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What is the perfect Credit score for loans?

10-May-2017 written by : FSI-Team

When there are scores involved in a screening process then there are good scores and bad scores. If you apply for an entrance exam then there will be a cut off score below which you are not likely to get admission to that college or institute. However it is important to mention here that each institute might have different rules regarding at which score they offer admissions and also it may vary as per the score. The same rule applies to credit score; the level at which you get a loan may vary from lender to lender and also as per the loan. So there is no single perfect score for getting a loan; the perfect score depends on a lot of external factors; some of which we discuss here.

The Perfect Credit Score:

Credit Scoring is done by CIBL, Equifax, Experian and Highmark. While as per the Reserve Bank of India, all bureaus have to rate individuals on a range of 300 - 900 but the credit score on each of these may vary depending upon the algorithms used by the particular bureau even if the data set is same. So say for example while the CIBIL score may be at 740, the Equifax score could be 757.

A score of 750 and above generally is considered to be an excellent score and getting a loan with that score would not be a challenge for the applicant. A score of 550 and below indicates that the individual has constantly been on loan defaulters list, has poor payment record, and has maybe settled a loan, has high utilization ration and so on. Getting a loan with such a score is almost impossible. Below we give what different score level mean:

Score RangeWhat it Signifies
750-900Excellent score and a perfect track record for repaying dues. Getting any loan would be simple.
700-750A decent score that reflects a good payment track record. Lenders will be willing to lend after making some more checks especially for unsecured loans.
550-700Reflects irregular credit behavior, most lenders will not accept a loan application. Very few may consider lending with extra credit check, high collateral and at high interest rates.
300-550Sign of extremely irresponsible credit behavior. The CIR may have loans that have been written off in the past. Almost impossible to get a loan in the organized lending market.

There are some other factors also that can impact what score can be considered to be perfect for the lender; they are

  • Loan Type: While we discussed the scoring patterns of different rating agencies and also discussed broadly the significance of scores at different levels, the requirement may vary as per the loan type also. For secured loans like a car loan or a home loan the lender may be willing to except a slightly lower score as the bank has an asset to fall back in case of a default. While for a personal loan they may be more stringent when it comes to the acceptable credit score as personal loans have no collateral backing.
  • Lender's Policy: Generally private and public sector banks are more careful about the credit score when lending. Co-operative banks, NBFCs, private money lenders may not lay so much emphasis on the credit scores. Thus if somebody has a low score then they can visit one of the above mentioned to get the loan sanctioned; however it is important to mention that these lenders generally offer loans on very high interest rates which can serve has a huge deterrent.
  • Other Factors: While lenders look at the score to determine which applicants should be sanctioned a loan certain other factors also play an important part in this decision. These are factors like job stability, where the applicant is employed, relationship with the lender, role of guarantor etc.

While the basics regarding good credit behavior cannot be ignored a perfect score for loan depends on certain other factors that we discussed above. A perfect score depends on the loan that one is seeking, the lender that one is approaching and a few other aspects too! However following good credit basics is always advisable.

Also, it is advisable to keep checking your free cibil score every year now that the RBI has mandated all bureaus to extend it for free to all consumers. This will keep you to be in complete control of your credit status.


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