A CIBIL Score is a personal credit rating that proves a borrower’s credit worthiness. The score ranges between 300 and 900. The higher the score, better is the chance to get a personal loan approval. A personal loan for CIBIL Score of 500 is difficult to get. Banks and NBFCs prefer CIBIL Score of 750 and above to approve a personal loan. However, a few lenders may approve the loan for score of 550, but at a higher rate of interest, fees, and charges.
In the below post, we will discuss about what a personal loan is, CIBIL Score 550, personal loan for CIBIL Score of 550, factors responsible for a low credit score, how to improve your CIBIL Score, disadvantages of applying for a loan with low CIBIL Score, and FAQs.
A personal loan is an unsecured loan. It is a multipurpose loan with no restriction on the end use. Thus, you can use the loan amount for any financial need. Several borrowers take this collateral-free loan to meet their emergency needs such as medical contingency, home improvement/repair, educational expenses of children, big-ticket purchase, travel, wedding, and more.
Being an unsecured loan, banks and NBFCs strictly analyse your credit history, income, existing financial liabilities, employment history, etc, to decide whether to lend or not. As the lender does not take any security to provide funds, it reviews your financial position.
Only a few lenders may provide a personal loan for CIBIL score of 550. This is because, 550 is not worthy enough a credit score to provide an unsecured loan. You must check all the available offers from lenders who offer low credit score personal loan. Compare the interest rates, fees, and charges, besides other terms and conditions.
Your credit score can change based on your financial transactions such as EMI payments, credit card bill payments, missed/delayed payments, closure of accounts, and more. Thus, your personal credit rating is not a static figure. It may increase and decrease with each of the said transactions. The credit score 550 indicates your financial behaviour needs an improvement. You have made a few regular payments, but defaulted/missed several.
A score of 550 is not sufficient to take a personal loan from a leading bank or NBFC. The CIBIL Score 550 signifies that you have made a few mistakes down the line when handling credit, leading to a low score. For a lender, a low CIBIL score is a warning sign. It may discourage the loan-provider from trusting you with credit. Most banks require you to have a minimum credit score of 750 to consider your personal loan application.
It is not advisable to lower your score further by applying for a new loan before boosting your CIBIL score. Every time you make a fresh enquiry for a credit card or a loan, the bank pulls up your credit report. This is considered as a hard inquiry, and greater the number of recent hard inquiries means your credit score will take a hit. Thus, if you are in need of an emergency loan, approach short-term lenders or microfinance companies, who may provide a personal loan with credit score 550.
A good CIBIL Score can help you in times of financial difficulties. It can open doors to credit at favourable terms. Thus, you must strive to improve your credit score if it is as low as 550. After knowing your score, you can work on the factors responsible for lowering it. Below mentioned are the reasons for a low credit score:
Here are a few tips on how to improve your CIBIL Score:
In times of financial emergencies, you may have to apply for a personal loan immediately even with a low CIBIL Score. But there are several disadvantages attached to applying for the loan with 550 as CIBIL Score.
Here are the following FAQs:
Your repayment history, mixture of credit, enquiries, utilization of credit, and duration of credit services influence the credit score.
The suitable CIBIL score for a personal loan is 750 and above. The closer the score is to 900, higher are the chances of getting a loan approval.
As understood, the lenders may charge a higher rate and fee for a personal loan that has been approved on a low credit score. So firstly, you must check and compare the loan amount, fees, charges, and rates offered, before narrowing down the options. After this, you may compare the reputation of the fund-provider, service, customer satisfaction, and other factors and pick the best offer.