Have you taken any loan earlier? Or this is your first time?

And you don’t understand some terms. If yes, then no need to worry. We are always with you.

Today we are going to discuss “what is personal loan score” and try to cover all the related topics in brief.

I hope this article will clear all your confusion. So let’s start…..

What is personal loan score? 

A personal loan is based on your credit history, payment history, and debt-to-income ratio that reflects your creditworthiness. Simply, it is a numerical score. This score is provided by the lender who provides the loan or else by the financial institution.

In simple language, a personal loan score is the grade card of your financial behaviour. It is easy to find out what was your result in school, what kind of student you were by looking at your grade card,

Similarly, a personal loan score shows how you are managing your finances. Just like having a good grade card increases your chances of getting admission in a good college, similarly having a good personal loan score makes it easier for you to get a loan.

Read Also:- How To Get Loan From App In India? / Loan Resource App Review: Best Guide For Quick Loan

Importance of Personal loan score.

Personal loan score is also called a credit score or credit rating by many people. The importance of a good personal loan score and a bad personal loan score are discussed here.

All the points are mentioned below in detail-

1. Loan Approval

When you apply for a personal loan the lender thoroughly verifies your profile and checks your loan score whether you are eligible or not. 

if your credit score is good it means your credit risk is low and it becomes easy for you to get loan and the chance of getting your application approved is 100%

But if your credit score or personal loan score is not good, then it is a little bit difficult for you to get a loan.

2. Better Interest Rate

A person who has a very good credit score has a high probability of getting a loan as well as a good interest rate because he never fails to pay the interest of his loan on time

But a person whose credit score is not good, the interest rate of the person is likely to be high.

3. Loan Amount

Lenders easily offer loans to the person whose credit score is good and also get as many loans as they want, but it is difficult to get the desired loan amount for the one whose loan score is not good.

4. Flexible Loan Terms

Those who have a good loan score, they get the opportunity to be flexible, such as taking a loan for a long time, getting more time to return the interest etc.

But those who do not have a good credit score, they have to strictly fulfill all the terms and conditions at the time of taking the loan.

5. Easy Access to Credit 

It is not that your good loan or credit score is useful only for loans, it is also important in credit cards or mortgages.

It is very important to remember one thing that loan score or credit score is not the only factor when you go to apply for a loan.

————————————

How to check personal loan score?

For checking your personal loan score, you can go through the credit bureaus authorized by the Reserve Bank of India (RBI).

The credit bureaus collect information from different financial institutions and provide you credit score by collecting your data where you can see the loan score.

How to check personal loan scores –

Step 1:- First, you have to select the credit bureau according to your choice. And there are 4 major credit bureaus in India such as TransUnion CIBIL, Equifax, Experian, and CRIF High Mark and all of them authorized by RBI.

Step 2:- All the bureaus have their own separate official website, you can select the website according to you and login the website.

Step 3:-  After that, you have to provide your personal information like full name, date of birth, permanent address, contact details and identification document like PAN, Passport, Aadhaar field.

Step 4:-  After this your identity will be verified by looking at whatever information you provided to the credit bureau. You may also be asked security questions during verification.

Step 5:-  To get all this information, you have to make a nominal amount payment on the website of the credit bureau, which you can easily do online on that website.

Step 6:-  After all the information and payment is done, you can check the credit report online. Also credit-related information such as personal loan score or credit score, credit history, credit card usage, and any late payment or default payment.

————————————

What are the factors that affect personal loan score?

There are many factors that affect personal loan score, the main factors that affect a personal loan score are –

1. Payment History

– Timely payments positively impact the score.
– Late payments, defaults, or collections have a negative impact.

2. Credit Utilization

– Keeping credit utilization below 30% is ideal.
– Higher utilization suggests a higher risk.

3. Credit History Length

– Longer credit history is beneficial.
– The age of oldest account and average age of accounts are considered.

4. Credit Mix

– A diverse mix of credit types is favourable.
– Handling different types of credit responsibly is important.

5. New Credit Applications

– Multiple credit inquiries within a short period may lower the score.
– Recent credit accounts can impact the score.

6. Credit Account Balances

– Lower balances are preferable.
– High balances relative to credit limits can negatively affect the score.

7. Public Records and Negative Information:

– Bankruptcies, foreclosures, liens, or judgments have a severe negative impact.

————————————

How to improve personal loan score?

Improving your personal loan score takes time and responsible financial habits. Here below are all those points for which you can improve your credit score –

• Pay bills on time: Ensure timely payment of all bills.
  
• Keep credit utilization low: Use a small portion of available credit.
  
• Manage debt effectively: Make regular payments and reduce outstanding balances.
  
• Maintain a diverse credit mix: Have a variety of credit accounts.
  
• Avoid opening multiple credit accounts at once: Limit new credit applications.
  
• Regularly check your credit report for errors: Monitor and dispute any inaccuracies.
  
• Avoid closing old accounts unless necessary: Length of credit history matters.
  
• Build a positive credit history gradually: Start with small, manageable credit options.
  
• Be patient and consistent: Improving your score takes time and responsible habits.

————————————

What is personal loan score in Cibil?

The personal loan score in CIBIL (Credit Information Bureau India Limited ) is a three-digit numerical representation between 300 to 900 of an individual’s creditworthiness based on their credit history and financial behaviour.

CIBIL is a reputed credit bureau organization in India and this bureau collects data from various financial institutions and helps you in obtaining credit scores.

Difference between Personal loan score and Cibil score.

Can I check my personal loan score for free?

Yes, definitely you can check your personal loan score for free. If you want to check your credit or personal score for free then there are many websites in India like CRED, Paisabazaar, Bajaj Finserv etc.

As already mentioned above, you can also check your loan or credit score easily through credit bureaus, for which you have to pay a minimal fee in a year.

I hope you liked reading this article, Thank You…..