Credit Score for Personal Loan: A Comprehensive Guide

A strong credit score is crucial for personal loans, especially since they’re unsecured. According to CIBIL TransUnion, 79% of loans in India go to borrowers with scores above 750, highlighting its role in loan approval, interest rates, and processing speed. This guide covers why your score matters, the minimum required, and how to boost it.

What Is a Credit Score?

A credit score (or CIBIL score in India) is a 3-digit number ranging from 300 to 900 that reflects your creditworthiness. It’s based on repayment history, credit usage, and financial discipline. A score above 700 is considered good, improving your chances of faster approvals and better loan terms. Scores below 600 are seen as risky.

Also Read: How Much Credit Score is Needed for a Personal Loan in India?

How Much Credit Score is Required for Personal Loans?

Lenders in India typically prefer a credit score above 750 for personal loans, but criteria vary. Here's a quick breakdown:

Higher scores mean better chances and more favourable loan conditions.

Also Read: Alert: Personal Loan Charges You Should Know About

How Your Credit Score Affects Personal Loan Terms?

Your credit score directly affects loan eligibility, interest rates, and repayment flexibility. Here's how:

1. Interest Rate
Scores above 750 attract lower interest rates. Below 700, rates rise sharply.

For Example: ₹5 lakh loan for 5 years - 
•    At 10%: EMI ₹10,624, total interest ₹1.37 lakh
•    At 20%: EMI ₹13,247, total interest ₹2.95 lakh. 

You are paying ₹2,623 more in EMI and ₹157,406 in interest.

2. Loan Amount Eligibility

Higher scores qualify for larger loans (₹10–20 lakh), as lenders trust your repayment ability.

3. Speed of Approval and Disbursal

High scores mean faster approvals and minimal documentation. Low scores lead to delays and extra checks.

4. Repayment Flexibility

Good scores offer longer tenures (up to 7 years) and flexible EMIs. Poor scores limit options and increase EMI burden.

5. Chances of Pre-Approved Offers

High-score customers often receive pre-approved personal loan offers with exclusive perks. Those with lower scores rarely get such offers, meaning you’ll have to apply from scratch every time.

Also Read: Personal Loans for Doctors: Eligibility and Application Guide

How to Improve Your Credit Score for Personal Loan Approval?

Boost your credit score and loan eligibility with these proven steps:

1.    Pay on Time: Timely EMI and credit card payments are critical. Even one missed payment can hurt your score for years.

2.    Limit Credit Usage: Keep your credit utilisation below 30%. High usage signals financial stress.

3.    Avoid Multiple Applications: Too many loan or card applications trigger hard inquiries and lower your score. Space them out by 6+ months. 

4.    Check Your Credit Report: Review your report twice a year. Dispute errors like incorrect unpaid loans or duplicate entries. 

5.    Keep Old Accounts Active: Longer credit history boosts your score. Don’t close old cards—use them occasionally and pay in full.

6.    Diversify Credit Types: Maintain a mix of secured (e.g., home loan) and unsecured credit (e.g., personal loan, credit card) for a balanced profile.

Also Read: A Brief Guide to Personal Loan Part-Prepayment

To Conclude

A strong credit score is the foundation for securing a personal loan with favourable terms and faster approval. A low credit score not only increases the likelihood of rejection but also results in getting a higher interest rate with less favourable terms. A score of 750 or higher, on the other hand, allows you to get a personal loan that is seamless, fast, and affordable.

At Poonawalla Fincorp, we prioritise your needs above the stringent eligibility criteria. While we do consider your credit score, we look beyond it and consider your finances and needs. To help you meet all your financial obligations, we offer a personal loan of up to ₹50 lakh. Apply for a personal loan online and enjoy fast approvals and competitive interest rates starting at 9.99%* p.a.

FAQs 

What’s the required minimum credit score for a personal loan at Poonawalla Fincorp?
The minimum recommended score is 750 to qualify for a personal loan with Poonawalla Fincorp.

What interest rates can I get with a 750+ score?
With a strong score of 750+, interest rates can start as low as 9.99% per annum. This helps you reduce EMIs and overall borrowing costs.

Can I get a personal loan even with a lower credit score?
Yes, some lenders may approve loans with lower scores, but the terms are usually strict. You may face higher interest rates and smaller loan amounts.

How long does it take to improve a credit score?
Credit score improvement is a gradual process that takes anywhere between 6 months to a year.

Is checking my CIBIL score free?
Yes, you can check your CIBIL score for free through official portals. Poonawalla Fincorp also offers a free CIBIL score checker without affecting your score.