The Ideal CIBIL Scores for Different Types of Loans - Loan Trivia


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Friday 10 May 2024

The Ideal CIBIL Scores for Different Types of Loans

The CIBIL score or credit score usually ranges between 300 and 900, determining a borrower's creditworthiness. To obtain approval for a loan application, a borrower has to maintain a good CIBIL score. 

Doing so not only helps them meet the eligibility criteria for that particular loan but also allows them to get improved terms on their credit. Potential borrowers can read along to determine the ideal CIBIL scores for different credit types. 

Ideal CIBIL score for a secured loan 

The CIBIL score necessary for a secured loan may differ from lender to lender, however, it ranges from 625 to 750 and above. In this range, if a borrower's credit score is on the lower side, they might be eligible for a loan, but loans may come with slightly higher rates. 

Ideal CIBIL score for an unsecured loan

For approval of unsecured loans like business loans and personal loans, a borrower's CIBIL score has a very crucial role to play. Depending on the range of one's CIBIL score, their credit application might get approved or rejected. 

A score above 750 is ideal for such loans. A borrower with a score between 600 to 750 can be eligible, but, they may get approval for a lower amount or have to pay higher interest.   

Factors that affect your credit score 

To get the benefits of a good credit score take the following factors into consideration: 

  1. Outstanding debt

Individuals can miss out on regular payments for various reasons. Outstanding debt, and missed EMI payments impact credit score negatively. 

  1. Error in the credit report 

Institutions can make mistakes and negatively impact one’s credit report badly. 

  1. Debt history 

Closing a loan account after complete repayment, many individuals also delete all debt history, which results in no credit rating. 

  1. Credit utilisation ratio 

A high credit utilisation ratio (money available as credit: money spent) or higher than 30%, which is ideal, will negatively impact the CIBIL score.  

  1. Mix of credit 

A good mix of secured and unsecured loans reflects a borrower’s capability of handling all kinds of loans and EMIs, improving the credit score. 

  1. Application for credit card 

Multiple applications for credit cards reflect one's credit hungriness and decrease credit score. 

How to keep the CIBIL score good? 

Potential borrowers can go through the following points and master these essential habits to maintain a good CIBIL score: 

  1. Timely repayment of credit dues 

Setting monthly reminders or even automating EMI payments ensures that a borrower never misses out on their instalment payments. 

  1. Have an assortment of credits 

A borrower with a healthy mix of unsecured and secured loans is a versatile credit user and improves credit score considerably. 

  1. Limit credit utilisation ratio 

Increasing one's credit card limit is an easy way to boost CIBIL score. However, it only works if one's spending does not increase proportionally. 

  1. Frequently check the credit report 

By keeping the credit report in check, a borrower can minimise errors on the report, and get an understanding of their financial health.  

  1. Opting for debt consolidation

A borrower can get a debt consolidation loan if they are finding it difficult to handle multiple ongoing loan repayments.  

Many financial institutions extend pre-approved loans for their loyal and long-standing customers. This offer is applicable for a variety of financial products including secured and unsecured loans. It reduces the hassle of obtaining a loan and helps a borrower get ahold of the money quicker. To check for eligibility one must visit the lender's website and give specific inputs. 

If a borrower considers the factors and implements the best practices it would be fairly easy to maintain a good CIBIL score. Whether a borrower’s credit score is at the low or high side of the 600 to 750 (and above) range, improving or maintaining it is essential to get quick loan approvals.

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