CIBIL score is a three-digit numeric summary of your credit history, rating and report. It is calculated by Credit Information Bureau India Limited (CIBIL), one of the four credit bureaus in India. CIBIL score ranges from 300 to 900, with 900 being the best possible score. A higher CIBIL score indicates that you are a more creditworthy borrower and are less likely to default on your loan.
Lenders use CIBIL scores to assess the risk of lending to a borrower. A higher CIBIL score will make you more attractive to lenders and can help you qualify for a personal loan with a lower interest rate.
Minimum CIBIL Score for Personal Loan
The minimum CIBIL score required for a personal loan varies from lender to lender. However, most lenders prefer a CIBIL score of 750 or above for personal loan applications. A CIBIL score of 750 or above is considered to be a good score and indicates that you have a good credit history.
Borrowers with a CIBIL score below 750 may still be able to get a personal loan, but they may be offered a higher interest rate or may be required to provide collateral.
Factors that Affect Personal Loan Eligibility
In addition to your CIBIL score, there are other factors that lenders consider when evaluating your personal loan application, such as:
- Income: Lenders want to make sure that you have a sufficient income to repay your loan.
- Employment status: Lenders prefer to lend to borrowers who are employed full-time.
- Debt-to-income ratio: Lenders want to make sure that you do not have too much debt relative to your income.
- Credit utilization ratio: Lenders want to make sure that you are not using too much of your available credit.
How to Improve Your CIBIL Score
If your CIBIL score is below 750, there are a few things you can do to improve it:
- Make all of your loan and credit card payments on time and in full. This is the most important thing you can do to improve your CIBIL score.
- Keep your credit utilization ratio low. This means using less than 30% of your available credit.
- Pay down any existing debt. This will reduce your debt-to-income ratio and make you more attractive to lenders.
- Avoid opening new credit accounts unnecessarily. Every time you apply for a new loan or credit card, a hard inquiry is placed on your credit report. Too many hard inquiries can lower your CIBIL score.
Conclusion
A CIBIL score of 750 or above is considered to be a good score and is preferred by most lenders for personal loan applications. Borrowers with a CIBIL score below 750 may still be able to get a personal loan, but they may be offered a higher interest rate or may be required to provide collateral.
If you are looking for a personal loan with a low interest rate, it is important to improve your CIBIL score. You can do this by making all of your loan and credit card payments on time and in full, keeping your credit utilization ratio low, paying down any existing debt, and avoiding opening new credit accounts unnecessarily.
Here are some additional tips for improving your CIBIL score:
- Dispute any errors on your credit report. You can get a free copy of your credit report from each of the three major credit bureaus (CIBIL, Experian, and Equifax) once a year. Review your credit reports carefully and dispute any errors that you find.
- Become an authorized user on a credit card with a good payment history. This can help you build your credit history and improve your CIBIL score, even if you do not have any credit history of your own.
- Consider getting a secured credit card. A secured credit card requires a deposit, which serves as your credit limit. This can be a good option for borrowers with a bad credit history or no credit history at all.
By following these tips, you can improve your CIBIL score and increase your chances of qualifying for a personal loan with a low interest rate.