What is the necessary CIBIL or credit score for securing a personal loan?
A credit score, a three-digit number ranging between 300 and 900, is a crucial factor in determining an individual's creditworthiness. This score is calculated based on various parameters such as current outstanding debt, credit utilization, repayment history, and more.
Maintaining a good credit score is essential for securing any type of personal loan or credit card. One of the most important factors that affect your credit score is your past payment history. Lenders use this score to determine whether you are likely to repay their money.
When it comes to personal loans, lenders in India typically prefer a credit score of 760 and above for easy approval without difficulties. However, some lenders, especially Non-Banking Financial Companies (NBFCs) and fintech companies, may approve loans with a score closer to 685, but often with stricter terms, higher interest rates, or collateral requirements.
Among the various credit bureaus in India, TransUnion CIBIL is the most widely used and preferred by lenders. The ideal personal loan threshold with TransUnion CIBIL is around 760 or higher, though some lenders accept scores from 685 upwards.
Experian, another credit bureau, considers a credit score of 670+ to be good, which can qualify for personal loans, but lenders' acceptance varies. Experian scores tend to have a different scale than CIBIL, so a slightly lower Experian score might still be acceptable.
CRIF High Mark and Equifax also provide credit scores, but minimum score requirements are less standardized publicly. They typically align with similar thresholds, aiming for scores roughly equivalent to those of CIBIL and Experian. Most lenders still rely predominantly on CIBIL, but some fintech or NBFC lenders may give weight to these agencies' reports too.
In summary, while there is no universally fixed minimum score, aiming for a CIBIL score above 750-760 is ideal for personal loans, with some flexibility towards the low-700s or mid-600s depending on the lender and bureau. For lenders preferring Experian credit score, a credit score above 750 is considered good.
Maintaining a good credit score not only helps you get a loan easily but also at favourable credit terms, such as lower interest rates and longer loan tenures. Regularly checking your credit score is important to identify errors and get them corrected. Frequent hard inquiries in a short span of time may impact your credit score negatively.
Remember, credit scores are given by credit bureaus such as CIBIL Transunion, CRIF, Experian, Equifax, etc. Each credit bureau has its own method of calculating the credit score. Maintaining a good credit score is important for getting a higher loan amount. If you don't have a credit score, you may face difficulties in getting any type of credit in the future.
References: 1. BankBazaar 2. CreditMantri 3. MoneyControl 4. Financial Express 5. Credit Tap
An emi calculator can help you understand the monthly installments for a personal loan based on your loan amount, interest rate, and loan tenure. A good credit score (above 750-760 for CIBIL and above 750 for Experian) is crucial for securing personal loans at favorable credit terms, such as lower interest rates and longer loan tenures. Maintaining a high credit score also opens up opportunities for investment in mutual funds, which is an essential part of personal-finance management.
