Your CIBIL score is an important factor that is considered while gauging your capacity to repay a loan. These insights into your credit management and handling are all the more important in a Personal Loan as it is unsecured and there is no collateral pledged against your loan amount. The score ranges from 300 to 900, where 900 indicates excellent credit health, and 300 reflects poor credit standing. A score of 550 falls below the ideal range, meaning you may face challenges when applying for a Personal Loan. However, it’s not impossible to get one.
Factors contributing to a low CIBIL score of 550
Your credit score is affected by your payment history (35%), owed liabilities (30%), length of your credit history (15%), your credit mix (10%), and any new credit (10%). Hence, your low score could be due to —
- Consistently missing due dates on Credit Cards or loan EMIs drastically affects your score.
- Having a high credit utilisation ratio suggests you are dependent on credit, which lowers your score.
- Frequent loan applications within a short period can indicate credit-hungriness, reducing your score.
- If you have very little or no credit history, it becomes difficult for lenders to assess your creditworthiness.
How to improve CIBIL score for loan in India
- Consistent and full credit payments show that you're responsible with credit, which gradually improves your score.
- Aim to keep your credit utilisation ratio below 30%. This means if your Credit Card limit is ₹1,00,000, try to spend less than ₹30,000 monthly.
- If your CIBIL score is 550, lenders might reject your applications. Avoid applying for multiple loans in a short time to prevent further score damage.
- If you have multiple loans or Credit Card balances, consolidating all debt into one can simplify repayment and improve your score.
- Regularly check your CIBIL report for any discrepancies or incorrect entries that could be dragging your score down.
- Having a mix of credit, including both secured loans (like a Home Loan) and unsecured loans (like a Personal Loan) shows you can handle different types of credit responsibly.
While obtaining a Personal Loan for a CIBIL score of 550 may be more challenging than usual, it is possible. In such situations, some lenders may have collateral requirements or offer loans with higher interest rates. But with the right option like an Axis Bank Personal Loan, you can get a longer tenure of 84 months*, which means your EMIs can be minimal and reduce stress on your credit score.
Also Read: Complete guide to Personal Loan approval process
FAQs
What is an ideal CIBIL score?
An ideal CIBIL score is typically considered to be 750 or above. This score range improves your chances of loan approval and helps you secure better interest rates.
Is a CIBIL score of 550 eligible for a Personal Loan?
Yes, but getting a Personal Loan with a CIBIL score of 550 is more difficult. Lenders may charge higher interest rates or require collateral to avoid any risk of defaulters.
What is a good CIBIL score for a Personal Loan?
A good CIBIL score for a Personal Loan is generally 720 to 750. A score in this range shows lenders that you are likely to repay the loan on time.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
