CIBIL Score for a Personal Loan

As per TransUnion CIBIL, 79% of loans and credit cards are approved for those with a high CIBIL score. It is a marker of your creditworthiness and ranges between 300 and 900. The ideal CIBIL score for a loan application may differ as per the policies of the financial institution. However, a score of over 750 is considered excellent, allowing you to get unsecured loans, such as a personal loan, quickly and at favourable terms. 

 

With a good score, you may also receive pre-approved personal loan offers from lenders. Such offers make applying for funds easier, as you may not be asked for additional documents. You may even get a personal loan if your credit score ranges between 650 and 749, albeit with a slightly higher rate of interest. Thus, your score is one of the factors that affects the terms and the funds you can get.

 

By checking your CIBIL score before you apply for a personal loan, you can assess your eligibility beforehand. On Bajaj Markets, you can check your score free of charge and make informed decisions.

Since a personal loan is an unsecured credit facility, financial institutions do not have any collateral to fall back on if you do not pay your EMIs on time. This makes a good CIBIL score more important for lenders when evaluating your loan application. It allows them to understand your credit health and assess the probability of a default. 

 

Here’s how the score impacts your borrowing journey:

• Loan Amount

By maintaining the best CIBIL score for loan applications, you may get a higher loan amount even without collateral. Financial institutions are more likely to trust a borrower with a score falling in the range of 740 to 800 and above to repay a personal loan responsibly. So, with a higher score, you may be able to negotiate your desired loan amount.

• Loan Approval

Getting an instant personal loan with a CIBIL score of 740 and more is easier. A high score increases your creditworthiness and allows lenders to make faster decisions when checking your loan application. 

• Rate of Interest 

Meeting or exceeding the minimum requirements for the CIBIL score for a personal loan can help you get the most competitive interest rate. This helps you reduce your loan EMIs, which makes repayment more comfortable.

• Tenure

You can get a personal loan for long or short durations, usually between 3 months and 8 years. With a high credit score, lenders are likely to approve a longer tenure, which makes repayment more comfortable for you. The exact tenure options depend on the financial institution you are applying for, so it is best to check before you apply.

 

Here are the various CIBIL score ranges and what they generally mean for the likelihood of personal loan approval:

Different scores can result in varying personal loan terms from lenders. Let us understand this with an example. See the table below to know the possible consequences assuming that Riya applies for a personal loan. Suppose Riya has different CIBIL scores at different stages in her life and applies for a loan amount of ₹20,000.

Disclaimer: The example given above is for illustrative purposes only, as loan eligibility and terms depend on other parameters as well. 

 

This example makes it clear that with a good credit score, you can get:

• A higher loan amount 

• A more competitive rate of interest 

• A longer tenure 

• Quicker approval and disbursal of the loan amount (subject to the lenders’ policies)

Bajaj Markets makes it easy for you to determine your credit health before applying for a personal loan. Follow these simple steps to get your score for free:

1. Click on the ‘GET YOUR SCORE’ option on this page

2. Enter your personal information, including your name, mobile number, date of birth, personal email ID, PAN details, and Pincode

3. Select your employment type and agree to the terms and conditions

4. Click on ‘GET REPORT’ to receive the OTP

5. Enter the OTP to view your credit score 

You can even check your credit score through the official TransUnion CIBIL website.

Increasing your credit score is easy when you adopt the right credit habits. These include:

Timely EMI and Credit Card Bill Payments

Pay the EMIs of any existing debts on time to build a good credit history as a responsible and diligent borrower. Follow the same pattern when it comes to your credit card bills. This is the primary way to boost your score.

Extensive Experience with Credit 

By having a mix of secured and unsecured loans and repaying them on time, you showcase good credit management skills. Having an experience with different types of credit products can enhance your credit score. 

Staying Up to Date With Changes in Your Credit Score 

By checking your score and Credit Information Report (CIR) every 3 months or so, you can monitor your credit health better. By analysing changes in your credit score, you can identify issues, such as:

• Mistakes in reporting by financial institutions

• Fake loans in your name 

 

By reporting these issues and raising disputes when needed, you can increase your score and take better control of your creditworthiness. 

Applying for Credit Carefully

Applying for multiple credit products at the same time can bring your CIBIL score down. This triggers multiple hard enquiries of your credit report by financial institutions and lowers your credit score. 

 

Instead of trying your luck with various financial institutions, apply for loans and cards only if you are eligible. 

Decreasing your Monthly Obligations 

By reducing your current debt, you can decrease your Debt-To-Income ratio (DTI) and increase your score. The DTI measures existing debts against your income, and a ratio of 35% or below is considered ideal.

While the CIBIL score is one of the major factors affecting your eligibility for an unsecured loan, there’s more to it. Here are some of the other considerations:

• Salary and Total Income

Financial institutions calculate your total earnings, be it from your salary, other sources like rent, or business. A higher income can increase your chances of getting approval on your personal loan application as long as you do not have many existing obligations.

• DTI

A lower debt-to-income ratio will help you get a personal loan easily, as it means you have the ability to pay EMIs comfortably. Usually, keeping your DTI to 35% or less when applying for a new loan is ideal. However, this depends on the lender you apply to and its policies. 

• Job/Work Stability

A stable and secure job with a well-established company can help you get faster approval on your loan application. This decreases the probability of you missing EMIs and increases your creditworthiness. 

• Existing Relationship with a Financial Institution

A long and sound history with a bank or Non-Banking Financial Company (NBFC) can increase your eligibility for a personal loan. Since the lender already has information related to your finances and credit profile, the evaluation process is faster. 

• Credit History

Apart from your score, lenders also check your past behaviour with credit. By not carrying forward unpaid balances on credit cards and having a longer length of experience with credit, you can boost your eligibility.

Taking a personal loan can have both a positive and negative impact on your credit profile. If repaid responsibly, personal loans can help enhance your score. Here is how your credit score influences your loan and further, how your liabilities impact your CIBIL score. 

 

CIBIL Score’s Impact on Eligibility When Applying for a Loan

Meeting the lender’s requirements of the minimum CIBIL score for a personal loan is a prerequisite to qualify for financing. Financial institutions use your credit score to assess your reliability and ability to repay the loan. 

 

Here's how it impacts the way your personal loan application is viewed and the terms you get:

• Loan Approval 

Having a high credit score increases your chances of getting approval on your personal loan application. 

• Interest Rates

With a higher score, lenders are more inclined to offer competitive personal loan interest rates. This can significantly reduce the overall cost of the loan and reduce your EMIs. 

• Loan Amount

A higher score may allow you to borrow a larger sum, while a lower score may limit the personal loan amount you can borrow.

• Favourable Terms

You are more likely to be offered flexible repayment terms if you have a higher credit score. This could include longer repayment periods and more manageable monthly payments.

CIBIL Score’s Impact on Further Liabilities After Taking a Loan

Regular and timely personal loan EMI payments can steadily improve your score. This can help you get approval for preferred credit cards and loans in the future, possibly with more favourable terms. 

 

Be it for a medical emergency or for your home renovation, you can get financing across the stages of your life by maintaining a good score. However, taking a personal loan does bring your DTI down, and can decrease your eligibility for a new loan until you repay it. 

 

Not repaying this loan on time or defaulting on it can also have severe consequences on your credit health. It can hurt your creditworthiness, which makes it difficult for you to get access to funds when needed.