A personal loan is one of the easiest ways to get a decent amount of money to see you through a bad patch or to spend on planned expenses. If you can provide your lender with minimal documentation about income continuation and have a good credit history and score, you become an ideal candidate for quick personal loans.
A credit score can be a pivotal number when you are looking to get a personal loan. Good credit history can get banks and NBFC’s sending you pre-approved offers for loans and offer reasonable personal loan rates. A good credit card score does not guarantee that you will get a favorable loan as there are other factors like your repayment history and your employment status that affect your creditworthiness.
How the credit score impacts personal loan rates
The credit score may be measured by independent agencies like CIBIL, Equifax, and Experian. The most common one is CIBIL. A score of over 700 is considered good and can get you many offers for loans and credit cards. The score ranges between 300 and 900. If you have a low score, you may have to work on the score to become creditworthy. You can repair your credit score in many ways.
- Always take a loan that you can repay quickly. There is no sense in taking a loan that you do not need. Not only do you end up paying excessive interest, but you also create an outstanding loan on your name.
- Always pay your EMIs on time. It is a good idea to pay credit card bills in full on time. If you pay just the minimum amount due on the credit card, it will reflect poorly on your score. Most credit scores will not take into account your utility bill payments, but it is a good idea to pay them in full on time.
- It is a good idea to keep your credit within 50% of the total credit you can get. It makes for an excellent way to prevent getting reasonable offers on loans. Overutilization of credit may lower your credit score and also jeopardize your chances of getting a favorable loan.
- There is a chance that you have been approached by many credit card companies and have opened many credit lines. You might have also taken a new personal loan. If your credit lines are new, you are likely not to get an excellent personal loan rate. This is because the lender thinks you are credit hungry and may mark you as a person who is expected to default on payments. It is a good idea to maintain old lines of credit, as the age of the loan also shows your repayment capacity.
- There is no hard and fast rule about what your credit score should be when you apply for quick personal loans, but a score of seven hundred and above is considered a good score. The higher your score, the better rate of interest you are likely to be offered.
- Some lenders will offer you credit even if your credit score is 600 and above. But the catch is that beggars can’t be choosers. The interest rates could be high, and you will hardly have any negotiating power about rates, processing fees, and tenure.
Your credit score shows your pattern as a borrower. The healthier the score, the better your repayment pattern generally is. If your rating has dipped due to loan settlements and defaults, do not despair. It is possible to build your score up if you are vigilant. All it takes is a little patience, discipline, and consistency.