One of the crucial considerations that lenders check when you apply for an instant cash loan is your credit score or CIBIL score. A high credit score shows that you are financially stable, facilitating smoother financing. A salary loan is one of the most flexible debt instruments that you can avail to address your financial crisis. It comes with easy processing, quick disbursal, zero collaral, no end-use restrictions and easy repayment. But in order to avail a salary loan, you must maintain a good credit score.
Read on to understand all about credit scores in details.
What is credit score?
Credit score is an indicator of a person’s creditworthiness. It is a three-digit numerical expression that range between 300 to 900 and is based on a thorough analysis and examination of their credit reports and history. A good CIBIL score is between 720 and 900 and is entirely based on the borrower’s credit history and behavior. The borrower gains many advantages, including quick approvals, lower interest rates, larger loan amount and better loan terms.
A credit score of 750 or more is considered excellent for an unsecured loan. A borrower with a high credit score is more likely to receive the best interest rate and benefits from a quicker loan approval process. In the long term, it helps save money and time.
Credit Score Range
Maintaining a good credit score can be beneficial for multiple reasons if you plan to avail a salary loan or an auto loan at any time in the future. Banks conduct due diligence to confirm a your ability to repay and financial responsibility.
One factor that the lenders consider is the credit score range. Below are different credit score ranges that describe different creditworthiness levels:
750–900: This range is regarded as good and shows that you have excellent financial management skills and are a highly creditworthy individual. The likelihood of a loan being approved is highest for this score range.
700–750: The creditworthiness won’t be questioned because this range is regarded as safe. Most lenders require a minimum credit score of 750 for personal loans, and the likelihood of loan acceptance is high.
650–700: A home loan, which is a secured loan, requires a CIBIL Score of 650–750. Despite being a decent score, you might not be able to get a personal loan with this score quickly. Even if lenders offer you personal loan, the loan terms will not be very favourable.`
600–650: This range is not deemed realistic because your creditworthiness will significantly decline. If you don’t attempt to raise your credit score before applying for a loan, your chances of getting one are pretty slim.
Below 600: This raises serious concerns about your ability to make payments and financial stability. Information about settled and written-off accounts will be included in your credit report. With such a financial history, receiving approval for a home loan will be extremely tough.
Benefits of A Good Credit Score
A high credit score offers many advantages. That’s why you must always aim to maintain a healthy credit score. It not only improves your loan eligibility but also brings you the best offers in credit cards and personal loans.
Some of the benefits of having a good credit score are:
- Chances of Higher Approval
A lender retrieves the credit report and examines the credit score when you apply for an instant cash loan or credit card. Every time one of these so-called ‘hard inquiries’ is made, your credit score takes a hit. If your application is denied, the consequences could be disastrous. However, if you have a high credit score and a good track record of making loan payments on time and in full, you have a far higher chance of getting approved for a loan.
- Lower Interest Rates
Having a high credit score has several advantages, but one of the biggest advantages is that it makes you eligible for loans at lower interest rate. Interest is assessed in accordance with the risk associated with your profile. A high credit score indicates excellent creditworthiness and prompt and regular payback of previous loans. Because there is little chance of default, the benefit is reflected in comparably low interest rates.
- Higher Loan eligibility
A high credit score shows that you are a deserving and trustworthy borrower. Therefore, the lender might be willing to give you a higher credit limit on your card or a higher loan amount. The loan amount will also depend on your total montly income, and your current income-to-debt ratio.
Conclusion
The limits of maximum and minimum credit score required varies from lender to lender. If you apply for a loan through a peronsal loan app, then the required credit score can be much lower than that requested by traditional lenders. You can download a loan app and compare the loan terms specified by different lenders.