March 12, 2025 · 14 mins read
Santosh Kumar
A loan can be of great help in times of financial distress. Not only are these loans easy to get as there is no need for collateral, but there is also no restriction on the end-use. However, in order to get a personal loan amount of your choice, along with a convenient repayment term and interest rate, you need to have a good credit score.
In this article, let us understand what is the minimum Credit score for a loan.
When you wish to pursue higher education, you will have to take entrance exams, and your grade will determine your eligibility. Similarly, your credit will decide your eligibility criteria for loans. The higher the score, the greater your creditworthiness.
Your creditworthiness indicates your repayment ability. Therefore, if the lender is convinced that you will repay on time, you will easily get a loan at advantageous terms and conditions. This is why you will need to have a minimum Credit score determined by lenders to be eligible for a loan or other credit products. The minimum score for a credit card and the minimum Credit score for a loan will vary.
The minimum credit score for personal loans is between 730 and 750. Credit scores range from 300 to 900, with 900 being the highest. The higher the score, the greater the chance of getting a loan under favourable conditions.
The minimum and maximum credit score range for personal loans is between 600 and 900, although having a 900 Credit score is rare. Although 600 is the minimum, it is still hard to get loans at this score. Any number above 750 is seen favourably by lenders.
If your score is above 750, you can easily get a personal loan or any kind of loan from lenders at an interest rate and repayment tenure that suits your needs and wants. But what can you do if your credit score is lower than 730? Will you not be able to get a loan then? Luckily, this is not the case.
Read More:: What is UPI limit?
A home loan is always a secured form of loan where your home acts as a lien against the loan you are about to borrow from a potential lender. In this case, even if your credit score is around 550, you will be able to get a home loan. The catch here is – the loan amount you may be offered will be lower than what you had applied for in the first place. This is because of the low credit score. If you apply for a home loan with a credit score of 700 or above, you can be assured of being offered the best interest rates along with easy and quick approval of your loan application.
The ideal credit score for a business loan is around 600-700. However, the interest rates you will be offered depend on your credibility as a business and borrower.
Always remember that there isn't a magic number that will instantly qualify you for a loan. This is partially because getting a loan depends on many other factors besides your credit score and partly because credit agencies and lenders may have different scoring algorithms.
However, it is always a fact that the higher your credit score, the greater your chances of getting a loan offer at favourable interest rates. However, if your credit score isn't good, you will probably have trouble getting a loan.
Steps like correcting any inaccuracies on your credit report or repaying your credit card bill on time and in full can help you boost your credit score. However, the most efficient strategy to increase your credit score is to use credit responsibly and for a long time. It is difficult to predict how long it will take for your credit score to improve. Even if you are taking all of the necessary actions to boost your credit score, delays in reporting can make it take several months for it to reflect on your credit report.
Read More:: How To Change Upi Id In Paytm
As mentioned previously, if you wish to join a university, you will have to clear the entrance exams and the score that you get will determine your eligibility. This score will also have an impact on the subjects you can choose, the fee you will have to pay, etc.
Similarly, your credit score will determine your loan eligibility. Higher the score, better are your chances of getting a loan at favourable terms and conditions. Here are some of the reasons why it is important to maintain a high credit score -
A high credit score can only be achieved if one repays all loans on time, maintains a good credit utilisation ratio, has a good mix of secured and unsecured loans, and doesn't take multiple loans at the same time.
Therefore, if one's credit score is between 750 to 900, it is a good indication that he/she follows healthy credit practices. Hence, lenders will easily provide loans to such borrowers at favourable terms and conditions.
Read More:: How Is Digital Rupee Different From UPI?
Perhaps the most important criteria for borrowers, the rate of interest imposed will have an impact on your EMIs. If you have a high credit score, your lender will have faith in your repayment abilities and will therefore provide loans at lower interest rates.
If you have a high credit score and you have proven your ability to repay a loan, you will be able to avail a higher loan amount along with a longer repayment term. A higher loan amount not only works to your advantage, the longer repayment period will ensure that your monthly payments are not too high.
However, it is to be noted that longer repayment periods will result in a higher interest amount being paid over time.
Once the lender is sure of your repayment abilities, there will not be any unnecessary delays in loan approvals. Therefore, not only will you be able to get a loan at your terms and conditions, you will also get a loan easily.
Read More:: How to Reset UPI PIN on PhonePe
Maintaining a high credit score is essential but sometimes, due to certain circumstances, this might not be possible. If you are new to credit then you may not have a good credit score yet. Both these situations make it hard for you to avail a loan easily from most lenders.
Credit scores can be categorised into certain groups, and depending on which group your credit score falls into, your loan eligibility will vary.
If your credit score falls within this category then chances are that you are new to credit or you have defaulted on your loans, or followed other bad credit practices. With these scores, it will be very hard for you to get a loan.
While these credit scores are slightly better than the previous range, it is still not ideal. This is the minimum Credit score required for personal loans. You may still avail of personal loans, but the conditions will definitely not be in your favour. Either the interest rate will be high or you will not get a high enough loan amount. The good news is that you can increase your credit scores by following certain best practices.
Read More:: How to Reset UPI PIN
If your Credit score falls within this range then congratulations! You can easily get a loan of your choice. Not only will your lender give you the loan amount that you want, you will also get it at a rate that is beneficial for you.
The Credit score minimum and maximum is 600 and 900 respectively. However, just having a minimum Credit score for a loan is not enough to actually get a loan amount that is beneficial to you. Do your best to increase your credit score over time and reap the benefits.
Let’s explore some of the methods of improving your score.
Utilisation here means how much you use of the credit limit you have on your card. Surpassing 40% of your limit shows that you have a high need for credit and raises the possibility that this high usage of credit means possible defaulting in future. Get another card and spread out your credit utilisation. Never surpass 30% to be safe. 40% is the upper cutoff. The ones that don't need money are often the ones that are granted money. Also, here you can take measures to increase your credit limit so that you will never surpass 30% as well.
Read More:: What is UPI Reference Number?
Just paying the minimum is a terrible way to increase your score. Pay off the unpaid balance as soon as possible, and pay off the entire balance at that.
The fact that your balance is carrying over to the next month is an indicator that you are unable to pay your debts fully and on time, and this hurts your score. Do whatever you can to lawfully pay off the balance to see your numbers start improving. Seek assistance from benevolent friends and family and other resources you have.
For the next year, don't apply for any new loans. Loan thirsty individuals are seen in a negative light. Each loan mandates a recheck of your CIBIL score, and this counts as a hard check. As discussed before, you want to avoid hard checks at all costs.
Your Credit Score plays a significant role in the approval of your loan application. Let's check your score for free in less than 3 minutes and understand its powers.
When applying for a loan, your Credit Score is as important as your employment history, salary, and other eligibility factors. Make sure your score is at least above 750. 800 is a great number!
One of the parameters for a loan approval is the repayment history of the applicant. How do they find it? By checking your Credit Score. Good repayment history = good Credit Score.
This may be possible but be prepared for a longer processing time as banks will put in some additional checks. Moreover, you might not always get the best deal.
Read More:: How to Check CIBIL Score Without Mobile Number
Sometimes, errors can make their way into a spotless credit report and mar your lovely Credit Score. Give your report a glance before submitting your loan application to rule this out.
Avoid trouble, you must! So, let's check your Experian Credit Score for FREE! You read that right. We don't charge a rupee. Just click the link below and get started!
Where you live: Including your current and previous addresses.
Demographics and beliefs: Your age, race, colour, religion, national origin, sex, sexual orientation, gender identity and marital status. The Equal Credit Opportunity Act prohibits creditors from considering this information or using credit scores that consider this information when making lending decisions.
Income and employment: Your salary, occupation, title, employer, date employed or employment history. However, lenders may consider this information when making decisions.
Soft inquiries: A record of when someone checks your credit for a non-lending purpose. Soft inquiries are often the result of companies reviewing existing customers' credit reports, creating marketing lists or responding to preapproval requests. They can also occur when you check your own credit report or when you use credit monitoring services from companies like Experian.
Read More:: How to Get Money Back From UPI Frauds?
Checking your score is important, and keeping up with your payment history will allow you to do that. However, there are times when checking can hurt your actual score! So how do you avoid this?
1: Soft checks
2: Hard checks
Soft inquiries do not hurt your score. Soft inquiries are when an enquiry is requested by:
1: Credit bureaus
2: Third-party authorised institutes
3: An infinite amount of these checks is okay and does nothing to affect your score.
However, when a request is made by institutes such as:
1: Banks
2: Credit card companies
3: Various creditors
Your score undergoes damage. This is called a hard enquiry, and you must avoid them as much as possible.
However, please don't worry if this seems too complicated. You are entitled to a free credit report annually by the TransUnion CIBIL authority, so make sure to keep that in mind. The first one is free, but you are charged for any further reports in a year.
There are no fast and easy shortcuts to this, however. Keep in mind that your financial behaviour for the duration of 6-12 months is analysed before arriving at your score. So, the only way to improve your score is through actual perseverance, dedication and hard work.
So, there you have it. Bear in mind that even if you do happen to have a low score, don't fret too much. You might still get a loan, albeit at a higher interest rate. These measures simply ensure you are in the best position to seek loans. Keeping these facts in mind will allow you to gain control over your Credit score and allow you to nurture and grow your business into an indispensable part of the economy one day.
A credit score is a 3-digit number, usually between 300 and 90. It is created using a complex statistical model that summarises the past credit information of an individual. The number reflects the probability that a borrower will pay off the loan in a timely fashion. A high number means you have been paying off your past dues (towards loans or credit cards) regularly and have rarely delayed payment. As a result, lenders have more confidence in extending credit to borrowers with high credit scores.
A high credit score is definitely an asset when it comes to loan and credit card applications. A high credit score (closer to 900) implies that you have good financial discipline and tend to pay off your dues on time. Thus, your chances of being approved for additional credit in the form of a new loan or credit card are higher. This is so because lenders perceive borrowers with high scores as trustworthy. They notice the financial discipline of applicants and accordingly decide whether to extend new credit or not.
When you submit a new loan or credit card application, the prospective lender will access your credit score and report from one of the credit bureaus. This counts as a "hard look" and shows up on your credit report. Therefore, if you submit multiple applications within a short time period, you would be classified as a "credit-hungry" borrower and this can adversely impact your credit score.
Yes. Your role as a guarantor shows up on your credit report and if the primary applicant is unable to pay off the loan, you will have to make the balance payments. Your credit score will be adversely impacted in case you too are unable to repay the loan.
Download the app now
Download the app from PlayStore
