CIBIL score

Irrespective of the purpose like medical emergency, higher education, debt consolidation, travel, home renovation, etc., personal loans can always come handy. Due to its no-end use limitation, this loan facility is used widely by several individuals.

Even though the eligibility criteria are lenient, lenders ensure the credibility of borrowers while providing this collateral-free loan facility. To cut off any risk, financial institutions have set some ground qualification criteria for the applicants. 

One of the most important determining factors is the credit score of an applicant. Individuals with a credit rating of around and above 750 can be considered as eligible for a personal loan

What is a credit rating?

An individual’s credit score or CIBIL score is determined based on his or her credit history, which includes previous credit repayment record and behaviour. 

The score ranges from 300 to 900, where 900 is the maximum score one can achieve. A good CIBIL score of 750 and above indicates higher credibility of individuals.

Hence, a credit rating nearer to 900 indicates a lower risk for the financiers. However, several other measures are also fixed by lenders other than the CIBIL score during a personal loan approval process. 

But, credit rating is one of the prime factors when it comes to personal financing. Thus, individuals should know how to check free CIBIL score and keep an excellent score to maintain higher creditworthiness.

Determining factors of credit rating:

As credit history is the evaluating measure of individuals’ CIBIL score; following are some important aspects that can help to improve one’s personal credit score -

Repayment record

The repayment record of past credit is one of the most important aspects of a credit score. So, borrowers should always clear credit card debts and loan EMIs on time without fail. 

Though it sounds simple, without proper financial management, this can impact the credit rating significantly. Repetitive default payments can adversely affect the CIBIL score and reduce the chances of availing personal loans in the future.

To make their repayment process easy, individuals should always borrow advances within their repayment capacity to clear all outstanding dues faster and on time. 

Credit history timeline

Credit responsibility of individuals can be evaluated better from an older loan or credit card. Individuals with a longer history of well-managed advances signify the possibilities of future credit prudency. Thus, longer credit history helps to increase the credit score significantly.

Credit utilisation ratio

The credit utilisation ratio is a ratio between the available credit limit and the amount utilised from the same. It is always advisable to maintain a ratio below 30%, which means that credit card holders should keep their expenses within 30% of the limit. 

It’s how individuals can improve their payment capacity by reducing expenditure. Moreover, maintaining a low credit utilisation ratio indicates a responsible credit behaviour of borrowers that positively impacts their CIBIL score.

Credit mix

The ideal credit record should be a balanced mixture of both secured and unsecured loans. Borrowing too many collateral-free loans can imply an inclined risk of credit default in the future. So, balanced credit history can help in maintaining an improved credit score.

With a higher credit rating, individuals can avail personal finance with better benefits. Borrowers can negotiate with the lenders on various terms like a lower interest rate. They can even avail Personal Loans from NBFCs like Bajaj Finserv within 24 hours of the application.

The company also brings pre-approved offers that simplify the application process to avail financing. These offers are applicable to several financial products, like business loans, credit cards, etc. Individuals can check their pre-approved offers by submitting their credentials like name and phone number. 

In conclusion, the CIBIL score is an important factor while applying for unsecured loans like a personal loan. Nonetheless, in emergencies, borrowers need to know how to avail a personal loan with low credit score and meet their financial commitments.