Your CIBIL score plays a crucial role in determining the interest rate you receive on a Personal Loan. It essentially acts as a report card of your financial history, indicating your creditworthiness to lenders.
A higher score signifies responsible financial behaviour, making you a more desirable borrower and leading to lower interest rates and favourable loan terms. This blog will explore the impact of credit score on Personal Loan and how to improve your credit score.
Impact of Credit Scores on Personal Loan
Your credit score plays a crucial role in eligibility for Personal Loan. A higher credit score results in lower interest rates and better loan terms, while a lower credit score may lead to higher interest rates and difficulties in loan approval. Lenders use credit scores to determine the risk associated with lending you the loan amount and your ability to repay the loan.
Also Read: 6 Factors That Will Not Affect Your CIBIL Score
How to Improve Your CIBIL Score?
Here are several effective strategies to improve your CIBIL score:
1. Make all Payments on Time: A major factor affecting your CIBIL score payments is delayed repayment. You should pay all your credit card bills and EMIs on time and avoid delays.
2. Keep Credit Utilisation Low: According to experts, you should only use 15-30% of your credit card limit. Frequently using your credit limit to the fullest adversely affects your CIBIL score range for Personal Loan.
3. Correct Errors in Your CIBIL Report: Check your credit report regularly for inaccuracies and dispute any errors promptly. This ensures your score reflects your true financial standing.
4. Increase the Credit Limit on Your Credit Card: To quickly improve your CIBIL score, ask your bank to raise your credit card limit. Then, keep your credit usage low. This decreases your credit utilisation ratio, boosting your score.
5. Do Not Close Old Credit Accounts: Keeping old credit cards with a positive credit history helps maintain a long credit history, improving your CIBIL score. Avoid closing them to preserve your score.
Also Read: Disadvantages of Having a Low CIBIL Score to Get a Personal Loan
How to Check CIBIL for Free?
If you want to check your credit score, Poonawalla Fincorp offers a free CIBIL score checker. Follow these steps and check your score for free:
Step 1: Click on 'Get Your CIBIL' and fill out the form with your employment type and gender.
Step 2: Add all the required details.
Step 3: Carefully review and agree to the terms and conditions before submitting.
Step 4: Upon verification, receive your CIBIL score promptly and download the CIBIL report.
To Conclude
Before applying for a Personal Loan, make sure you have a good credit score. With a higher CIBIL score, borrowers can access loans at more favourable terms, including lower interest rates and quicker approvals.
Also, after applying for a Personal Loan, make sure you repay it on time to give the necessary boost to your CIBIL score. Follow these above-mentioned tips to improve your credit score so it lies between the CIBIL score range for Personal Loan.
Frequently Asked Questions
- How do you determine the right Personal Loan amount?
The most preferred way to determine right personal loan amount is to monitor your spending and saving rate.
- Is frequent checking of CIBIL reports harmful to the credit score?
No, regularly monitoring your CIBIL score is recommended as it provides insight into your financial health and habits. Checking your score personally is considered a soft inquiry and doesn't harm your credit score.
- Who calculates credit scores in India?
In India, credit scores are calculated by four major bureaus: TransUnion CIBIL, Experian, CRIF High Mark, and Equifax. Each bureau employs its methods and algorithms to determine credit scores.
- What are the benefits of having a good CIBIL score?
A good CIBIL score offers several advantages, including, increased likelihood of loan approval, access to lower interest rates, availability of attractive pre-approved loans, eligibility for premium credit cards, ability to secure higher loan amounts and credit card limits and option for longer loan tenures.
- What is a good credit score for a Personal loan?
While exact score requirements vary between lenders, typically, a CIBIL score of 750 or above is considered desirable for securing a Personal Loan with attractive interest rates.