For most millennials taking a personal loan is probably the easiest way to reach their short to medium-term financial goals or tide over an emergency. Over the past few months, because of crushed economic activities, there has been a spike in short-term loans. If you are planning to apply for a personal loan, bear in mind that a healthy credit score can greatly affect your personal loan eligibility. Apart from personal loans, your credit score also gives you access to other credit products such as home loans, car loans, credit cards etc.
A part of TransUnion, CIBIL is an RBI-approved agency that generates credit scores of individuals as well as businesses. Banks and other lending institutions provide the data for the same.
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An Update
The criteria for scoring cardholders and borrowers has been recently updated by the Credit Information Company. Instead of 24 months, credit history for the previous 36 months will now be taken into account.
A Good Credit Score
Your credit score is a pivotal element that builds or breaks the lender’s trust when you apply for a loan. A good CIBIL is any score between 700 to 900. It is the first impression that you cast on the lender. A higher score directly reflects a higher chance of acceptance of your loan application.
Credit Score and Personal Loan Eligibility
As a personal loan is an unsecured loan, there is no collateral that you need to provide when seeking one. Apart from the personal loan eligibility, you would also have to have a decent score, as the lender will check your creditworthiness. They need to make sure that you have the capability to make the repayment. Here’s a look at how a good score can come in handy when applying for a personal loan:
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Quicker Approvals
Your credit profile reflects your repayment behavior. Furthermore, a high score would also help you with easier and quicker documentation.
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Competitive Rates
With a higher score, you may also be eligible for preferential interest rates on your personal loan. Some banks may offer you minimal or even no processing fee too.
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Pre-Approved Loans
Banks/ financial institutions may themselves offer you a loan if you have been maintaining a good credit score. Being pre-approved for credit echoes your creditworthiness.
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Longer Tenures
A high credit score, like 850 and above, may make your lender offer you a loan for a much longer tenure.
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Puts you in a Better Position
An applicant with a stronger CIBIL score will attract lenders, thus putting you in an advantageous position to negotiate for better interest rates and suitable tenures.
In Conclusion
As a borrower, you need to be mindful of a few factors that can affect your credit score. The score represents the risk or danger that you may pose to a probable lender, the higher your score the better the chances of the lender putting you in good standing.
While having a good credit score is vital, it may not always be possible to maintain a constant. It may change when you make a repayment on your loans or open a new line of credit. Because CIBIL is always recalculated, you need to regularly work to maintain a good one.
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