In today’s era, almost everyone has a bank account, and many people often consider taking a loan. Before approving a loan, banks review the CIBIL score of the account holder. In the modern financial world, the CIBIL score plays a crucial role as it provides a comprehensive picture of an individual’s financial health through a simple numerical representation.
This article highlights the latest rules related to the CIBIL score, including the minimum score required for loan approval. If you are planning to apply for a loan, make sure to read this article till the end for complete information.
What is the new rule for taking a loan? What should be the civil score?
All bank customers need to know that having a good CIBIL score has become crucial for obtaining a loan. Most banks consider a CIBIL score of 750 or higher as excellent. However, it’s important to note that no fixed score guarantees instant loan approval. If your CIBIL score exceeds 800, your loan application is likely to be approved in most cases.
The CIBIL score, provided by Credit Information Bureau (India) Limited, acts as a financial report card. This score ranges between 300 and 900. Studies show that a higher CIBIL score increases your chances of getting a larger loan amount. Therefore, it is vital to maintain a good CIBIL score. A higher score also allows you to secure loans at better interest rates and with more favorable repayment terms.
Additionally, lenders use the CIBIL score to evaluate loan applicants. Borrowers with a score of 800 or above are generally considered low-risk, making banks more likely to approve their loans. Typically, banks swiftly process loan applications for individuals with a CIBIL score above 750.
Keeping your CIBIL score high not only boosts your chances of loan approval but also helps you get better financial benefits.
What is the CIBIL score required for a personal loan?
If you are looking to apply for a personal loan, a minimum CIBIL score of 750 is generally recommended. However, it is also possible to apply for a personal loan without a CIBIL score. In such cases, banks may offer personal loans of up to ₹25 lakh without requiring collateral.
That said, if you want to secure a personal loan without a CIBIL score, offering collateral can increase your chances of approval and make the process smoother.
Can a person with a 600 civil score get a personal loan?
If you are an account holder wondering whether individuals with a low credit score can get a personal loan, here’s some information for you. Even with a credit score as low as 600, it is possible to get a personal loan. However, most banks consider a credit score of 750 or above as ideal, as it represents a lower risk for them.
In such cases, banks may offer loans at higher interest rates and for smaller amounts. Additionally, there’s a possibility that your application might be rejected. On the other hand, certain online lenders, such as Money View and others, follow alternative credit rating models. These platforms do not discriminate solely based on credit scores, allowing individuals with lower credit scores to apply for personal loans and receive approval.
What should be the CIBIL score to get a loan approved?
If you have an account in any bank and are considering applying for a loan, you will need a good credit score (CIBIL score). Banks use different CIBIL score requirements to approve loans. The CIBIL score, provided by Credit Information Bureau (India) Limited, typically ranges from 300 to 900. Most banks believe that a higher CIBIL score increases the chances of loan approval, better loan terms, and favorable interest rates and repayment periods.
Before approving a loan, banks assess the applicant’s creditworthiness to minimize risk. Applicants with higher CIBIL scores are more likely to get their loans approved. A score of 720 or above is considered very good, while a score of 640 or below is seen as poor. Generally, a minimum score of 720 is preferred for loan approval.
For personal loans, a score of 750 or higher is ideal. However, applicants should note that even without a high CIBIL score, personal loans of up to ₹25 lakh can be availed by offering collateral as security.
How to maintain the best CIBIL score?
To maintain a good credit score, here are some essential tips:
- Pay on Time: Ensure timely payment of your credit card bills, EMIs, or any other loans. This is crucial to keeping your credit score high.
- Use Credit Wisely: Limit your credit usage to less than 30% of your total credit limit. Excessive usage can negatively impact your score.
- Check Your Credit Score Regularly: Monitor your credit score at least once or twice a year to stay updated and address any discrepancies promptly.
- Maintain Old Accounts: Keep your old accounts active, as well-managed accounts over a long period reflect your financial responsibility and improve your credit score.
By following these practices, you can effectively maintain and improve your credit score over time.
How to improve my CIBIL score if it is bad?
If your CIBIL score has dropped and you are looking to improve it, it’s important to take strategic steps. Most banks prefer lending to individuals with a good CIBIL score. To improve your score, you can follow these tips:
- Pay Bills on Time: Ensure timely payment of your credit card bills and loan EMIs. Clearing all dues on time reflects positively on your credit report.
- Clear Outstanding Dues: Settle any old outstanding amounts as soon as possible to avoid negative marks on your credit history.
- Use Credit Cards Responsibly: Regularly use your credit card but ensure responsible usage. Avoid unnecessary transactions and overspending.
- Borrow Within Limits: Never take loans exceeding your repayment capacity. This helps maintain financial stability and keeps your credit score intact.
- Maintain a Low Credit Utilization Ratio: Try to use less than 30% of your credit limit. High usage can negatively impact your score.
- Avoid Multiple Loan Applications: Refrain from applying for multiple loans within a short period, as it reflects poorly on your creditworthiness.
- Monitor Your CIBIL Report: Check your CIBIL report regularly, at least once a year. If you notice any discrepancies, report them to the bank or credit bureau immediately.
- Complete Documentation When Closing Credit Accounts: If you decide to close a credit card, complete all formalities and obtain a closure certificate from the bank to avoid future issues.
For immediate improvement:
- Pay your credit card bills and loan EMIs on time.
- Minimize unnecessary expenses on credit cards.
- Make frequent payments to reduce outstanding balances.
By following these steps, you can gradually improve your CIBIL score and enhance your financial credibility.