In the world of financial products today, although applying for a personal loan has become easy, you still need to go through various background checks to get a personal loan. For instance, when applying for a personal loan, the importance of having a strong credit score cannot be undermined.
When consumers apply for credit, their CIBIL score is one of every financial institution, and the bank looks at crucial indicators. TransUnion CIBIL works with most of every bank to assess the creditworthiness of millions of people and businesses. A high CIBIL score highlights both your financial management and your ethics. Let’s decode the credit score to understand where you stand in terms of getting credit:
850-900: It demonstrates that you have never defaulted and is an excellent score.
750-850: It is a fact that borrowers with a credit score of 750 or higher receive 79% of all loans approved. With a score of 800 or above, one may easily negotiate a reduced rate on personal loans and credit cards.
700-750: For secured loans, this is a decent score. However, the bank may conduct further research (such as a social score) for unsecured credit or charge slightly higher rates.
500-700: This denotes that you have previously delayed or defaulted. Personal loans from banks might be difficult to avail of. A private financier or private bank may charge a high rate of interest.
300-500: Such a low score demonstrates far too many inconsistencies in previous loan repayments that cannot be ignored. It won’t be easy to obtain a loan from any bank in the country until you work on credit repair or improvements.
It’s not the end of the world if you fall under a low credit score. It’s important to remember that significant changes in your credit score and ‘improvements’ on your credit report will take at least six months.
If you manage your debts properly, your credit score will rise. For instance, as credit card works on revolving credit and how it can quickly become unmanageable if not appropriately managed. In this situation, paying off credit card debt with a personal loan is a prudent decision. This implies you’ll pay less interest and have more time to manage your problem.