This Is the Ideal Credit Score to Qualify for a Personal Loan & Get Approved!
When you’re planning to apply for a loan, your credit score plays a vital role. It determines whether your application will get approved and how much the interest rate will be. Here are the key features of personal loans that do not require you to pledge any security:
- Financial companies get an idea of your creditworthiness through your credit score
- It is one of the key factors to get an instant loan
- Knowing the ideal credit score required and how to improve it can make all the difference between approval and rejection!
Wondering What Credit Score Is?
It is a 3-digit number that reflects how creditworthy you are. A higher score indicates better financial reliability.
| Credit Score Range | Rating | Implication |
| 750-900 | Excellent | High approval chances, low interest rates |
| 650-749 | Good | Moderate approval chances, average rates |
| 550-649 | Fair | Approval is possible, but the interest rate will be high |
| Below 550 | Poor | Low approval chances |
Disclaimer: This table is for illustrative purposes only. The actual range may vary as per different credit information companies.
Ideal Score for a Personal Loan
To qualify for a personal loan with repayment terms of your choice, a credit score of 750 or above is necessary. Financial companies prefer borrowers in this range as it signifies responsible credit behaviour.
Here is why having a score of 750+ is ideal:
- Easier approval for larger loan amounts
- Lower interest rates
- Faster processing for instant loans
- If our score is below 650, then you may still get loans, but the interest rates will be higher
Effect of This Score on Loan Approval
Financial institutions are more likely to approve your application if you have a good credit score. Here is how it affects the loan approval process:
| Credit Score | Loan Eligibility | Interest Rate |
| 750+ | High approval chances; large amounts | Low (10–12%) |
| 650–749 | Moderate approval chances | Medium (13–16%) |
| Below 650 | Low approval chances; small amounts | High (17–24%) |
Disclaimer: This table is for illustrative purposes only.
How Financial Institutions Use Your Score
Your credit score determines if you can get a loan or not. Lenders use it to find how likely you are to repay the loan. Here is how:
- Assess Creditworthiness
Lenders evaluate your credit score to understand your financial discipline.
- High scores indicate timely repayments and low risk.
- Low scores suggest a higher probability of default.
- Loan Amount & Tenure
Your credit score impacts the maximum loan amount you’re eligible for and the repayment tenure.
- Set Interest Rates
If your credit score is excellent, you can enjoy lower interest rates. This means that your loan is more affordable.
Factors Affecting Credit Score
Credit bureaus generally use certain factors to compute your three-digit credit score. These include:
- Payment History (35%)
- Timely repayment of your loan EMIs and credit card bills positively impacts your score.
- Pro Tip: Automate payments to avoid missing due dates.
- Credit Utilization Ratio (30%)
To put it in simple words, this refers to the percentage of your available credit that you use.
| Utilisation Ratio | Impact On Score |
| Below 30% | Positive |
| Above 50% | Negative |
- Length of Credit History (15%)
A longer credit history shows consistent financial behaviour, improving your score.
- Types of Credit (10%)
A balanced mix of secured and unsecured loans enhances your credit profile.
- Recent Credit Inquiries (10%)
If you have too many hard inquiries in a short span, then it can lower your score.
Why Your Score Matters for Instant Loans
For instant loans, which are approved quickly and disbursed within hours, credit scores play an even more significant role.
- High Scores: Ensure faster approval with minimal documentation
- Low Scores: May delay processing or result in rejection
Here are some of the steps you can take to improve higher score:
- Pay EMIs & Credit Card Bills on Time
The easiest way to increase your credit score is timely repayment.
- Reduce Credit Utilization
Keep your utilization ratio below 30% to maintain a healthy score.
- Don’t Apply for Loans Frequently
Applying for multiple loans within a short period results in hard inquiries, which can negatively impact your credit score.
| Application Frequency | Impact |
| Infrequent | Positive |
| Frequent | Negative |
- Monitor Your Credit Report
Check your credit report regularly. Check if there are any errors or discrepancies. If you find any, immediately report it to your bank.
- Use Secured Credit Cards
For those with low scores, secured credit cards backed by fixed deposits can help build credit.
Here are some other factors that lenders consider before approving any loan request:
- Monthly Income
A stable income reassures lenders of your repayment capacity.
- Employment History
Consistency in your job profile increases approval chances.
- Debt-to-Income Ratio
In simple words, this ratio measures your total monthly debt payments against your monthly income.
| Debt-to-Income Ratio | Impact on Loan Approval |
| Below 30% | High approval chances |
| 30%-50% | Medium approval chances |
| Above 50% | Low approval chances |
Now that you have the basic information, it’s time to track your score and increase it. Simply use the OneScore App to do this like a pro. It not only allows you to get your credit score and detailed credit report for free, but also provides personalised advice so you can improve it. So, what are you waiting for? Download this powerful app and view all of your credit activity in one place!
