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CIBIL Score Guide for Personal Loans

CIBIL Score Guide for Personal Loans: What all you should keep in mind? 

When you decide to avail a personal loan, there are many factors which the Banks and NBFCs consider. Though the process is easy as you can apply for personal loan online, there are still some things you should keep in mind. Of those, the most critical is the CIBIL Score. Here we share everything there is to know about the CIBIL Score and how you can improve it.

What is a CIBIL score?

A CIBIL Score is a three-digit score given by the Credit Information Bureau India Limited. It is derived on the basis of your credit history which is available in your CIBIL report also known as the Credit Information Report (CIR).

What is the Perfect CIBIL Score for a Personal Loan?

The range of a CIBIL Score is from 300-900. According to the official website of TransUnion CIBIL, a score of 700 and above is considered as a good CIBIL Score. If you want to avail a Personal Loan, then the credit score is the first criteria which are evaluated by the Banks and NBFCs.

Parameters for Personal Loan Approval

  • CIBIL Score

This is the foremost parameter a lender will check from a plethora of other parameters. As a personal loan is an unsecured loan, there are no collaterals or securities involved. If you have a good CIBIL Score, then there are higher chances of loan approval.

  • Employment Position

When a bank or NBFC does not ask for any collateral, then they look at other criteria such as your employment status. They need to know if you are eligible enough to repay the loan amount.

  • Payment Records

If you have any kind of loans to pay for, pay them before applying for a new one. Banks and NBFCs check your payment history to see if you have any payments due and also how regularly you do the payments.

  • EMI-Income Ratio

When you apply for the loan, the Banks and NBFCs also look at your monthly salary at the time of application. If the total EMI exceeds your salary by 50% then you have very low chances for loan approval. So before you apply, you can check how much EMI you can pay each month for the loan amount. You can do this with the help of a personal loan emi calculator.

Factors Affecting Credit Scores

There are a lot of reasons which can affect your credit score. Here we list a few of them.

  • As mentioned above, you need to have a stable payment history. Late payments affect your credit score badly.
  • Your current credit utilization ratio is also an important factor which can affect your credit score. If you use more than 50% of the credit available to you on the credit cards or if you do not pay the balance, then this increases your ratio and reflects badly on the credit score.
  • You need to have a healthy credit report with a mix of different credit types.

credit score

How to Improve One’s Credit Score

If you want to improve your credit score, then you can try the following steps:

  • Do timely payment of EMIs.
  • Maintain old credit cards to have a good credit history.
  • Restrict your credit usage as per the limit.
  • Choose a longer tenure while applying for a loan.
  • Check and rectify if there are any mistakes in your CIBIL Report.
  • Have a mix of credit types.

Here’s How to Get A CIBIL Score

If you do not have your CIBIL score yet then you can visit the CIBIL website, fill in the details, pay a minimum fee and get your CIBIL Report.

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