Did you know that your bank checks your credit score before sanctioning a personal loan? If your credit score doesn’t meet the minimum eligibility criteria of the bank, then your loan application is likely to be denied! Continue reading to know the significance of credit scores for personal loans and how to check your credit score for free before applying for a loan.
The Role of Credit Scores in Personal Loan Approval
Personal loans are unsecured loans – meaning a borrower doesn’t have to submit collateral, pledge an asset or provide a guarantee to the lender. If that’s the case, then how do lenders evaluate potential borrowers? How do they separate risky borrowers from trustworthy borrowers?
This is where the credit scores and credit report of an individual come into the picture. The credit score is the deciding factor for a personal loan. Lenders determine your creditworthiness and loan repayment capabilities using your credit score and your credit report.
When you apply for a personal loan with a poor credit score, the application is likely to be rejected, which in turn causes your credit scores to drop further. So, if you’re planning to take a personal loan, then it’s highly recommended to check your credit score before proceeding with the loan application.
There are several ways to check your credit score for free online. Let’s take a closer look at some of the top methods to get your credit score.
Method #1: Directly from the Credit Bureau
The four credit bureaus in India – Equifax, Experian, TransUnion CIBIL™, and CRIF Highmark-must provide credit scores for free once a year. Follow the steps given below to fetch your credit score directly from your preferred credit bureau.
- Login to the website of your preferred credit bureau. For example, if you want to check your CIBIL ™ score, you have to visit the CIBIL™ website.
- Check for the tab/button, “Get your Free Credit Score & Report.”
- Next, you will be directed to create an account by providing a few key details like your name, email ID, and mobile number.
- To check your credit score, it’s mandatory to provide your PAN number.
- Once you have provided these details, you will be required to complete the verification process by entering the OTP sent to your mobile or email.
- Complete the verification process and go to your account dashboard on the credit bureau’s website.
- You can view your current credit score and your credit report, containing details about your credit transactions and other credit records.
The next time, you don’t have to create an account. Instead, you can directly log in to your account using your user ID and password and check your credit score.
*However, note that credit bureaus offer a free credit score only once a year. If you want to check your credit score more frequently, you have to pay for a subscription plan. This brings us to the second method.
Method #2: Via CreditMantri, India’s No.1 Credit Portal
CreditMantri is India’s most trusted credit resolution services provider. The company also offers customers an easy and hassle-free way to check their credit scores for free any number of times.
Here are the steps to follow to get your credit score from CreditMantri:
- Visit the website www.creditmantri.com and click on the “Free Credit Score” tab.
- Enter your mobile number and click on check for free.
- If this is your first time logging into the site, you will be required to provide a few basic details like your name, email address and PAN number.
- Once you provide your details, you get your latest credit score for free directly from the credit bureaus.
Besides the credit score, you can also access several other features like your credit health report, financial wellness indicator, credit monitoring and more directly from the CreditMantri dashboard. CreditMantri also provides you with the best loans and credit cards in the market, matching your credit profile.
Here are a few points to keep in mind while checking your credit score online:
- Checking your credit score does NOT hurt it. When you check your credit score by yourself, either directly at the credit bureau’s site or any other portal like CreditMantri is considered a soft enquiry. Soft inquiries do not hurt your score. So, you can check your credit score any number of times without being worried.
- It’s highly recommended that you monitor your credit score frequently to know where you stand and what correction steps to take if needed.
What’s a good credit score for a personal loan?
A credit score is a three-digit number that lies between 300 and 900. The higher the score, the better are your chances for personal loan eligibility. Most lenders for personal loans prefer a score above 750.
Here are the different credit score ranges and what it means for your Aloan application:
|Credit Score Range||What does it mean?|
|NA/NH||This means you’re new to credit, and you don’t have any credit account previously. If your credit score falls in this range, lenders may not offer you the best interest rates since they don’t have any proof of your creditworthiness.|
|350 – 549||A score in this range is considered poor, and your personal loan application is most likely to be rejected.|
|550 – 649||A credit score in this range is considered fair; only a few lenders approve the application, and even if the loan is granted, the interest rates are high.|
|650 – 749||A score in this range is considered good, yet you may not be able to secure the best interest rates.|
|Above 750||A credit score in this range is considered excellent and fetches you instant approval on your loan offers; it also gives you negotiation power to secure the best deals and interest rates.|
Before You Leave
The higher your credit score, the better are your chances of getting your personal loan application approved. Additionally, a good credit score fetches you the best loan interest rates and other value-added benefits like flexible repayment terms, higher loan amounts and longer tenures.
Make sure to check your credit score online before you apply for a personal loan to know where you stand and what steps can be taken to improve your score if needed.