Be it renovating the house or going on a dream vacation, an instant personal loan always has your back. But there is one thing you just can’t overlook, and that is your credit score. This three-digit number proves to lenders that you are a responsible borrower.
How? Well it considers your past and present when it comes to your handling of and experience with credit. No matter which loan apps or websites you use to apply for a personal loan online, your credit score takes centre stage when the time comes for financial companies to assess if you are worthy of credit.
Think of it like a red, orange or green light – if the financial institution sees your score in the green range, you will get faster approval and pocket-friendly loan terms.
What Is A Credit Score All About?
In India, credit score is often referred to as CIBIL score since the score assigned by CIBIL is popular. However, there are other trusted companies that assign your score such as Experian, Equifax and CRIF High Mark.
Here are some facts that will help you understand more:
- It is a numerical representation of your credit history.
- It summarises how well you have managed loans and credit cards in the past
- It records your current debts and obligations
- It ranges between 300 and 900
Why Does Credit Score Matters When It Comes To Personal Loan Approval?
When you apply for personal loan, financial companies want to make sure that you’ll be able to repay it. Your credit score gives them a quick insight into your financial behaviour and sense of responsibility.
It answers the question: Are you someone who pays bills on time, keeps credit card balances low, and manages debt responsibly?
| Why It Matters | Details |
| Pay Heed to First Impressions | Your credit score is the first thing lenders check when reviewing your loan application. If your score is high, it’s like walking into a meeting with a stellar reputation. On the other hand, a low score can make lenders cautious from the start. It may not completely ruin your chances, but it will certainly raise questions. |
| Determines Loan Approval | A strong credit score (generally 750 and above) shows that you’re a low-risk borrower. A lower score may still get you approved, but you might face stricter terms or even rejections. |
| Affects Loan Terms and Interest Rates | Even if your loan gets approved, your credit score can impact the terms of your loanA higher score can get you lower interest rates, which means lower monthly payments and less interest over timeOn the other hand, a lower score could result in higher rates, making the loan more expensive overall |
| Shows How You Manage Debt | Your credit score reflects how well you handle borrowing and repaymentLenders use this score to assess whether you’ll be able to repay the loan on timeLate payments or large debts can indicate poor financial habits, and lenders may see that as a red flag |
| Helps You Qualify for Higher Loan Amounts | If you have a high credit score, lenders may be more willing to lend you a larger amountThis could be especially important if you’re applying for a mortgage or a big-ticket item like a car loan |
Improving Your Creditworthiness
If your credit score isn’t where you want it to be, don’t worry. It is possible to improve it. First, it all starts with knowing the numbers of active loans and cards you have. Make sure you download your credit report and ensure you are aware of all your obligations.
Once you do that, here are a few tips that can help:
| In Short | Reason Why It Matters |
| Pay Bills on Time | Late payments can hurt your credit score significantlyMake sure to pay your bills—credit cards, loans—on time every month |
| Keep Credit Card Balances Low | Try to keep your utilisation ratio (the percentage of your credit limit you’re using versus what you’ve been assigned) below 30%If you’re maxing out your cards every month, it shows financial mismanagement to lenders |
| Limit New Credit Applications | Every time you apply for a new credit card or loan, it results in a hard inquiry of your credit report/scoreThis can lower your score |
| Check Your Credit Report for Errors | Sometimes, your credit report may contain inaccuraciesRegularly check your report for errors and dispute anything that seems incorrect |
| Use Old Credit Accounts Wisely | Closing old accounts can hurt your score because it shortens your credit historyIf possible, keep old accounts open and in good shape |
How to Check It Like a Pro
Now that you know why knowing your credit score is so important for loan approval, understand how you can check it for free. Simply download the OneScore app on your mobile and check your Experian & CIBIL scores in an instant.
This app helps you get lifetime-free credit reports and track all your loans and repayment history in one place. Its user-friendly interface keeps all spam away so you can focus on your score and nothing else.
You can also get personalized insights on how to increase your credit score and even set a target you want to reach. So what are you waiting for? Install the OneScore app to build a better credit history today!
