CIBIL Score for Personal Loan

In order to avail any credit, including a personal loan, it is necessary to assess an individual's creditworthiness. This is the bank or financial institution's way of checking if the individual will be able to repay the loan or make regular payments towards the credit card. CIBIL score is one of the most vital factors considered by lenders when assessing your personal loan application

Minimum CIBIL Score for Personal Loan

The minimum CIBIL score required to be eligible for a Personal Loan is 750 (700 for some lenders) or above. This requirement may vary from lender to lender and the type of loan. For secured personal loans, minimum CIBIL score requirement can be much lower. The score should be closer to 900 to improve your chances for personal loan approval.

Lenders have to be sure about your ability to repay the borrowed loan before approving your loan application and your credit score helps them assess your risk of default. Having a high score suggests you are a responsible borrower and have paid your past loan EMIs and credit card bills on time. A lower score usually increases your risk for defaulting on a loan.

What is CIBIL Score?

A CIBIL score is a 3-digit number (300 to 900) that shows your creditworthiness based on your past repayment behavior. 

CIBIL or the Credit Information Bureau India Limited is a licensed credit information company that collects all possible information about your loans and existing credits. Using this, they compile a credit report each year. The details in this credit report are as follows:

The employment history of the individual

  • Track record of the repayments made towards different loans and credit cards
  • Existing and outstanding credit
  • Information about the applications submitted and enquiries made about loans.

With this information, each individual is given a credit score between 300 and 900. An individual is considered to have a good CIBIL score if it is closer to 900.

Each year CIBIL provides all members with a free credit report. This allows you to check and narrow down on the possible options to get a Personal Loan. If you need another credit report in the same year, you can subscribe to the unlimited access plans based on your requirement. You can get unlimited access for 1 month, 6 months or even a year depending on what loan and credit requirement you may have through the year.

How to Build a CIBIL Score?

Having a CIBIL score makes it a lot easier to avail of the credit products when required. However, many people who have never taken any loan or credit cards, usually don’t have any credit score. 

Here are some ways in which you can start building your credit history:

  • Apply for a secured credit card: These cards are issued against the value of your fixed deposit and you can use it just like other credit cards to pay your bills on time to improve your CIBIL score.
  • Apply for a loan with your bank: If you have a long and healthy relationship with your bank you can apply for a short-term personal loan there and repay it on time. Once you have built a credit score, you can apply with other lenders too.

What is Personal Loan?

It is an unsecured loan that is provided to individuals to fulfill any of their immediate financial requirements such as travel expenses, expenses towards higher education, medical emergencies, and even any expense towards domestic functions like a wedding. The most important characteristic of a Personal Loan is that it is a versatile loan without very few limitations on what the sanctioned amount may be used for.

There are a few eligibility factors that you need to fulfill in order to get a Personal Loan:

  • The applicant should be at least 21 years old
  • Loans are available for both self-employed and salaried individuals
  • The individual should have a steady employment history. In the case of self-employed individuals, an experience of at least 2 years in the respective fields is a must.
  • The debt to income ratio is important. Most often, the net income after all deductions, including the possible EMI on loan should be at least 40% of the gross income.

What Impact Does CIBIL Score Have on Personal Loan?


Since these loans are unsecured, credit history and CIBIL score play a very important role in deciding if you will be able to get a loan or not. Usually, a credit score above 700 is required by most banking institutions in order to get approval on a Personal Loan.

There are various factors that impact your CIBIL score and each of them has an impact on the Personal Loan as well. The table given below will help you understand how each of these factors impacts your chances of getting a Personal Loan.

Factors Affecting CIBIL Score Impact on Personal Loan
 

Repayment history and track records of previous loans and credits

If you have defaulted repayment towards your loans or credit cards, it is an indication that you do not have the means to make regular payments. This reduces your creditworthiness and results in a low credit score. In this case, your chances of getting an unsecured Personal Loan reduce. You may be able to look at alternatives like loan against property to fund your financial emergencies.

Credit utilisation

Credit utilisation means how much of the available credit card limit you are using. For instance, if you have a credit limit of  1 Lakh and you use  50,000, the credit utilisation ratio is 50%. This helps keep the credit score high and in turn, increases the chances of getting an approval on the Personal Loan.

Too many credit cards or constantly increasing credit card limit

An individual with too many credit cards or one who has the habit of increasing the credit limit frequently is categorised as a credit hungry individual. This is an indication of poor spending habits, which reduces the chances of getting a Personal Loan or requires you to pay a higher rate of interest as you are considered a high-risk borrower.

Multiple loan applications

This is yet another indication of a credit hungry individual. If a person is credit hungry, it means that they do not have adequate financial sources to fund the necessary expenses. As a result, repayments on the sanctioned loan may also default. As a result, the approval on a Personal Loan is also affected.

Too many unsecured loans

For most banks, multiple unsecured loans are an indication of poor financial management or lack of necessary sources for expenses. This not only lowers the credit score but also affects the chances of the person getting approval on another unsecured loan.

Simple Steps to Improve CIBIL Score

To increase your chances of getting a Personal Loan, the first step is to improve your credit score. This can be done with the simple steps mentioned below:

  • Make sure that you make all repayments towards loans and your credit cards on time
  • If you are applying for a new loan, it is a good option to settle an existing loan to improve your credit score.
  • Before you apply for any loan or credit card, make sure that you have narrowed down your options. Multiple applications lead to lower credit scores.
  • Maintain a good balance between your secured and unsecured loans
  • Avoid applying for credit cards unnecessarily
  • Do not increase the credit card limit too often
  • Making use of cash withdrawals on your credit card too frequently is an indication of a poor financial condition and shows that you do not have enough income sources.

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CIBIL Score for Personal Loan FAQs

What should be the credit score for a personal loan?

Credit score requirement for Personal loans differs from lender to lender based on different types of criteria. Most banks require customers to have a CIBIL score of 700 or above. However, in case of balance transfer and debt consolidation requests, some lenders may lower their CIBIL score requirement while compensating it with the rate of the interest charged from the customer. 

What if you don’t have a CIBIL score?

If you don’t have a CIBIL score, banks will be reluctant to accept your personal loan request. In such cases, customers can avail a loan from a cooperative bank, private lender or some online lenders. You can also approach the bank with which you have a long banking relationship. However, it is always useful to build and maintain a good credit score as other available alternatives may involve a higher rate of interest. Customers with zero score can also apply for a secured loan against any asset, such as gold, property, deposits, etc.