When you apply for a loan, your CIBIL score plays an extremely important role. It impacts your loan approval, the interest rate offered and your credit limit.
Loan companies perceive your creditworthiness by reviewing your CIBIL score. CIBIL score becomes even more important when you apply for an unsecured personal loan. This is because you don’t have to pledge any collateral to borrow money. A higher CIBIL score will establish you as a less risky borrower and you will get personal loans at a competitive interest rate.
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A CIBIL score is a three-digit number that is calculated on the basis of your credit behaviour. It ranges from 300-900. In simple words, your CIBIL score is an indicator of your past credit behaviour.
Different lenders have different scoring models. Generally, individuals with a CIBIL score above 700 are considered responsible borrowers. Let’s see how credit score ranges are perceived by lenders
Also Read: How Can You Get a Personal Loan for a CIBIL Score of 550 to 600?
Different banks and NBFC Personal loans have different criteria for approving personal loan applications. A minimum CIBIL score is a threshold below which lenders don’t give a loan.
For example – If a lender has a minimum CIBIL score criterion of 650 and your CIBIL score is 640, your loan won’t get approved.
If you find yourself in a situation where you are not getting loans due to a low CIBIL score, you should immediately start taking the necessary steps and increase your cibil score.
Your CIBIL score is based on factors like your credit utilisation ratio, personal loan repayment track record and length of credit history. Although different lenders have different criteria for loan approval, a CIBIL score above 700 is generally considered a good cibil score.
The maximum CIBIL score a person could have is 900. If your credit score ranges between 750-900, you are considered as a less-risky borrower.
Generally, a score below 600 is considered a low credit score. You would find it difficult to get a lender that would give you a loan if you have a low CIBIL score.
When you maintain a good CIBIL score, lenders think of you as a trustworthy borrower. As a result, you could enjoy the following benefits –
If you have a good CIBIL score, you can avail loans at lower interest rates since lending you money is considered less risky.
Since individuals with a good CIBIL score are low-risk borrowers, lenders feel comfortable offering them a higher loan amount.
A higher CIBIL score proves responsible financial behaviour and hence, it significantly increases the chances of loan approval.
It is extremely important for your financial well-being to have a good CIBIL score. Start following these tips immediately to move up your CIBIL score needle –
Also Read: How to Improve Cibil Score?
If you are finding it hard to get a personal loan approval due to a low CIBIL score, you can try out these alternatives –
Since pledging collateral reduces risk for the lender, you will find many loan companies willing to lend you money if you are ready to provide a security against the loan.
If you don’t meet the criterion of minimum cibil score for loan, you can get personal loans by applying with a co-signer or guarantor. Your co-applicant should have a good CIBIL score.
To build your CIBIL score and increase your chances of loan approval, apply for a smaller loan amount.
Also Read: Short Term Loan
A good CIBIL score works as a facilitator towards achieving your financial goals. Lenders think of individuals with good CIBIL as more trustworthy borrowers and give good deals on credit products.
If you have a low CIBIL score, you should take all the necessary measures to improve it.
If you want to avail a personal loan, you can check your loan eligibility with Zype in less than 8 minutes. Just download the app and enter these basic details – name, mobile number, PAN and employment information. Your credit line offer will be generated in less than 60 seconds.