What Is the Minimum Credit Score Required For Personal Loan?
13 August, 2024
Synopsis
A credit score helps lenders evaluate the risk of lending you money.
Banks have a minimum credit score requirement of around 700+ points to consider you eligible.
You can improve your credit score by paying off your EMIs and Credit Card bills on time.
Whether you are eyeing a dream vacation or a home renovation, knowing where you stand on the credit score spectrum is important. In this guide, we will explore the minimum credit score required for obtaining a Personal Loan, its importance, factors affecting credit scores and how to improve minimum credit score for Personal Loan.
What Is A Credit Score?
A credit score is a 3-digit number ranging from 300 to 900, determined by government-approved credit bureaus. It indicates your creditworthiness based on factors like your payment history, credit utilisation, credit history duration, types of credit used and latest credit inquiries.
A higher credit score signifies lower credit risk, making it easier for you to obtain loans and credit at favourable terms. Conversely a lower score indicates higher risk, leading to potential loan rejections or higher interest rates.
The Importance of Credit Scores in Personal Loans
Following are the reasons why credit score is important:
Risk Assessment: Lenders use credit scores to gauge the likelihood of you defaulting on a loan. A higher score indicates a lower risk of default, making it easier for you to secure a loan at favourable terms.
Interest Rates: If you have a higher credit score, you will be offered loans at lower interest rates. This is because you are considered a low-risk customer. Conversely, if you have a lower score you may face higher interest rates due to the perceived higher risk.
Loan Amount and Tenure: A good credit score can influence the maximum loan amount and the repayment tenure quoted by the lender. Higher scores often lead to higher loan amounts and more flexible repayment terms.
Minimum Credit Score Requirement
Banks and Non-Banking Financial Companies (NBFCs) have different minimum credit score criteria for Personal Loans. Major banks typically require a credit score of 700 or above for loan approval, offering better interest rates and terms to higher-scoring applicants.
Getting a Personal Loan without credit score or with minus one (-1) as credit score is not possible.
Steps to Improve Credit Score
Improving minimum credit score for loan is a gradual process, but it can be achieved through disciplined financial practices:
Ensure that all loan EMIs and Credit Card bills are paid on time. Setting up automatic payments or reminders can help you maintain a timely payment record.
Paying off existing debt, especially high-interest debt, can positively impact the credit score.
Limit the number of new credit applications which will help reduce hard inquiries on the credit report.
Periodically check your credit reports for errors and discrepancies so you can promptly correct them and maintain an accurate credit score.
Ensure you do not exhaust the credit limit on your Credit Card and keep your credit utilisation limit below 30%.
Manage a mix of credit types responsibly to positively influence your credit score over time.
Maintain A Good Credit Score To Easily Get Xpress Personal Loan From HDFC Bank
Maintaining a credit score of at least 700 is pivotal for securing Xpress Personal Loan from HDFC Bank. By consistently making timely repayments, managing credit utilisation and rectifying any discrepancies in credit reports, you can bolster your creditworthiness. This proactive approach not only increases the likelihood of loan approval but also opens doors to favourable terms and lower interest rates.
*Disclaimer: Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Personal Loan at the sole discretion of HDFC Bank Limited. Loan disbursal is subject to documentation and verification as per Bank’s requirement. Interest rates are subject to change. Please check with your RM or closest bank branch for current interest rates.
