Personal Loan for CIBIL Score of 550 to 600

Whichever loan you apply for, including a personal loan, your CIBIL score will act as an imperative factor to get approval for the application.

A CIBIL score ranges between 300 and 900. A higher score means higher personal loan eligibility. For a personal loan, you must have a credit score of 700 or above.

Most lenders require applicants to have a good score, preferably 750 or more. If your score is below 600, it is considered insufficient to meet most lenders’ personal loan eligibility criteria.

Hence, availing a personal loan for a CIBIL score of 550 to 600 or anything below 600 is difficult. However, you can always improve your chances of getting a personal loan approval under such situations.

Here are some tips to improve your CIBIL score to increase your chances of getting sanctioned for your loan application: 

• Check your CIBIL score and report at least twice every year.
• Pay your credit card bills in full and on time every month.
• Maintain a credit utilisation ratio (CUR) of below 30 always.
• Increase your credit card limit to lower your CUR instantly.
• Pay off your existing debts (if any) before applying for a fresh loan.
• Avoid applying for multiple loans or credit cards simultaneously.
• Keep your old loan and credit card details to make a lengthy credit history.
• Have a diverse credit mix of secured and unsecured loans.
• If you find any discrepancy in your credit report, raise a query instantly and get it rectified. 

Benefits of a High CIBIL Score

• Faster loan and credit card approval.
• Lower interest rates on loans.
• Better credit card deals.
• A higher credit limit on credit cards.
• Discounted processing fee and other charges on loans.

Minimum CIBIL Score Required for Personal Loan

There is no fixed minimum CIBIL score number for personal loan approval. However, most lenders consider a CIBIL score of 750 or above a good score. Having a score in that range can open multiple credit options for you. A high credit score can also help you get a higher loan amount at a lower interest rate and affordable tenure.

Factors That Can Lower Your CIBIL Score

Some of the common factors that can impact your credit score negatively are:

Irresponsible repayment behaviour: It is important to repay your existing loan instalments and credit card bills on time every month. Delinquency in repayment can reduce your score by several points. 
High CUR: Always keep an eye on your CUR (amount of credit used in proportion to the available credit limit). As per experts, you should not exceed using 30% of your credit limit. 
Leaving outstanding debt: Make sure you clear off all your outstanding debts before applying for a new personal loan. Any unpaid dues reflect on your credit report and take a toll on your score. 
Paying only the Minimum Amount Due (MAD): MAD is a small part of the principal outstanding amount displayed in your credit card statement every month. Avoid falling into a debt trap by regularly paying only the minimum amount due. 
Multiple credit applications: Applying for a loan or a credit card leads lenders to want to check your creditworthiness by pulling out your credit report (called a hard inquiry). Sending out multiple applications means multiple credit inquiries occurring around the same time, making you look credit hungry.
Now checking errors in your CIBIL report: Your CIBIL report contains a detailed record of your current and past credit accounts. Having any error in your report can hamper your score. If you notice any discrepancies in your report, get them rectified by the concerned department immediately.
Not having a credit mix: It is vital to maintain a healthy balance of secured (home loan, loan against security, etc.) and unsecured loans (personal loan, credit card, etc.) as it suggests you have experience in handling both types of credit. 
Short credit history length: Credit history is the number of years passed since you opened your first credit account. Having a long credit history helps lenders take an informed decision at the time of offering you credit. 
Closing old credit card accounts: When you close your old credit card accounts, you lose a long credit history associated with it. Hence, if you have used a credit card for a substantial number of years, keep it open as long as possible.

Importance of CIBIL Score in Getting a Personal Loan Approval

Being an unsecured loan, a personal loan is offered by lenders without collateral. As they do not have any security, unlike a secured loan (like a home loan, loan against property, or a car loan), it is a risky investment for them to lend you money. That’s why, creditors assess applicants’ credit scores carefully when evaluating their personal loan applications.

CIBIL score helps personal loan providers in many ways, such as:

• Determining borrower’s creditworthiness.
• Deciding the rate of interest for a loan.
• Deciding the amount of loan the applicant can borrow.

Please note that while having a CIBIL score of 550 to 660 does not necessarily mean your personal loan application will be rejected, it may result in getting approved for a high-interest-rate personal loan or a lower loan amount than you applied for. Hence, it is crucial to improve your score before applying for a personal loan to get a better deal.

FAQs

✅What is the fastest way to build my CIBIL score for a personal loan?

A good way to build your credit score is through a credit card that is secured. You can also get a secured loan and make sure you have a co-signer. However, nothing beats practising good credit habits. Keep a check on your credit report and scores to take timely remedial action. 

✅What are the documents needed to apply for a personal loan?

The documentation needed to apply for a personal loan are very basic, including proof of your age, address, and employment and income statement.

✅What is the minimum CIBIL score to apply for a personal loan?

Ideally, it is important to maintain a minimum CIBIL score of 750 or above.

✅Can Credit Scores or CIBIL Scores be reset?

No, it is not possible to reset your credit scores as they are based on credit history that helps lenders decide your creditworthiness. 

✅What is the time period involved in clearing credit history?

As long as you have an active account, it is not possible to clear your credit history. However, if your loan account is closed then your credit history will remain available for two years, after which it may be cleared.