Consistently improving your credit score has now become indispensable. It gains even more importance as a high credit score increases the chances of securing personal loans, credit cards, and other credit lines on better terms and conditions.
Lending, particularly personal loan distribution, is on the rise due to increasing digital transformation, evolving consumer needs, and consistent efforts by lending institutions to attract more clients. This brings to mind the essence of individuals’ creditworthiness and repayment histories, because without a solid credit profile, securing new loans is nearly impossible.
“A higher credit score reflects financial discipline and directly boosts your borrowing power. It assures banks of timely repayments, reducing NPA risks, and in return opens the door to bigger personal loans with better terms, creating a win-win for both borrowers and lenders,” says Abhijit Paul, Co-Founder at Fynocrat Technologies.
Why does a credit score matter for personal loans?
A credit score is simply a three-digit number ranging from 300 to 900. It indicates how responsible and reliable a borrower is in repaying debts. Lending institutions view credit scores of 750 or above as excellent, providing not only faster approvals but also lower applicable personal loan interest rates, bigger approval loan amounts, flexible repayment tenures, and swift digital disbursals.
For example, borrowing profiles with credit scores near 780 generally get personal loans up to ₹10 lakh at rates starting from 9.99% along with flexible and easier repayment terms. Whereas, individuals with scores around 640 may find it difficult to secure personal loans. Not only this, even if they can secure a loan, they may receive smaller amounts with interest rates exceeding 15% along with strict repayment terms.
Credit score and loan approval probability
| Credit score range | Creditworthiness | Loan approval probability |
|---|---|---|
| 800-900 | Excellent | Very high |
| 750-799 | Very good | High |
| 650-749 | Good | Moderate to high |
| 550-649 | Fair | Possible with higher rates |
| 300-549 | Poor | Low/ very difficult |
Note: The credit score range discussed above is illustrative and subject to change. For complete details, refer to the respective credit bureau website.
Furthermore, as a responsible borrower, one should be careful with debt. Following fundamental rules, such as not sending too many credit applications within a short period of time. Ensure that the total EMI amount never exceeds 40% of your total monthly income are some key essentials that individual borrowers should always keep in mind while going ahead with any form of credit.
How to improve your credit score for bigger loans?
You can improve your credit score for bigger loans by:
In conclusion, with rising competition among lending institutions, borrowers with solid credit profiles and high credit scores can easily secure bigger and better personal loans at the most lucrative rates, enabling them to seamlessly meet lifestyle, wedding, or educational requirements.
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Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards, and credit scores. Mint does not promote or encourage taking credit, as it comes with a set of risks, such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.