Credit information company TransUnion CIBIL analyzes your activity relating to loans and credit cards and assigns a 3-digit number to summarize your credit history. This number, ranging from 300 to 900, is known as your CIBIL score. Whenever you apply for personal loan or any other loan, the lender checks your CIBIL score to decide whether to approve or deny your request. Hence, you must understand how your CIBIL score affects your personal loan eligibility. This will help you maintain a good score and access credit as and when you need it.
Additional Read – What is a CIBIL Score? Why is it important while applying for a loan?
What is a low CIBIL score, and what is its significance?
Your credit score is a crucial factor that decides your eligibility for a personal loan. A CIBIL score close to 900 is considered high, and a number over 750 is deemed favorable. A high CIBIL score indicates long-term financial maturity and helps lenders be convinced you can repay a loan. A score below 600 is considered low and increases the probability of your loan application being rejected.
How does a high CIBIL score impact your loan application?
Rapid approval: A high CIBIL score will establish your creditworthiness to potential lenders, resulting in faster processing of your application and a speedy disbursal of funds.
Personal loan interest rates: If you have a low CIBIL score, lenders are more likely to ask for a steep interest rate. A high score will enable you to negotiate better terms.
Amount of loan sanctioned: A good score reflects dependable credit behavior and will help you get a high loan amount.
Why is a low CIBIL score a concern?
A high credit score proves that you have handled your past credits responsibly, making payments on time. It assures prospective lenders that you are likely to repay your new loan promptly. This increases your likelihood of securing an instant personal loan. A low score, on the other hand, sounds alarm bells indicating that the odds of your defaulting are high.
Here is a summary of the reasons behind a low score to help you understand why it negatively impacts your loan eligibility.
Missed or delayed repayments: Inconsistency in paying your existing loan indicates an unstable financial position.
Multiple loans: Having several loans points towards an elevated debt burden and, consequently, a reduced repayment capacity.
Frequent credit inquiries: It is a sign of being desperate for funds, which is a considerable risk factor.
High credit utilization rate: If you use a high percentage of the credit that has been sanctioned to you, it can imply that you are not handling your finances responsibly. This could be a red flag on your personal loan application.
Inaccurate management of credit types: A lack of balance in the number of secured and unsecured loans in your portfolio is another cause of concern for your repayment ability.
Zero credit history: If you have no credit, then the credit bureau will have insufficient data to predict your repayment behavior, lowering your CIBIL score.
Additional Read – Top 4 Things You Should Know About CIBIL Score to Get a Personal Loan
With a high CIBIL score, you will be considered a reliable borrower and receive loans at favorable terms. Ensure you maintain a good score. If you are looking for quick access to finance, Tata Capital offers personal loans at flexible repayment schedules. Check your eligibility and apply for personal loan online today.