bills regularly and on time. If lenders see this, they’ll be more than willing to sanction your loan. However, if your payments have not been regular and you have a poor repayment history, then that would reflect in your credit score, which would be low. In this case, getting a loan approved may prove to be difficult, or you may be charged a higher interest rate.

Your CIBIL score is affected by a lot of factors, both negatively and positively. Let us look at some factors that affect your credit score:

Factors that improve credit score

• Paying your credit card bills on time
• Making your loan EMI payments in a timely manner
• Regularly paying the entire outstanding amount on your credit card bill and not just the minimum outstanding amount.

Factors that may bring your credit score down

• Late payment or non-payment of credit card bills and loan EMIs.
• Using more than 75% of the credit limit on your credit cards
• Paying only the minimum amount of your credit card bill.
• Having too many existing lines of credit like multiple loans and credit cards.

• CIBIL Score Directly Decides Your Loan Approval A personal loan can be approved or rejected based only on your credit score. So it becomes as important as your income and employment history.
• Past Credit History Your CIBIL score is a direct representation of all your past credit records and repayments. One look at your score, and lenders can evaluate your repayment capability.
• Low Credit Score If your credit score is low, your loan may not be approved. If it is approved, the interest rate may be on the higher side.
• Errors in Credit Report Sometimes your credit report may have some errors that poorly impact your report. So ensure that your credit report is error-free when applying for a loan.

Before you go ahead and apply for a loan, make sure you do the following steps to ensure eligibility and availability of the best deals.

1. Get your CIBIL Report for Free You can easily get your CIBIL report for free on the official CIBIl website. Don’t just let the lender check the report. Check the report first yourself to see where you stand and how your credit history looks. The Reserve Bank of India has instructed all credit bureaus to provide a credit report once a year for free.
2. Check Your Credit Score Once you see your credit report, see what your CIBIL score is. If it is low, then there’s no point in applying for aloan as there will be fewer chances of approval. Even If a lender approves it, the interest rate may be high. What you can then do is take steps to improve your score and apply for a loan when your score is better.
3. Shortlist Lenders Once you decide to take a personal loan, do your research online and shortlist lenders that are offering you the best deals. Do not just zero in on a lender. The market for loans is pretty competitive, so you might get better deals out there. Also, remember to negotiate for better interest rates with the lender.
4. Apply with a Few Lenders Only When lenders make hard enquiries after you apply for a loan, this can go into your credit report and affect your score. So, if you make multiple applications, all the lenders may make hard enquiries, and multiple enquiries can bring down your credit score. So ensure that after your lender shortlists, you choose only the top 2 or 3 lenders and apply with them.

Your CIBIL score is an important parameter that determines your loan approval. So make sure you go through this blog to understand the details about the CIBIL score and how you can improve it. It is always a great idea to start building your credit score, even if you do not need a loan anytime soon. Get a credit card, use it wisely and keep paying the bill on time. This will build a healthy credit score, and years down the line, when you actually need a loan, your chance of getting it will be much higher due to your excellent credit score.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.