CIBIL score for loan – The CIBIL score is an important measure to decide the creditworthiness of an individual and his eligibility to get a personal loan. The CIBIL score and Credit score report is provided by TransUnion CIBIL Limited, one of the four credit bureaus in the country. It collects information from all banks and financial institutions and generates a numerical score between 300 and 900 where 300 is the lower end of the band and 900 is the higher end of the band. Generally a score between 300 and 549 is considered poor, a score between 550 and 749 is considered fair and a score between 750 and 900 is considered very good.
CIBIL score for personal loan is the first indicator that the lender looks out for. A good CIBIL score indicates a good credit history which means the borrower repays his loans on time without delay or default. It gives the lender confidence that the borrower will pay all the EMIs on time.
Credit score for loan should be reasonably decent for the lender to be ready to release the loan to the borrower.
How much CIBIL score required for personal loan varies from lender to lender. While a CIBIL score above 750 increases the likelihood of getting your loan approved to over 95%, things can get tricky when the score is lower. The lender will need more proof of your ability to repay the loan like a good job for many years, a reputed employer, a high salary, high networth etc. If you can prove that the fall in credit score was a one-off incident or an aberration, the lender may agree if you meet the other parameters.
While Loan credit score is important to get a personal loan quickly, there are some lenders who offer a Loan for low CIBIL score as well. The borrower may need to get a co-applicant with a better than minimum CIBIL score to improve the chances of getting a personal loan. You can wait to improve your credit score and reapply after 6 months. You can even negotiate with the lender who may agree to lend you the personal loan at a higher interest rate.
Minimum CIBIL score for personal loan is between 720-750. It is important for borrowers to maintain a minimum credit score for loan.That is the easiest way to get a personal loan easily.
Why should Borrowers check the CIBIL score before applying for a personal loan?
- Personal loan CIBIL score is a very important measure for borrowers.
- They should check the credit score report before applying for a personal loan.
- They should investigate any accuracies and get them corrected before applying for the loan
- In case their credit score is lower than the minimum credit score, they should consider including a co-applicant in their application
- Else, they should consider reapplying after improving their credit score. It may take 6 months – 12 months for the credit score to improve.
What are the factors that don’t affect your credit score?
- If you keep checking your credit score multiple times, it will have no impact on your credit score.
- Your savings account does not affect your credit score.
- Whether you renew your fixed deposits or withdraw them will not impact your CIBIL score.
- Use of your debit card has zero effect on your credit score.
- Your income has no impact on your credit score.
- Even if you have an overdraft facility it has no effect on your CIBIL score.
- The bouncing of a cheque has zero impact on your credit score.
- Your credit score is not a function of your education. Whether you are educated or illiterate has no impact on your credit score.
What are the factors that affect your CIBIL score for personal loan?
Your payment history is responsible for 30% of your credit score while credit exposure contributes 25%. Of the balance, 25% comes from credit type and duration while the remaining 20% can be attributed to other factors.
Indifferent or Negligent Payment Behaviour – Taking debt is not viewed unfavourably but not repaying on time leaves a bad impression. If you delay an EMI by 30 days, your credit score may drop by 100 points. If you have multiple debts, you should set up an auto alert or auto-debit facility so that you do not miss any payments. A default will reflect poorly on your credit score and indicate that you are inconsistent with your repayments.
High Credit Utilization Ratio – You should never let your credit utilization cross 30% of your limit. If you have a credit limit of Rs 50,000, you should never utilize more than Rs 15,000. Suppose, you use Rs 25,000, which is 50%. It will reflect badly on your credit score as it will be an early indicator that you may default in future.
Unpaid Dues – If old unpaid dues reflect in your credit score report, it will affect your credit score. Even if the amount is small, you should endeavour to clear them as soon as possible to avoid a black mark on your credit score report.
Paying only the minimum amount due – Many borrowers have the tendency to treat their credit cards as an extension of their paycheck. On the due date, when they cannot pay the credit card bill in full, they pay the minimum amount due and kick the can down the road. Before they realise it snowballs into a huge amount by adding interest @ 30% annually. You take other debts to pay for this and slowly fall into a vicious debt trap.
Errors in your credit score report – It is up to you to check your credit score report before applying for a personal loan. If there are any errors or inaccuracies, you should take them up with the concerned institutions and get them rectified. In case you have repaid a loan in full but failed to collect a No Dues Certificate , the system would continue to show it as an unpaid debt and the failure to pay would show up as a default . This would reduce your credit score. It is important that you contact the lender and fix this issue before applying for a personal loan.
Multiple Applications – If you have applied to multiple lenders at the same time, there would be too many enquiries about your credit score which would lead to its depletion because you would appear desperate for credit. If your personal loan application has been recently rejected, you are better off waiting for at least 6 months before applying again.
Length of credit history – If you are still using your old credit card, it works in your favour because you have a longer credit history. This would reflect better on your credit score.
Have a mix of long and short duration of loans – It is ideal to have a mix of secured and unsecured loans of varying durations. Home loans and auto loans are secured loans while a credit card is an unsecured loan. Lenders desire that you have experience in using different types of loans.
Closing old credit cards – When you close an old credit card, you close your credit history. If you are holding multiple credit cards, you are better off closing your newer credit cards and retaining the old ones as it will boost your credit history and your score.
What are the benefits of a high CIBIL score for a personal loan?
Access to cheaper interest loans – A high CIBIL score will give you access to loans with cheaper interest rates as lenders will be confident about your repayment capacity.
Access to longer tenure loans – A high CIBIL score may tempt lenders to grant you a personal loan with a longer tenure of repayment.
Better Negotiation power – If you have a high CIBIL score, you will have better negotiation powers while dealing with lenders. Whether it is waiver of processing fee or lowere interest rates or higher tenure, you may be able to get better deals from lenders.
LoanTap offers very quick processing if your CIBIL score is decent. All you need to do is fill up an online application form and upload the following documents –
- PAN Card
- Aadhaar Card/Passport/Driving Licence
- Salary slips for the last three months
- Bank statements for the last six months
- eNach Mandate
The LoanTap team will evaluate your loan application. If the cibil score for personal loan is decent and other parameters are met, the loan will be approved and the cash disbursed to your account. The entire process will take 24-36 hours.
LoanTap offers personal loans from Rs 50000 to Rs 10,00,000 for tenures ranging from six months to sixty months. Interest rates start from 18%. LoanTap offers several flexible repayment schemes to make EMIs convenient for borrowers. You can foreclose the personal loan after 6 months without any prepayment penalty.
If you have any queries regarding personal loans please visit our website and we will be glad to assist you with the best deals available.