Know the Importance of Credit Score in a Personal Loan

A personal loan is a versatile financial facility. Unlike other loan types where the usage is restricted, the personal loan amount could be used for almost everything. 

From debt consolidation to marriages to medical emergencies to home renovations and more, the funds can be used for all, and much more. 

However, when it comes to availing an online personal loan, your creditworthiness needs to be high. And your credit score is one of the crucial factors making your creditworthiness. 

The credit score for personal loans needs to be higher if you wish to avail the loan approval faster and at a lower rate. 

On that note, let’s check out the significance of credit score in a personal loan in this post!

What is a credit score?

Your CIBIL score is among the key eligibility factors that lenders rely on while processing your loan application. And the personal loan is not an exception! A credit score is a 3-digit number ranging 300-900 authorized by credit bureaus. 

The higher is your credit score, the better is your chances of getting the loan approval at a lower rate. The ideal CIBIL score that lenders consider is 750 or more. It showcases that you have paid your existing and past loan and other bills on time. 

How vital is the credit score in a personal loan?

Having a good credit score is extremely vital for securing personal loan approval. It is majorly because the personal loan is unsecured. And it means that you don’t have to keep collaterals. 

Most lenders may want you to maintain a CIBIL score of 750 or more if you want to get personal loan approvals faster and at a lower rate. 

It is easy to do that by paying your credit cards and other EMIs on time. 

Some lenders may let you avail the personal loan with low credit score if other factors affecting your creditworthiness are proper.  

In case you have not yet taken any loan in the past, or have no credit history, your personal loan application may take longer to process. Financial experts recommend creating a good credit history. This way, when it is the time to avail the personal loan, you may find no issues in its approval. 

What if your credit score is lower and you still want to apply for personal loans?

If you wish to apply for a personal loan with low credit score, you need to prove to the lender that you have sufficient income to repay it. You can also apply with another applicant having a higher credit score to get the loan approval fast.  

What are the ways to improve and keep a higher credit score?

  1. Pay your ongoing credit card and loan EMIs on time, every time!
  2. Try reducing your debt to income ratio
  3. Keep a mix of secured and unsecured debts in your financial profile. 
  4. Don’t close your oldest credit card unless you can make repayments. 
  5. Apply for a new loan and credit cards only when needed. 

You are now well aware of the significance of the credit score in personal loans. You can check your credit score for free on many third-party platforms easily. 

Bajaj Finserv offers pre-approved offers on working capital loans, personal loans, home loans and more. It is to simplify the processing of the loan. 

You can check out your pre-approved loan offers today after sharing your basic details such as your name and mobile number.