What is the minimum credit score you need for personal loan and how to achieve it? | Mint

If you are planning to raise a personal loan, it is important for you to know that your credit score should be high. For those who are unaware, credit score is the measure of a borrower’s creditworthiness.

Lenders require personal loan applicants to have a good credit score which means the borrower is worthy of taking an unsecured i.e., personal loan.

But what is a good credit score and how can you achieve it? We explain it here.

Although different lenders have different criteria, a good credit score required to be able to raise a personal loan is 700 or above.

An impressive credit score is considered to be 750 which is not only good for raising a loan but also to procure a tempting interest rate offer.

Tips to follow to improve the credit score

1. Monitor the score: First of all, it is vital that you monitor your credit report on a regular basis. It could, at least, be once a year or more frequent, if possible.

2. Rectification: In case you spot an anomaly in your credit report, you could get it rectified by reaching out to the credit information company such as CRIF High Score.

3. Credit card bills: Clear your credit card bills at the earliest. Do not just pay the minimum amount. 

4. Low credit utilisation ratio: Another key method to maintain a good credit score is by keeping a low credit utilisation ratio (CUR). This ratio refers to total credit divided by available credit. For example when your credit limit is ₹10 lakh and you have already taken credit for ₹4 lakh, then your CUR would be 40 percent.

5. Secured credit card: If you don’t have a credit profile or a low score, you can opt for a secured credit card. This helps borrowers to build their credit score over a period of time.  

(Note: Raising a loan comes with its own risks. So, due caution is advised)