Yes, you can apply for a personal loan online or offline even if you have a low credit score, but there are certain caveats. To understand them, we first need to dwell upon the importance of a credit score and how you can improve yours.

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What is a Credit Score?

Also called CIBIL score, your credit score is a number that lies on a scale from 300 to 900 points. It helps lenders decide your creditworthiness or capacity to repay a loan. A credit rating above 750 is considered excellent and could help get approval of a personal loan at lower interest rates. If your CIBIL score is below 750, you can still apply for a personal loan, but the interest rate might be slightly higher.

Simply put, the higher your CIBIL score, the better your chances for loan approval at the lowest possible interest rate. But, this does not mean that your chance for approval of personal finance drops steeply with a less than ideal credit rating. Individuals with both - high and low CIBIL score - are eligible to apply for a personal loan, however, the interest rates for both will slightly differ.

How Can I Improve My CIBIL Score?

If you plan to apply for personal finance, we recommend improving your CIBIL score beforehand to get the best possible interest rates. Fortunately, you can boost your credit rating in just a couple of months, maybe even less. Taking your CIBIL score above 750 requires you to follow these three steps.

Check Your Latest CIBIL Score

If your score is already above 750, there is no real need to boost it further. But, you need to cross-check the score by logging on to the CIBIL website and calculating your rating. If your score is lower than 750, you will be able to see the reasons for the same. The report will tell you whether you have defaulted on any previous loan EMIs or have outstanding dues.

Pay Your Credit Card Bills on Time

Don’t delay your credit card bill payments and stay within your approved credit limit. While a couple of delayed payments might not hamper your CIBIL score, more than a few will. Further, don't go to the very limit of your credit utilization ratio. If your credit utilization is high every month, it might negatively affect your CIBIL score.

Repay Previous Loan EMIs on Time

If you have an ongoing loan, do not default on the EMI payments. Paying your EMIs on time for a home or vehicle loan boosts your credit rating. It also highlights you as an ideal borrower capable of making timely repayments.

Additionally, avoid taking too many loans before applying for personal finance. Even if you have a decent CIBIL score, a borrower profile overloaded with loans is rarely ideal for a bank.

The Bottom Line

In addition to these three simple steps, here’s a bonus tip - don't generate your CIBIL report more than once a month. If you check your CIBIL score too many times on the CIBIL website, it might raise the alarm with the authorities.

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