What is the Minimum Salary Needed to Qualify for a Personal Loan?

Have you ever sought a loan or applied for a credit card?

If you have, you must know that availing a credit card or a loan requires you to fulfil the eligibility parameters set by the lender. Among other eligibility criteria, one of the most important criteria is your CIBIL score based on which the loan or credit is issued.

CIBIL stands for Credit Information Bureau (India) Limited. CIBIL, now renamed TransUnion CIBIL, is the leading Credit Information Company in India which calculates credit scores of individuals and so the score is commonly known as CIBIL score.

CIBIL score, also called credit score popularly, is a 3-digit number which measures your creditworthiness. The score measures your ability to take credit and also to pay it off within the stipulated time without defaults.

Simply put, this score allows the lender to figure out whether you would be able to repay the loan or not. The credit score ranges between 300 and 900, and the higher the score that you have, the more favourable would be your chances of availing a loan or credit in your name.

Usually, a credit score of 750 and above is considered to be a good score. If you have a good score, your loan application would be accepted, and you would be able to avail easy credit.

On the other hand, scores below 650 or 700 are considered to be bad scores. At these scores, the loan application is either rejected or accepted with high interest rates and specific terms and conditions.

Your credit score acts as a pivot on which the availability of credit depends. For every loan application, your CIBIL score is assessed, and the loan is granted only if you have a good score. Besides the importance of loan approvals, credit score also determines the following –

• The interest rate charged by the lender
• The amount of loan you can avail
• The repayment terms of the loan

If you have a high credit score, you can negotiate a lower interest rate, opt for a high amount of loan and get favourable repayment terms from the lender.

Your credit score is calculated by CIBIL as well as by other Credit Information Companies based on your past credit behaviour. The score is calculated using different factors. The main factors which affect your credit score calculation are as follows –

• Repayment history
  The main factor which has a major impact on your CIBIL score is the repayment history of your past credit. If you had availed a loan in the past or have a credit card, the repayment history on the credit you availed determines a major portion of your credit score.
  If you always repaid your debt on time, your repayment history would be clean, leading to a high score. On the other hand, if you defaulted on your loans or credit card bills, your score would be low.
• Credit utilisation
  Another important factor is the amount of credit that you use against the credit limit allowed to you. This is called the credit utilisation ratio, and the lower the ratio that you have, the higher would be your score.
  In other words, if you limit your credit usage, your credit score would be high.
• Credit mix
  The type of credit that you have availed also impacts your credit score. Credit comes in two types – secured and unsecured. Unsecured loans are those that do not require collateral security while secured loans are those that do.
  Credit card and personal loans are common examples of unsecured loans while home and car loans are secured loans. If you have a good mix of secured and unsecured loans in your portfolio, your credit score would be high.
  Too many unsecured loans, on the other hand, are bad for your score and should be avoided.
• Inquiries into the score
  Every time you apply for a loan or credit, the lender makes a hard inquiry into your credit score. Each inquiry affects your score, and if there are multiple inquiries within a short period of time, your CIBIL score would be negatively impacted.

While your CIBIL score is just a numerical figure, your credit report is the total picture of your current and past credit behaviour. Your credit report contains the following information –

• Your credit score
• Your personal information like your name, PAN number, gender, date of birth, etc.
• Your contact information
• Your employment information as mentioned by banks and NBFCs
• Your account information which contains the details of your loans and credit cards
• The history of enquiries done into your credit report and by whom

You should check your CIBIL score regularly to ensure that it is high or to improve it if it is low for future loan applications. Checking your own credit score is called a soft enquiry and does not affect your score.

You can check your score online using your PAN number. To do so, here are the steps which you should follow –

• Visit CIBIL's official website, which is https://www.cibil.com/.
• On the website, you would find the option ‘Get your CIBIL score'. Click on it to proceed.
• A new page opens wherein the subscription plan details would be shown. Subscription to these plans helps you do your CIBIL score check unlimited times.
• If you wish to get a free credit score, CIBIL allows an annual free score and credit report. For that, you would have to register yourself with CIBIL and become a member. Use the link https://myscore.cibil.com/CreditView/enrollShort.page?enterprise=CIBIL&offer=FACRAA and register yourself for an annual free credit score and report.
• Whether you use the paid service or the free service, Under ‘ID Type' choose ‘Income Tax ID Number (PAN)'
• Provide your PAN number and all the details like your name, gender, contact information, date of birth, etc. and verify your identity.
• If you are buying the paid subscription, pay for the plan that you choose.
• After all the details have been entered, and the payment is made, your CIBIL score would be displayed, and your credit report would also be sent to your email ID.

Your credit score is an important eligibility parameter when you seek credit. The score is dynamic and keeps changing depending on your credit behaviour.

So, practice good credit behaviour to maintain your score for getting quick loan approvals. For a high credit score, you can use the following tips –

• Always repay your EMIs on time
• Make credit card bill payments in full
• Avoid too much credit especially if it is unsecured
• Do not make a lot of loan applications at once
• Pay your utility bills on time as they too impact your credit score
• Have a healthy mix of credit in your portfolio

Few simple habits and you can keep your CIBIL score high!

Understand your credit score and pay attention to it. Keep tracking it regularly so that if it falters, you can take the necessary steps to improve it before applying for loans.