Home / Money / Personal Finance /  Can you get a personal loan with a low credit score?

A credit or a CIBIL (Credit Information Bureau (India) Limited) score is one of the principal factors considered by lenders while extending any loan—a personal loan or a credit line. Lenders have a threshold credit score below which they will not lend. Banks usually require a credit score of at least 650 or more for sanctioning a personal loan.

A credit score catches your conduct as a borrower and presents a synopsis of the different types of credit availed by you previously. Credit score assumes a vital part during the credit approval process.

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CIBIL and other credit bureaus such as Experian, Equifax and CRIF are where banks and other financial institutions get your credit history from. A high CIBIL score means a borrower is more credit-worthy. The higher your score, the more likely it is that your loan or credit card application will be approved. A credit score is generally determined by your credit habits, like your repayment history, credit experience, types of loans previously taken, the number of inquiries, credit utilization and overall indebtedness.

But is it possible to get a loan with a low credit score?

“Yes, it is possible. However, your loan may be smaller and the interest rate you pay may be higher. Lenders will generally ask you for evidence of income. If you can show lenders that you have a steady income with which to repay the loan, they are a lot more likely to lend. Offering an asset such as property or gold as collateral makes it easier to get a loan. You can opt for a joint loan. If your co-applicant has a high CIBIL score, it could help you get a loan based on their record," said Prithvi Chandrasekhar, president-risk and analytics, InCred, a Mumbai-based fintech firm.

Additionally, check for errors in your credit history. In some cases, an error is an actual culprit for your low CIBIL score.

There are many ways to strengthen your bureau score. You can start by making timely payments. Avoid making too many credit inquiries, and check your bureau report frequently and thoroughly.

According to Chandrasekhar, borrow only what you need. “If your needs are satisfied by a small loan, don't take a bigger loan. The higher your credit score, the bigger the loans you can get. However, don't take a big loan just because you can. A smaller loan amount is easier to pay back," he added.

Moreover, if your co-applicant has a good credit score, it could speed up your application and the subsequent loan disbursement. This depends on the policies of individual lenders.


Abhinav Kaul

Abhinav Kaul writes on cryptocurrencies and mutual funds at Mint. His previous stints include ETMarkets, Reuters Bangalore and Press Trust of India.
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