What is the Best Credit Score For A Personal Loan?

Are you considering taking a personal loan and wondering how your CIBIL score might impact your loan approval? If you’re asking, “What is the personal loan CIBIL score?” or “What is CIBIL score for a loan?” then this blog is tailored for you. We aim to demystify the role of CIBIL scores in loan approvals and guide you on how to improve your score for a successful loan application.

Understanding CIBIL Score:

Before we delve into the specifics, it’s crucial to understand what a CIBIL score is. The Credit Information Bureau (India) Limited (CIBIL) is an agency that collects and maintains records of an individual’s payments pertaining to loans and credit cards. This information is then used to create a Credit Information Report (CIR) and a credit score, which is referred to as the CIBIL score.

Here are the credit scores provided by CIBIL and what they imply about your loan-borrowing eligibility:

Credit Score Outcome
300-500 (Low Credit Score)
There is a very high chance that your loan application will be rejected by most lenders or you may get extremely high interest rates.
500-600 (Moderate Credit Score)
Most lenders will provide you a personal loan at high interest rates. There may be few instances of rejection.
Between 600-750 (Good Credit Score)
You will be able to access personal loans at standard interest rates.
Between 750-900 (Excellent Credit Score)
It is very probable that most lenders will provide your personal loans at low or competitive interest rates.

Role of CIBIL Score in Personal Loan Approval:

Now, let’s address the primary question, “What is the personal loan CIBIL score?” When you apply for a personal loan, lenders like Finnable check your CIBIL score to assess your credit risk. A high CIBIL score indicates that you have managed your credit responsibly in the past, which increases your chances of loan approval.

On the other hand, a low CIBIL score can make lenders perceive you as a high-risk borrower, which could lead to your loan application being rejected or you being charged a higher interest rate.

Leveraging Finnable for Your Loan Needs:

Finnable, a registered NBFC with the Reserve Bank of India and a member of CIBIL, offers a seamless, paperless, and quick loan process. With competitive interest rates starting at 10.5% per annum and loans up to ₹10 lakhs, Finnable is an excellent option for individuals seeking instant personal loans.

The online process eliminates the need for physical presence, making it convenient for borrowers across India. However, it’s important to note that Finnable’s services may not be available in all states, and a credit check is required as part of the loan approval process.

Strategies to Improve Your Personal Loan CIBIL Score:

If you’re wondering “how can I improve my personal loan CIBIL score?” here are a few strategies:

1. Timely Payments:

 Ensure you pay your EMIs and credit card bills on time. Late payments or defaults can negatively impact your CIBIL score. Consistent, timely payments over a period can significantly improve your score.

2. Maintain a Low Credit Utilization Ratio:

Try to use only a portion of your credit limit. A high credit utilization ratio, which is the percentage of your credit limit that you’re using, can lower your CIBIL score. It’s recommended to keep this ratio below 30%.

3. Limit Your Credit Applications: 

Applying for credit frequently within a short period can make you seem credit-hungry and negatively impact your CIBIL score. Each time you apply for credit, a hard inquiry is made, which can lower your score. Space out your credit applications to avoid this.

4. Maintain a Healthy Credit Mix:

Having a mix of secured (like home loan, auto loan) and unsecured loans (like personal loan, credit cards) can improve your CIBIL score. This shows lenders that you can manage different types of credit responsibly.

5. Regularly Monitor Your Credit Report:

Check your credit report regularly to ensure there are no errors that might be affecting your CIBIL score. If you find any discrepancies, report them to the credit bureau immediately. This proactive approach can help you maintain an accurate CIBIL score.

6. Avoid Settling Loans and Credit Cards:

When you settle a loan or credit card, it means that you’ve paid less than your total outstanding amount. This can negatively impact your CIBIL score. Always aim to pay your loans and credit cards in full.

7. Limit Your Unsecured Loans:

While unsecured loans like personal loans and credit cards are easy to get, having too many can lower your CIBIL score. Try to maintain a balance between secured and unsecured loans.

8. Long Credit History:

Having a long history of good credit can improve your CIBIL score. If you’ve been servicing credit like loans or credit cards responsibly for many years, it indicates that you’re a reliable borrower.

Conclusion

While the question “What is CIBIL score for loan?” depends on various factors, understanding these factors can help you improve your CIBIL score and increase your chances of loan approval. Remember to maintain financial discipline and regularly monitor your credit report. With careful planning and responsible credit behavior, you can successfully navigate the personal loan landscape and meet your financial goals.

In conclusion, securing a personal loan can be a strategic move, provided you understand the importance of a good CIBIL score and work towards improving it. Finnable, with its competitive interest rates and quick loan process, can be a reliable partner in your financial journey. However, always remember to compare rates and terms from different lenders and make an informed decision.

Amit Arora Finnable

AMIT ARORA

I am a seasoned retail banker with over 21 years of global experience across business, risk and digital. In my last assignment as Global Head Digital Capabilities, I drove the largest change initiative in the bank to deliver the end-to-end digital program with over US$1 billion in planned investment. Prior to that, as COO for Group Retail Products & Digital, I implemented a risk management framework for retail banking across the group.
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