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What is a Good CIBIL Score to Get a Loan?

Published on May 27, 2020Updated on Apr 26, 2024

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 personal 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.

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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 personal loan eligibility:

CIBIL SCORE

CREDITWORTHINESS

APPROVAL PROBABILITY

<600

Urgent Action Needed

Low

600-649

Murky and doubtful

Difficult

700-749

Good

Good

750-900

Excellent

Very High

How to Check & Calculate your CIBIL or Credit Score?

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

  • 30% weightage is taken by payment history, which is how punctually you have been paying your bills and EMIs.
  • 25% weightage is given to credit exposure, which is the ratio of credit used to credit limit available.
  • 25% weightage is for credit type and duration, under which your experience with handling credit comes.
  • 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:

  • Log on to the official website of Credit Information Bureau (India) Limited
  • Click on “Get your CIBIL score” and log into an account.
  • Choose your subscription plan and make the payment.
  • 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 personal 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 Get a Personal Loan with a Low CIBIL Score?

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 personal 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.

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Factors Affecting your CIBIL Score

There is gnawing unawareness about the actions and behavior 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?

  • A high credit score indicates financial stability, making lending firms more likely to trust you with repaying loans on time. 
  • It can result in lower interest rates and faster approval times, potentially leading to savings and increased confidence in applying for personal loans.
  • 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.

How Can You Maintain A Good Credit Score?

Here are 5 effective habits to maintain a credit score:

  1. Monitor Your Credit Utilization Ratio: Keep your credit usage at around 30% of your credit limit to maintain stability in your credit score. Avoid maxing out your credit cards as well.
  2. Keep Old Credit Cards: Maintain old credit cards with a good payment history to demonstrate a longer credit history, which positively affects your credit score.
  3. Check Loan Eligibility: Before applying for a loan, assess your eligibility to increase your chances of approval and prevent unnecessary hard inquiries that could lower your credit score.
  4. Regularly Check Your CIBIL Report: Review your CIBIL report frequently to identify and correct any errors or discrepancies promptly, ensuring accuracy and reliability in your credit score.
  5. Take One Loan at a Time: Avoid applying for multiple loans simultaneously, as it can be perceived as credit greediness and negatively impact your credit score. Prioritize your borrowing needs and focus on managing one loan effectively at a time. 

10 Key Things That You Must Know About Credit Score

Here are 10 essential credit facts you need to know:

  1. Credit Reports vs. Credit Scores: Understand the difference between your credit report and credit score – your credit report provides a detailed history, while the other is a numerical summary of your creditworthiness.
  2. Factors Influencing Credit Scores: The core factors that impact your credit score are payment history, credit utilization, and account types.
  3. Free Access to Credit Reports: Take advantage of your right to a free annual credit report from each of the major credit bureaus to monitor your financial status regularly.
  4. Checking Your Score: Checking your credit score doesn't harm it, so monitor it regularly to stay informed and catch any errors or suspicious activity.
  5. Different Credit Score Ranges: Understand that each credit bureau and scoring model has its own scoring range, so be aware of which range you're referring to.
  6. Detecting Fraud: Regularly monitoring your credit can help you spot signs of identity theft or fraudulent activity early.
  7. Financial Impact of Credit Scores: Recognize that a lower credit score can lead to higher interest rates and cost you thousands of dollars over time.
  8. Individual Credit Scores: Understand that credit scores are individual, even in joint accounts or shared credit situations.
  9. Aging Off of Negative Information: Past mistakes on your credit report will eventually age off if you maintain good credit habits moving forward.
  10. Lending Decisions: Know that credit scores aren't the sole factor in lending decisions, and alternative options may be available if you have limited or poor credit.

Points to Remember While Clearing Your Past Dues

Here are some points to remember while clearing your past dues:

  1. Assess Your Debts: Take notice of all outstanding debts, including credit card balances, loans, and overdue bills.
  2. Create a Budget: Develop a realistic budget that allocates funds towards debt repayment while covering essential expenses.
  3. Avoid Taking on New Debt: Temporarily refrain from accumulating additional debt to prevent further financial strain.
  4. Track Progress: Monitor your debt payoff progress regularly to stay motivated and make adjustments as needed.
  5. Seek Professional Help if Necessary: If you're overwhelmed by debt, consider consulting a financial advisor or credit counselor for personalized assistance.
  6. Stay Committed: Consistency is key in debt repayment. Stay committed to your repayment plan, even when faced with challenges, to achieve financial freedom in the long run.

Why do Lenders Check your CIBIL Score before Approving your Loan?

Lenders check your CIBIL score before approving a loan for the following reasons:

  1. Risk Assessment: Lenders use CIBIL scores to assess the risk associated with lending money to a borrower. A higher score indicates a lower risk of default, making the borrower more attractive to lenders.
  2. Loan Approval Criteria: Many financial institutions have set minimum CIBIL score requirements for loan approval. Meeting or exceeding these criteria increases the chances of loan approval and may even lead to better loan terms and interest rates.
  3. Regulatory Compliance: Regulatory bodies may require lenders to assess the creditworthiness of borrowers before extending credit. Checking CIBIL scores helps lenders comply with these regulations and minimize the risk of lending to financially unstable individuals.
  4. Efficient Decision Making: CIBIL scores provide lenders with a quick and standardized way to evaluate loan applications. By using predetermined score thresholds, lenders can make faster and more consistent lending decisions.
  5. Protecting Financial Interests: Lenders aim to minimize financial losses by ensuring that loans are granted to individuals with a proven track record of responsible credit management. 

Why Having a Good Credit Score Is Important?

A few reasons why having a good credit score is important are:

  1. Loan Approval: A good credit score increases the likelihood of loan approval from financial institutions. Lenders use credit scores to assess the risk of lending money, and a higher score indicates a lower risk, making you a more attractive borrower.
  2. Better Interest Rates: With a good credit score, you're more likely to qualify for lower interest rates on loans. Lower interest rates translate to lower monthly payments and less interest paid over time.
  3. Access to Credit: A good credit score gives you access to a wider range of credit options, including credit cards, personal loans, and mortgages.
  4. Rental Approval: Landlords often check credit scores as part of the rental application process. A good CIBIL score can increase your chances of being approved for a rental property and may even help you secure lower rental rates.
  5. Employment Opportunities: Some employers conduct credit checks as part of the hiring process, especially for positions that involve financial responsibility. 

Conclusion

The CIBIL Score serves as a crucial tool for financial institutions to evaluate an individual's or a business's creditworthiness and ability to repay loans. Maintaining a high credit score can lead to various benefits, including easier access to credit, lower interest rates on loans and credit cards, and increased negotiating power with lenders. 

By consistently managing finances responsibly and ensuring timely repayment of debts, individuals and businesses can maintain a high credit score, which, in turn, opens up opportunities for financial growth and stability. With that being said, opt for SMFG India Credit personal loans to meet your financial needs or even improve your credit score! With flexible repayment terms, attractive interest rates and a 100% online application process, apply for your personal loan today!

* Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG India Credit. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG India Credit's policy at the time of loan application. If you wish to know more about our products and services, please contact us

FAQs

Can you get a 900 credit score?

900 is the best CIBIL score range for which you will have to ensure maximum financial discipline, on-time repayment of all EMIs, and a low credit utilization ratio. To achieve such a score, you must maintain multiple credit lines and consistently pay your dues on time.

How can I raise my credit score to 800?

You can raise your credit by repaying your EMIs punctually, maintaining your credit utilization ratio below 30%, expanding your credit limit, avoiding defaults and hard credit report inquiries, maintaining a variety of credit and personal loans, and recording all good loan borrowing and repayment practices on your credit report.

How do I increase my credit score in 30 days?

To raise your credit score in 30 days, pay all your bills and EMIs on time, maintain a credit utilization ratio below 30%, and consider getting a new credit card and following disciplined practices.

How can I raise my credit score in 60 days?

To increase your credit score in 60 days, avoid spending more than 30% of your credit limit, request a higher credit limit, and apply for further credit only when necessary.

What are the 5 easy ways to raise your credit score fast?

The 5 easy ways to raise your credit score fast are:

  • Pay your bills and EMIs on time.
  • Lower your credit utilization ratio to less than 30%
  • Request for higher credit limit.
  • Maintain a diverse portfolio of credit.
  • Buy a new credit card and follow disciplined practices.

What increases your credit score?

Your credit score increases if you have proven your financial health and stability over a period of time. If you have been punctual with repaying all the money that you have borrowed, maintained a low credit utilization score, and avoided default of any kind on any loan, then your credit score will eventually increase.

Why is my credit score going down when I pay on time?

Apart from paying on time, credit score also depends upon your history with debt, your current income-to-debt ratio, your credit utilization ratio, and your past history with loans. A decrease in income or an increase in credit utilization ratio could be the reasons for a drop in your credit score.

How does outstanding debt affect your credit score?

Outstanding debt can negatively impact your credit score. This means that you are using more than your credit limit allows. The more you owe to external bodies, irrespective of reason, the lower your credit score dips.

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