A poor CIBIL score makes you a high-risk borrower for lenders. As a result, it becomes challenging to get approval for an NBFC Personal Loan for a low CIBIL score. Not only you will get fewer loan approvals, but also, the interest rates offered are significantly higher than those borrowers with a good CIBIL score. Read on to learn about the disadvantages of a low CIBIL score and the strategies that can help you build a good score.
4 Disadvantages of Having a Low CIBIL Score
There are some common hardships you will have to face if you have a low credit score of 550 or even lower. Here are a few of them:
1. High-Interest Rates
A low CIBIL score directly questions your potential to repay the borrowed amount on time. Therefore, a bank or NBFC assumes you are under their high-risk clientele. Hence, even if they sanction the loan, they set a high interest rate to compensate for the risk taken.
2. Reduced Loan Amounts
You will get limited credit options when having a below-average CIBIL score of 700 or lower. Even if a handful of lenders agree to offer you emergency funding, the conditions put forward seem unfavourable. The loan amount is reduced and also at times, the tenure is cut short to lower the associated risks.
3. Stringent Terms and Conditions
The lenders present multiple conditions even while extending the basic credit instruments if you have a low CIBIL score. In certain cases, you may be asked to pledge something of value to get the desired loan amount. Denying the terms can lead to a potential loan rejection.
4. Limited Flexibility
As already covered, getting a reasonable NBFC Personal Loan for a low CIBIL score is tough, so you should be prepared to choose among limited loan options. Also, it is recommended not to apply for too many credit facilities simultaneously as that would result in a further dip in your CIBIL score.
Minimum CIBIL Score for a Personal Loan
Traditional lenders are hesitant to offer a Personal Loan to individuals with low CIBIL scores. Unlike them, some NBFCs offer favourable loan deals even to customers with an average CIBIL score.
The minimum CIBIL score for Personal Loan ranges between 720 and 750. A score below this can also secure you a loan but with higher interest rates and relatively shorter repayment cycles.
In today’s fast-paced world, we all need to manage unforeseen expenses that may temporarily disrupt one’s repayment schedule. Even if you have a low credit score and unsure regarding where to apply for a Personal Loan, consider checking the attractive deals listed on Poonawalla Fincorp. With lower credit score, you will be offered comparatively higher rate of interest.
Also Read: Difference Between Credit Rating and Credit Score
Ways to Improve Your Credit Score
Every individual parameter of your CIBIL report contributes to your CIBIL score. Thus, you can strategically follow the tips discussed below until your CIBIL score reaches 750 and above:
- Regularly Check Your CIBIL Report
You must frequently review your credit report to keep track of your credit score. Check for errors, fraudulent activity, or outdated information that could be negatively affecting your score. Dispute any inaccuracies you find in order to boost your credit score.
- Pay Your Bills and Other EMIs on Time
This is one of the most crucial things you can do to increase your credit score. All of your bills must regularly be paid on time. Priority must be given to paying off all obligations, including credit card balances, EMIs, and other outstanding debts, by the deadlines. This helps in increasing your credit score by demonstrating your dependability in managing credit and fiscal responsibility.
- Keep Your Credit Utilisation Low
Your credit utilisation ratio, which is the amount of credit you're using compared to your total available credit, plays a crucial role in your credit score. So, try to keep your credit utilisation ratio below 30% by paying off your outstanding balances.
- Diversify Your Credit Mix
Having a mix of different types of credit, such as credit cards, instalment loans, and mortgages, can positively impact your credit score. Please ensure that you accept only those credit offers that you can manage responsibly.
- Be Cautious with Credit Applications
Each time you apply for credit, it generates a hard inquiry on your credit report, which can slightly lower your score. Limit credit applications to when you genuinely need credit and space them out over time.
What Factors Lower Your CIBIL Score?
These behaviours over time corrode your creditworthiness:
- Delayed EMI payments
- High credit utilisation ratio
- Tendency to only settle the minimum amount due on credit card bills for a long period
- Too many loan applications within a short span
- Closing old credit card accounts
Apart from these, if you do not have a good credit mix then that can also lead to a low CIBIL score. Finally, you should resort to collecting NOCs after you finish paying high-ticket loans. This helps to avoid any disputes later on and also minimises the chances of error posting in your CIBIL report.
Also Read: 6 Factors that will not affect your CIBIL Score
To Conclude
An NBFC Personal Loan for a low CIBIL score is associated with challenges like a high interest rate and low approval chances. So, maintain financial discipline and adopt the necessary strategies to build your credit score over time. Once you have built a credit score above 750, check for attractive loan offers with Poonawalla Fincorp.
Frequently Asked Questions
- Can I get a Personal Loan with CIBIL 650?
Yes, a borrower is deemed eligible for a Personal Loan when their CIBIL score enters the range of 600-750. However, the loan interest rates will be comparatively higher when compared to the rates offered to customers having a credit score of above 750.
- How can I get an 800 CIBIL score?
First of all, stick to timely repayments. Next, you can resort to several strategies, like maintaining a healthy credit mix and building a long credit relationship with a lender. Also, make sure not to utilise more than 30% of your credit limit as doing so makes the lender assume that you are highly credit dependent.
- How fast can I add 100 points to my credit score?
Try reviewing your credit report. In case you can point out a valid mistake, then as soon as it gets rectified, your credit score may experience a 100-point jump within a month. However, these instances are uncommon and may happen to 1 in 20 customers as per reliable sources. Still, it is good practice to monitor your score.