Last Updated:July 07, 2025, 16:13 IST
While a good credit score can open doors to affordable loans with low interest rates, a poor one can lead to rejection for unsecured loans.
A score of 700-750 and above is generally considered ‘good.’ (Representative Image)
Are you planning to buy your dream home or start a new business and need a personal loan? If yes, the only thing standing between you and your perfect loan will be a three-digit number – your credit score. When it comes to securing a personal loan, your credit score is one of the most important factors lenders consider. While a good credit score can open doors to affordable loans with low interest rates, a poor one can lead to rejection for unsecured loans (like personal loans or credit cards) since these loans carry higher risk for lenders.
But what score do you actually need to get approved, and to get the best rates? Let’s dive into the right credit score for getting a personal loan in India and how to improve the credit score?
What is a credit score for a personal loan?
A credit score is a three-digit number that represents an individual’s creditworthiness, helping lenders determine how likely they are to repay a loan. The score typically ranges from 300 to 900, with a higher score indicating better credit health. A score of 700-750 and above is generally considered ‘good’ by the lenders for qualifying for a personal loan, while anything below 600 is considered a poor credit score.
It is calculated based on factors such as payment history, length of credit history, types of credit in use, credit utilisation, and recent credit enquiries. Credit agencies compile this data from your financial activities and generate the score.
How to improve your credit score?
Pay your bills on time: The most critical factor in determining your credit score is your payment history. Ensure that you pay your bills on time or before the due date. If needed, set up reminders or automatic payment options to avoid late payments.
Keep credit card balances low: Target 30 per cent or less utilisation out of the available credit card limit. Maintaining high credit card balances can negatively impact your credit score.
Monitor your credit report: Check your credit report at least once a year. Report any errors or inaccuracies that could be dragging down your score immediately.
Keep old accounts open: Don’t close old credit accounts, especially long-standing ones, as it can shorten your credit history. Keep older accounts open, even if you don’t use them, to maintain a longer credit history.
Avoid frequent credit enquiries: Apply for new credit only when you need it. Multiple applications in a short period can signal to lenders that you’re experiencing financial difficulties, which can lower your score.
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al…Read More
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al… Read More
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Delhi, India, India
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