What Credit Score do I need for Personal LoanA company or an individual will check the financial background and repayment ability of the borrower, before approving the loan. A personal loan is an unsecured one that requires no security against the loan. But the credit score of the borrower matters when applying for personal loans. The approval and disbursal process is quick if your creditscore is good.
Financial institutions measure the creditworthiness to repay the dues on time. Credit scores are arrangedfrom the lowest to the highest in a range of 300 -900, respectively. If your credit score is lower, you may have to pay a higher rate of interest. Generally, a loan applicant needs to maintain a minimum score of 500-600* to get the approval for a personal loan.
Credit Score Range for a Personal loan
Holding a good credit score makes a lot of difference while taking a personal loan. The required rangeof credit score should be as mentioned below:
• 0-1 is a score where you need to start building your credit score by procuring an authorized credit card and paying utility bills on time.
• 300-500* is considered a lowcredit score. It means you have been consistent with delayed payments. The probability of getting a personal loan or credit card is less here.
• 500-700* is a good score reflecting a considerable credit history. Maintaining a decent score like this simplifies loan approval. It shows that you are steady with your payments and can be trusted with new loans.
• 700-900* is a strong score indicating sincerity in clearing the credit payments. It is an ideal score to avail an instant personal loan or credit card approvals quickly.
*The credit score criteria are different for different financial institutions for personal loan approval. Please note that these may not be sufficient for loan approval and may change from one financial institution to another.
How to Increase your Credit Score for Personal Loan?
Individuals can improve their credit score by managing their billing cycles and EMIs timely. Read the following to build a better credit score:
• Manage your credit cards payments: Check your credit card usage and eliminate using credit cards when you have exceeded the monthly limit. Take credit card bills seriously before the interest starts piling up on every EMI you pay.
• Clear your dues on time: Taking forward the remaining balance to the next month brings an additional interest rate, which can adversely impact your credit score. Timely payments of bills and other dues within a specified due date every month will improve your credit score.
• Paying Taxes: Making regular tax payments forms a good impression of the borrower’s financial profile and helps to increase the credit score.
• Genuine Loan Guarantor: Prefer a loan guarantor or co-applicant from your own family, holding a good credit score.
• Good income and bank balance: A decent bank balance comes with a stable income. The scope of delayed repayments is less in this case. Hence, a balanced credit score is maintained.
• Track your incorrect credit report: Sometimes, financial institutions tend to make errors in your credit history. To maintain a good credit score, keep a track on your credit history and rectify the mistake on your financial agencies listing, in case of any discrepancy.
Activating the auto-debit option is a great way to be in sync with a monthly payment of EMIs. You can’t miss payments as it will be auto deducted from your account. Hence, no scope of credit scores getting affected.
Disclaimer: Please note that these criteria are for general understanding. These may or maynot apply for underwriting criteria of SimplyCash.