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What is the minimum CIBIL™ score needed for personal loans?

The credit score is a 3 digit that is issued by authorised credit bureaus. It is issued on the basis of the credit history of a person and ranges from 300 to 900. A credit score of 750 or more is considered to be good by any lender issuing personal loans or any other loans. A person having a minimum credit score of 750 issued by CIBIL™ can get access to personal loans at relatively lower interest rates and for a higher loan amount.

Let’s take a closer look at the role of a good credit score in the loan approval process.

Overview of Personal Loans

Personal loans are one of the most profitable as well as riskier products for any bank or financial institutions. These loans are general purpose loan that can be availed by any eligible person to meet their personal needs.

Personal loans are unsecured in nature and hence carry a relatively higher rate of interest as compared to other loan products like home loans. As these loans are unsecured in nature, lenders put a high emphasis on providing such loans to persons who have a higher credit score to ensure the viability of the loan.

The credit score is the rating issued by credit rating agencies based on the credit history of a person. There are four major credit rating agencies in India, namely,

  • CIBIL™
  • Equifax
  • Experian
  • CRIF Highmark

It is therefore essential to maintain a good credit score to get easy access to personal loans at relatively cheaper rates as well as for higher loan value and tenure. Given below are the details of the credit score needed by any applicant to be eligible for personal loans.

Factors Affecting the Eligibility of Personal Loans

There are many factors affecting the eligibility of a person for personal loans. The major factors are:

  • The credit profile of the applicant
  • Loan amount required
  • Tenure applied
  • Repayment capacity/ income of the applicant

Among these, the credit profile of the applicant comprises the credit score of the applicant as well as the credit report issued by the credit rating agency. It is one of the most important considerations for sanctioning a personal loan.

What is the importance of credit score in the loan process?

The credit score of a person is the compilation of the credit history of the person over a period of years. It consists of the track record of the payments made by such person toward the loan instalments and credit card dues.

If a person has defaulted or delayed in any such payments, it will reflect on his/her credit report and will lower the credit score of such person. This will result in the person not being a prime candidate for any personal loans (or any other loans) or credit cards issued by banks or financial institutions. Even if such a person is issued a personal loan, the rate of interest will be relatively higher and the amount of loan sanctioned may be lower than what is applied for.

Hence it is essential to maintain a healthy credit score to get access to good personal loans and other loan products or credit cards.

Can I get a personal loan with a low credit score?

The credit score is the first point of review when a person applies for a personal loan. Given below are the details of the possibility of a personal loan that can be sanctioned based on the credit score of a person.

Credit scores between 300-599

A credit score from 300 to 599 is considered to be poor by any lender. It is like a warning for the lender of the bad credit history of the applicant and the non-viability of the loan. Hence, most lenders will reject the personal loan application of such applicants having such a low credit score. It is important for such applicant to immediately take measures to improve his/her credit score to get access to loans or credit cards.

Credit scores between 600-749

A credit score ranging from 600 to 749 is considered below but not as risky as the previous range mentioned above. There are many lenders that may choose to overlook this score and provide personal loans to the applicant based on other factors like,

  • Sound repayment capacity of the applicant
  • Proof of income submitted by the applicant
  • Loan against any security or collateral
  • Employment history
  • Relationship with the bank

However, note that even if you’re granted a loan, the interest rate on it will be higher and the loan terms may not be favourable to the borrower.

Credit scores above 750

A credit score over 750 is considered to be good by all the lenders for personal loans. There are many lenders that may provide spot loans or instant loans for applicants with such a high credit score. The applicant can also get other advantages with a good credit score like better interest rates, higher loan amount, higher tenure, lower processing charges, etc.

FAQs

1. What is the credit score needed for a personal loan?

A. Credit score is the credit rating issued by CIBIL™ ranging from 300 to 900. It is one of the eligibility factors on which the lenders determine the loan eligibility of a person and the amount of loan that can be sanctioned by the lender. Ideally, having a credit score of 750+ is considered good for your loan prospects.

2. What should be the credit score for a personal loan?

A. Having a credit score of 750+ is good as it helps you secure the best interest rates on a personal loan.

3. Can you get a personal loan with a 600 credit score?

A. Yes. A person can get a personal loan with a credit score of 600 through some lenders. But, the interest rates and other terms of the loan may not work in the favour of the borrower.

4. What is the CIBIL™ score required for SBI personal loan?

A. SBI requires the applicants to have a minimum credit score of 650 to be eligible for the personal loans of the bank.

5. What is the credit score for personal loan approval?

A. The credit score is a 3-digit number issued by a credit rating agency to any person based on their credit history.

6. What are the credit rating agencies in India?

A. The credit rating agencies in India are,

  • CIBIL™
  • Equifax
  • Experian
  • CRIF Highmark

7. Is 550 a good CIBIL™ score?

A. No. A CIBIL™ score ranging from 300 to 599 is not considered to be good by lenders. It is a signal to lenders of the bad credit history of the applicant. Try to boost your credit score before applying for a personal loan to get the best deals on it.

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