What is a Good CIBIL Score to Get a Loan?

CIBIL score or credit score as it is generically known, is one of the important factors that we look into when prospective borrowers apply for loans. Good credit score represents the economic stability of an individual which in turn makes financial transactions easier.

What is a CIBIL Score?

A CIBIL score is a three-digit numerical expression that ranges between 300-900 based on extensive analysis and a detailed examination of a person’s credit files and history, denoting the creditworthiness of an individual.

What is a Good CIBIL Score?

A good CIBIL score lies between 720-900 and is determined solely on the basis of your credit behaviour and history. It yields multiple benefits to the borrower, including quick approvals, lower interest rates, and a higher loan amount.

For an unsecured loan, a CIBIL score of 750 or above is termed a good CIBIL score. A borrower with a good CIBIL score has a higher chance of getting the best interest rate on a loan and also experiences a quicker approval process. It helps you to save money and time in the long run. 

Hence, it is evident that a score between 700-900 will be considered a good credit score.

CIBIL Score Range

Below is the table of what a particular CIBIL Score signifies and consequently the probability of approval of loans.

It also helps us understand what is considered as a “good” CIBIL score and the minimum credit score required for loan eligibility:

How to Check & Calculate your CIBIL or Credit Score?

The calculation of a CIBIL score requires consideration of parameters like:

1. 30% weightage is taken by payment history, which is how punctually you have been paying your bills and EMIs.
2. 25% weightage is given to credit exposure, which is the ratio of credit used to credit limit available.
3. 25% weightage is for credit type and duration, under which your experience with handling credit comes.
4. 20% weightage is held by factors like credit report inquiries and number of credit lines taken simultaneously.

If you wish to check your CIBIL score, you can follow these steps:

1. Log on to the official website of Credit Information Bureau (India) Limited.
2. Click on “Get your CIBIL score” and log into an account.
3. Choose your subscription plan and make the payment.
4. Once your identity verification is done, your CIBIL report will be generated instantly.

Your CIBIL report will contain your score, credit summary, financial status according to employment, personal and contact information, and credit history of inquiries.

Benefits of a Good CIBIL Score

A good credit score has ample benefits. Hence, an aspiring loan applicant must be aware of the benefits before applying for a loan, to arrive at the loan most suited to his needs and requirements.

1. Higher Approval Chances

Every lender pulls out your credit report and checks your credit score once you apply for a loan or credit card. This is known as a hard inquiry, and your credit score takes a hit whenever such an inquiry is undertaken. The impact can be irrevocably adverse if your application gets rejected. But in the case of a good credit score, the probability of the approval of your loan is extremely high due to your sound credit history and past instances of regular and timely repayments of the loan amount.

Must Read: How to Check CIBIL Score For Personal Loan?

A good credit score also determines that you have not taken multiple loans from multiple lenders; that you have not piled up debt, making it difficult for you to repay the loan amount. Thus, the lender is confident of the repayment of the loan amount in full and on time, and hence the approval chances are incredibly high and almost guaranteed. In case of a home loan, you can expect up to 80% of the total cost of the property if your CIBIL score falls in the range of 700-900. However, such standards cannot be expected in case of a personal loan, as it is an unsecured loan, and hence the loan amount will depend on the specified purpose and indeed your CIBIL score. In case of a car loan, there is no specified CIBIL score that qualifies you; however, it is advised to have a score above 700 to stay assertive while applying for a car loan.

2. Low-interest Rates

The primary benefit of maintaining a good CIBIL score is low-interest rates. Interest is charged based on the probability of default. A good credit score determines sound creditworthiness and regular and timely repayments of past loans. The likelihood of default is minimal, and hence the reward is reflected in comparably low-interest rates.

3. Higher Limits

A good credit score reflects that you’re a worthy and responsible borrower. Hence the lender may not be hesitant to offer you a higher credit limit on your card or a comparably higher loan amount.

Must Read: How Much Personal Loan Can I Get?

Factors Affecting your CIBIL Score

There is gnawing unawareness about the actions and behaviour that affects your CIBIL score for a personal loan. However, after knowing the importance of the credit score, it is essential to understand the factors affecting the credit score.

1. Late Payment

Even a single payment made after the due date can adversely impact your credit score. Late payment signifies your inability to plan and handle your finances. It may be the case that you just let an EMI slip your memory or attention in the ensuing chaos and confusion of multiple EMIs with different renewal dates and different dates of repayment. However, such an unintentional lapse may shave some points off your CIBIL score. Hence, it is advisable to opt for a debt consolidation loan or a line of credit, avoiding the hassle of keeping track of multiple loans with multiple repayment dates. Thus, eliminating or reducing the risk of your credit score being lowered as a result of an EMI being precluded or overlooked.

2. High Utilization of Credit Limit

Credit Limit refers to the maximum amount a borrower can spend using a credit card or revolving line of credit. Usually, lenders set a credit limit based on the repaying capacity of the borrower. The credit limit signifies the amount of money he can spend on repayment after meeting other payment obligations. If you spend more than 50% of your credit limit consistently, your credit score can be affected. It shows you’re not apt in handling and managing your finances. To maintain a considerable credit score, it is imperative to keep your expenses within 50% of your credit limit.

3. Multiple Loans

If you take the refuge of debt whenever any expense is rearing its ugly head, and end up pursuing multiple loans from multiple lenders, your CIBIL score will take a colossal hit. It signifies you are desperate for credit and falling short in managing your finances prudently. Also, when each of these lenders sends an inquiry request to credit rating agencies, which are known as hard inquiries, such inquiries get recorded, lowering your CIBIL score.  

Hence, it’s indispensable before applying for any loan, to be aware and mindful of your CIBIL score. If your CIBIL score is low, be assured that you may not get a good deal. You’ll be charged exorbitant rates of interest or significantly lower loan amount than demanded.

Why is it Important to have a Good Credit Score Range?

1. A high credit score indicates financial stability, making lending firms more likely to trust you with repaying loans on time. 
2. It can result in lower interest rates and faster approval times, potentially leading to savings and increased confidence in applying for personal loans. 
3. A score between 750 and 900 is typically considered good and may even lead to higher borrowing limits. 

8 Ways by which you can Increase your CIBIL Score Range:

1. Pay your utility bills, credit dues, and EMIs on time.
2. Ensure that your credit utilization score is less than 30%.
3. Avoid applying for multiple credit cards simultaneously.
4. Diversify the loans or credit that you take up, i.e., take a mix of credit cards and personal loans if you need additional funds.
5. Try to increase your credit limit.
6. Include all records of good loan practices on your credit report.
7. Minimize risk and increase reliability through your financial practices.
8. Limit the number of hard inquiries on your credit report.

How to Improve your CIBIL Score?

In such a case, strive to improve your CIBIL score by paying all your outstanding loans and meeting your monthly payment obligations on time without any delay. In case of a good CIBIL score, use it as leverage, ask for rates of interests from different lenders who would be eager to offer you loans, compare the rates and the terms of the loan, negotiate if necessary, and then opt for the most appropriate loan.