Picture this: You plan to renovate your home or fund your dream vacation, but you need financial backing to realise these dreams. This is where a Personal Loan can be a game-changer. However, the key to unlocking this financial resource lies in understanding the minimum CIBIL score required for getting a Personal Loan. Your CIBIL score isn't just a number; it's a measure of your financial trustworthiness that lenders rely on.
CIBIL score and Personal Loan
Your CIBIL score acts as a financial passport when applying for a Personal Loan. It's a numerical representation of your creditworthiness, reflecting your past credit behaviour and repayment history. Lenders scrutinise this score to assess the risk involved in granting money to you. A higher CIBIL score increases your chances of loan approval and positions you for better interest rates and loan terms.
CIBIL score needed for a Personal Loan
Securing a Personal Loan hinges on your CIBIL score, a crucial factor for lenders. A score of 750 or above is ideal, maximising your chances of approval and favourable terms. However, if you are wondering, 'My CIBIL score is 600, can I get a Personal Loan?', the answer isn’t straightforward. Some lenders may consider scores lower than 750, but often with higher interest rates. The minimum CIBIL score for a Personal Loan varies across lenders.
Factors that affect CIBIL score
When it comes to securing a Personal Loan, your CIBIL score is a critical factor that lenders consider. This score, a numerical representation of your creditworthiness, is influenced by various elements. Here's a breakdown of the major determinants affecting your CIBIL score:
- Payment history: The most significant factor is your history of loans and Credit Card payments. Late payments, defaults, and settlements can negatively impact your score. Consistently paying your dues on time can positively influence your CIBIL score.
- Credit utilisation ratio: This is the proportion of credit you use compared to the total credit available. High credit utilisation can lower your score, as it may indicate more dependency on credit. Keeping this ratio low is advisable to maintain a healthy CIBIL score.
- Duration of credit history: A longer credit history provides more data for an accurate assessment of your credit behaviour. This is a positive sign for your CIBIL score. New borrowers may have a lower score due to a shorter credit history.
- Credit mix and variety: A balanced mix of secured (like Home Loans) and unsecured loans (like Personal Loans and Credit Cards) can positively impact your score. It shows your ability to handle different types of credit, which is crucial for a healthy CIBIL score.
- Number of credit inquiries: Every time you apply for a loan or a Credit Card, the lender makes a hard inquiry into your credit report, which can temporarily reduce your score. Therefore, frequent applications can lower your CIBIL score.
Also Read: Can getting a Personal Loan improve your credit score?
CIBIL score is important to get a Personal Loan
The CIBIL score is a critical component in the Personal Loan application process:
- Risk assessment: Your CIBIL score is the first impression a lender has of you. A high score, which is generally above 710, indicates a history of timely repayments and responsible credit management. It reassures lenders that you are a low-risk borrower.
- Loan terms and interest rates: Not only does a CIBIL score affect your loan approval chances, but also influences the terms of the loan. A higher score can fetch you lower interest rates and better repayment terms, making the loan more affordable.
- Quick approval: Lenders are more likely to fast-track the approval process for applicants with a high CIBIL score. This is because a high score reduces the need for extensive background checks.
- Higher loan amount: With a higher CIBIL score, you are likely to be approved for a larger loan amount. Lenders feel more comfortable offering substantial funds to individuals who have demonstrated financial reliability.
Understanding the lender's perspective
From a lender's perspective, a higher CIBIL score indicates lesser risk. Here's how it benefits them:
- Credit risk reduction: By evaluating your CIBIL score, lenders can gauge the level of risk associated with lending you money. A high score indicates a lower risk of default, thereby protecting the lender’s interests.
- Portfolio health: Lenders aim to maintain a healthy balance of low-risk and high-risk loans. Your CIBIL score helps them in categorising your loan application accordingly, ensuring a diversified and healthy loan portfolio.
- Customised loan products: Lenders use your CIBIL score to modify loan products to fit your profile. For instance, if you have a high score, you might be offered loans with better terms than someone with a lesser CIBIL score.
How to check your CIBIL score
Go to the CIBIL website to check your CIBIL score — this is the official website. Just input your details, such as your name, email and password and provide ID proof to get your score. Additionally, Axis Bank offers a convenient service for checking your CIBIL score online for free, providing an easy alternative for their customers.
Also Read: Need cash urgently, but is your low credit score a hindrance?
Conclusion
A good CIBIL score is essential for accessing various loan opportunities, including Personal Loans. Maintaining a strong credit score is important for favourable loan terms and approval chances.
Axis Bank is a reliable financial ally, offering comprehensive Personal Loan options catering to diverse needs. With Axis Bank, you are not just getting a loan but partnering with an institution supporting your financial aspirations. Explore Axis Bank's Personal Loan offerings and step towards achieving your financial goals with confidence.
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.
