What Should Be Your CIBIL Score and How It Affects Personal Loans?

Personal Loans are easily available nowadays due to the online application process. While the online application process helps you get loans. it's your credit profile that helps you get favourable loan terms, including competitive interest rates. Lenders use your CIBIL score to examine how well you have been managing your credit in the past. This blog will talk about the importance of your credit score and how you can improve it.

CIBIL Score Explained

A credit score or consumer CIBIL score is a three-digit number that falls between 300 and 900, representing your creditworthiness. It is often used by lenders to get an idea about your credit profile when granting loans. 

This score is calculated by using many factors such as:-

● Repayment history – Timely loan EMI and credit card payments boost your score.

● Credit utilisation – Keeping credit usage below 30% of your credit limit is recommended.

● Credit mix – An ideal balance between secured and unsecured credit enhances your score.

● Number of loan applications – Applying for multiple loan applications in a short time can negatively impact your score.

● Length of credit history – The longer your credit history, the better your score.

What is a Good Credit Score?

For a hassle-free loan approval process, it is suggested to maintain a credit score of 750 or above. Having a high score implies that you are financially responsible and have a strong history of making timely payments. This, in turn, makes you easily eligible for higher loan amounts and competitive interest rates. 

Impact of CIBIL Score on Personal Loans

1. Chances of Loan Approval 

A high credit score implies that you have been consistently paying your EMIs on time. It further improves your chances of loan approval and lenders offer you better terms and a decent rate of interest. On the other hand, if your score is low, there is a high chance that the lender may reject your loan request or ask for additional documents. 

2. Loan Interest Rates

With a high credit score, you get favorable terms. A score of 750+ can help you get a loan with an attractive interest rate. If you show a lower score, then it may lead to a higher rate of interest, which can lead to higher EMIs. 

3. Loan Amount Eligibility

A high cibil score helps you secure high loan amounts for various purposes. For example: Hero FinCorp offers loan amounts ranging from Rs 50,000 to Rs 5 Lakh, depending on your credit score, income, and financial profile. 

4. Faster Loan Disbursal

Online lenders offer fast loan approvals for applicants with a high credit score. If your score is high, your loan gets processed faster and funds are credited to your account quickly.

5. Repayment Tenure Flexibility

A higher credit score allows you to negotiate better repayment terms. Lenders may offer you longer repayment tenures, reducing your monthly EMI burden.

How to Boost Your Credit Score?

Let's look at some ways to boost your credit score.

1. Pay EMIs and Credit Card Bills on Time

Your repayment history makes up 35% of your credit score. Always pay your EMIs and credit card dues before the due date to maintain a good credit history.

2. Reduce Credit Card Utilisation

Try to keep your credit utilization below 30% of your total credit limit. High credit usage may indicate financial dependency, negatively affecting your score.

3. Avoid Multiple Loan Applications

Applying for multiple loans in a short time can make lenders see you as a credit-hungry borrower, which lowers your score. Only apply for a loan when necessary.

4. Check Your Credit Report Regularly

Errors in your credit report can lower your credit score. Review your report regularly and dispute any incorrect information with CIBIL to maintain an accurate score.

5. Maintain a Healthy Credit Mix

A mix of secured and unsecured credit boosts your score. Taking only unsecured loans can negatively impact your credit rating.

6. Increase Your Credit History Length

The longer your credit history, the better your score. Avoid closing old credit accounts, as they help in building a strong credit profile.

7. Negotiate with Lenders

If your score is slightly low but you have a steady income and a good repayment history, negotiate with lenders for better terms. Many lenders consider such factors before approving your loan.

Conclusion

Your CIBIL score plays a significant role in your Personal Loan approval. A high score of 750 or above improves your chances of getting a loan with better interest rates and flexible repayment terms. However, a low credit score can lead to higher interest rates, loan rejections, or stricter conditions.

If you're planning to take a Personal Loan, check your credit score first and work on improving it if needed. Following simple financial habits like timely payments, maintaining a low credit utilisation ratio, and monitoring your credit report can help boost your score over time.

Take control of your financial future today and secure a Personal Loan with confidence. By maintaining a good credit score, you not only get loan approvals but also build a financially strong future. For loan approvals and flexible terms, consider lenders like Hero FinCorp, who have a loan application process.

Disclaimer: The information provided in this blog post is intended for informational purposes only. The content is based on research and opinions available at the time of writing. While we strive to ensure accuracy, we do not claim to be exhaustive or definitive. Readers are advised to independently verify any details mentioned here, such as specifications, features, and availability, before making any decisions. Hero FinCorp does not take responsibility for any discrepancies, inaccuracies, or changes that may occur after the publication of this blog. The choice to rely on the information presented herein is at the reader's discretion, and we recommend consulting official sources and experts for the most up-to-date and accurate information about the featured products.