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Good CIBIL™ Score for Loans

CIBIL™ is one of the four authorized credit bureaus in India which provide credit score to individuals and businesses. The other credit bureaus are Equifax, Experian and CRIF High Mark.

Your CIBIL™ score plays an important role in getting loans and credit cards sanctioned because it gives lenders an accurate idea of your credit-worthiness. CIBIL™ scores can range anywhere between 300 to 900. If a person has a credit score of 750 or above, it reflects a good history of repayment behaviour and lenders are reassured that the individual is at a high probability of fulfilling all their debt obligations. Lenders are often willing to easily grant credit to individuals with a high credit score.

How much credit score is required for loans?

To determine whether a credit score is good for loan sanctioning, banks and other lenders look through the following aspects:

  • No Standard Score - There is no set standard on what constitutes a good or bad credit score. A CIBIL™ score is based on past and present credit behaviour and gives lenders a snapshot idea of a customer’s credit health and loan repayment record. A credit score above 750 is highly desirable as it denotes a consistent track record of timely payments and demonstrates financial maturity over a long period. Lenders feel comfortable lending money to customers with such a credit score.
  • Factors Other than Credit Score - Banks and other financial institution not only look at the credit score and credit report of a person but also take into consideration the person’s age, employment, annual income and other factors that influence their payment ability. However, your credit score and credit report are two very important factors in the loan-approval process.
  • Why Credit Score is Important - A good CIBIL™ Score means any score of 750 and above. A good score not only ensures a much better chance of loan approval, it also has several other advantages. For instance, a good score means that you might be offered a lower rate of interest, a longer repayment period, a larger loan amount, quicker documentation and a loan-approval process. This is because lenders think that you are at low risk of defaulting on your payments and will offer you attractive terms and conditions on your loan that might not be available to individuals with a low credit score. Thus, it is always advisable to have a good credit score when applying for a loan.

What are the reasons for low credit score?

These are some of the reasons for a low credit score:

  • Past payment history: Even a single late or missed payment can negatively affect your credit score, so it is important to make all repayments on time and in full to maintain a good score.
  • High utilization of credit limit: If you use more than 50% of your credit limit regularly, it serves as a warning signal that you might not be able to manage your finances and spending. This hurts your credit score. To ensure a good score, make sure that you do limit your monthly spending to less than 50% of your total credit limit. This will have a positive impact on your credit score.
  • Too many credit accounts recently opened: If an individual applies for multiple loans and credit cards in a short period without corresponding approvals, it signifies that they are ‘hungry’ for credit and may not be able to fulfil their loan obligations. This has a negative impact on their credit score.

Therefore, while there is no fixed minimum CIBIL™ score to apply for a loan, it is recommended that you ensure that you have a score of at least 750 before you apply. If you have a low score, there is a high chance that your application will be rejected, and each rejection causes your credit score to drop even further.

Conclusion

An aspiring loan or credit card applicant must carefully access his/her credit report and ensure that they have a good chance of easily getting a credit facility. If the credit score is low, it makes sense to try and improve the score before applying for credit with a lender. A score between 700-900 will make it easy to get loans approved by lenders.

FAQs

1. What is the minimum CIBIL™ score to get a loan?

The minimum CIBIL™ score required for a loan is usually in the range of 700 and 750. Having a good score is an indication that the borrower is creditworthy and lenders will easily approve loan application at reasonable interest rates and other terms.

2. Is 700 a good CIBIL™ score?

Yes, a credit score above 700 is considered acceptable by lenders while granting any form of credit.

3. Can I get a personal loan with a 650 credit score?

It may be difficult to get a personal loan at low-interest rates with a credit score of 650. It is advisable to have a credit score above 700 to fetch reasonable loan terms.

4. Is 730 a good CIBIL™ score?

Yes, a credit score above 700 is generally considered favourable by lenders while granting credit facilities to borrowers.

5. What is a bad CIBIL™ score?

CIBIL™ score ranges between 300 and 900. When the score is near 900, it is considered favourable by lenders. A score between 300 and 549 is considered poor, a range of 550 to 700 is considered fair.

6. How can I get a 900 CIBIL™ score?

It usually takes a few months and even years to improve your CIBIL™ score, especially if you do not have a credit history or have a poor credit track record. To get a score near 900, ensure to pay your bills on time and keep credit utilization low. Opt for the right mix of secured and unsecured loans to get a good credit score.

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