Minimum CIBIL Score for Personal Loan

What is minimum CIBIL score
required to get a personal loan?

Personal loans are one of the widely used funding methods that aid millions of people through difficult times. The funds obtained through this loan provide you with complete freedom regarding using the money. However, the CIBIL score might obstruct your financing journey when you apply for this loan.

If you are unfamiliar with this terminology or are unsure of the ideal CIBIL score for a personal loan, check this article.

What is CIBIL?

CIBIL refers to Credit Information Bureau India Limited. It is a Reserve Bank of India (RBI) approved agency whose primary function is to assess the creditworthiness of borrowers. CIBIL is one of India's most important credit bureaus, assisting financial institutions in risk assessments of applicants. CIBIL's functionality is based on data shared with them by a variety of financial institutions, data collection agencies, and other similar organisations.

However, many people confuse CIBIL with the CIBIL score. In reality, both of these terms are only interrelated, but their meanings are vastly different. So, what exactly does the CIBIL score mean? Let's find out.

What is the CIBIL score?

A CIBIL score is a three-digit score. It represents a borrower's capacity to make timely payments on credit obligations. To calculate the CIBIL score for a personal loan, the credit bureau considers your total debt across lenders along with your payment history. The platform demonstrates your creditworthiness in the numeric expression ranging from 300 to 900. The CIBIL score is also sometimes referred to as the credit score.

What should be the ideal CIBIL score for a personal loan?

Most lenders consider the personal loan application if the applicant's credit score is more than 750. A person with such a high score can get a high loan amount at a low-interest rate. However, a credit score of less than 750 does not mean that you will be rejected for a loan. There is still hope to secure funds from a lender. Let's look at the various ranges of scores to understand this better:

  • NA/NH:
    Don't be surprised if you see this term while checking your credit score. The letters 'NA' refers to Not Applicable. Applicants would see these letters if they had never taken out a loan or used a credit card.
     
  • A credit score between 300 and 549:
    A CIBIL score between 300 and 549 indicates a bad credit history. This may happen if you have previously defaulted on debt. It can also be a resultof missed EMIs. With a credit score like this, getting a loan is nearly impossible.
     
  • A credit score between 550 and 649:
    Anything within the range of 550 to 649 is considered fair. The range indicates a delay in paying EMIs. It also suggests a habit of raising multiple loan queries. Applicants with such low CIBIL scores are deemed high-risk. If you fall within this range, you will either be turned down for a loan or granted one in exchange for high-interest rates.
     
  • A credit score between 650 and 749:
    A good score falls within this range. Having this number gives the lender a good impression. It reflects a disciplined repayment history and low chances of default in the future. However, though this credit score may guarantee you a loan, it does not promise you a low-interest loan.
     
  • A credit score between 750 and 799:
    A credit score above 650 but less than 750 falls under the category of very good. You must have a long credit history with a favourable repayment record to belong to this category. Having this CIBIL score ensures a personal loan at a lower interest rate.
     
  • A credit score between 800 and 900:
    Excellent is the term used for borrowers with such a high credit score. Having this credit score shows regular EMI payments, low credit utilisation, and excellent financial management. Getting a personal loan on favourable terms is not tough with a credit score like this.

What are the key elements that influence your CIBIL score?

Four major factors aid in determining your CIBIL score:

  • Repayment history:
    Skipping on your monthly debt obligations or defaulting on your existing loans worsens your credit score.
     
  • Credit mix:
    Instead of relying on a single funding source, you can diversify your debt portfolio by raising funds through both secured and unsecured means. Doing so helps in improving your CIBIL score.
     
  • Multiple loan enquiries:
    Sending out too many loan inquiries to single or multiple lenders suggests your debt burden is likely to increase in the future. As a result of this, your CIBIL score will decline.
     
  • Credit utilisation:
    This is the percentage of available credit that you are using. A low credit utilisation percentage helps in improving your CIBIL score.

How to check your CIBIL score for a personal loan?

According to RBI, credit bureaus must provide individuals with their credit reports online. You are also allowed to run a free credit check once a year. Some of the most popular credit bureaus include CIBIL, Experian, and CRIF High Mark. Here are the steps to check your credit score through CIBIL.

  • Step 1:
    Visit the credit score page on the CIBIL website.
     
  • Step 2:
    Share your details like PAN number, date of birth, and address to verify your identity. Make sure the details are error-free.
     
  • Step 3:
    A one-time password(OTP) will be sent to your registered email address or contact number. Enter it to verify your login credentials.
     
  • Step 4:
    The page displayed on the screen details your debt and other information. Verify the same. There have been a number of occasions where banks have failed to submit the loan closure report or EMI payment records to credit agencies. Enter the missing loans, if any and other details.
     
  • Step 5:
    Tap on the submit button and see your credit score on the dashboard.

You can follow the above steps only if you have a login ID with CIBIL. For first time users, account creation is mandatory. You need to enter your name, email address, and contact number to make an account. Only then can you proceed further.

How to acquire a personal loan with a low credit score?

If your credit score is not favouring you,some factors can help. Applicants that meet the requirements specified below can still receive funding with ease.

  • High income: High income assures lenders of timely repayments. And, if you have one, you can submit your loan application to get instant approval.
     
  • Employment stability: Stability in a job or business suggests you are earning enough to meet your necessities. If you avoid switching jobs frequently and maintaining steady profits in your business, the lender might approve a loan without any hassles.
     
  • Co-applicant: Adding a co-applicant to your application also improves the chances of your loan approval. However, make sure that at least your co-applicant has a good credit score.

To sum it up

The whole concept of CIBIL score is to check if you can repay your dues. A good score does not always guarantee you loan approval. Similarly, a bad credit score for a personal loan does not always imply rejection. The lender evaluates several other parameters before accepting or rejecting your loan application. Having said that, it can never hurt to maintain a high credit score. As such, even if your CIBIL score is average, but you have stable employment and a steady income, you can get a personal loan from Poonawalla Fincorp without any trouble.

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