When individuals apply for a personal loan or any other financial product, the first thing that financial institutions check is the borrower’s credit score. A credit score is a three-digit number that ranges from 300 to 900 and indicates an individual’s creditworthiness. The higher the credit score, the higher the chance of faster personal loan approval.
If individuals with a 600 credit score apply for a personal loan, they may not face rejection as this credit score falls somewhat in the middle between good and bad. However, borrowers have to follow certain strategies to get an assured personal loan with a CIBIL Score of 600.
Ways to secure a personal loan with a CIBIL Score of 600
Following are the different ways to obtain personal financing with a CIBIL Score of 600:
● Submit proof of income to support loan repayments
Financial institutions check the credit score to assess the lending risk and understand whether a borrower can repay the loan amount or not.
Here, even if borrowers apply for a personal financing with a CIBIL Score of 600 and simultaneously be able to prove sufficient income to continue loan repayment, they can secure the deal. Borrowers can add their income from rental facilities, investments, and savings. In addition, they can show a recent hike in salary (if any) to increase the total monthly (steady) income from various sources.
● Apply for a low personal loan amount
Loan applicants with a low credit scores are a big threat to lenders, and applying for a high amount can work adversely for the borrower. In such circumstances, applying for a low amount lessens the worry of lenders as there are fewer chances of loan default.
This strategy, in a way, increases the chances of faster loan approval. Individuals are aware of the various reasons to apply for a personal loan. Thus, depending on the need and urgency of the fund, loan applicants can borrow the amount they actually require and repay it efficiently without burdening their pockets. Currently, there are various instant loan apps available that allow individuals to get funds almost instantly and manage emergency expenses adeptly.
● Rectify errors in the credit report, if any
Sometimes individuals can struggle to get a personal loan even without having a fault of their own. When borrowers apply for a personal loan, lenders check credit scores as well as credit reports. A credit report is a record that shows an individual’s bill payment history, current debt, loans, and other financial information.
This report is prepared by credit bureaus on the basis of information accumulated from financial institutions and similar agencies and may contain mistakes. Therefore, individuals must check this report for mistakes (if any) and opt for online dispute resolution with the respective credit bureau to correct discrepancies in a credit report.
● Involve a co-applicant or a guarantor
If loan applicants have a credit score of 600, they can consider including a co-applicant or guarantor. The chances of personal loan approval increase if the co-applicant or guarantor has a decent credit score and steady income. While onboarding a co-applicant or guarantor, the primary borrower must complete their KYC formalities and obtain signatures on relevant forms.
Personal loans are emerging as the preferred means of financing. It helps individuals manage a wide range of expenses, be it personal or medical expenditures, skilfully. Therefore, to ensure individuals get money from the personal loan app or lender’s official website whenever they want, they must have a credit score of 750 or above.
There are renowned financial institutions that offer personal loans to eligible applicants at improved terms.
Financial institutions also provide pre-approved offers to simplify the loan-availing experience. These offers are also applicable to other financial products, including personal loans, credit cards, business loans, etc. Individuals can check their pre-approved offers by entering their names and contact details.
Individuals who are willing to improve their credit score and keep it closer to 900 can follow the tips mentioned in the next section.
Tips to improve credit score
Here is mentioned some tips to improve your credit score:
● Make timely payment
Individuals must pay the dues of credit cards and loans on time. Handling multiple credit cards payment can become troublesome and can lead to delays or missed payments. To avoid such incidents, they can set alarms or reminders.
● Limit hard inquiries
Applying for loans leads to hard inquiries by financial institutions. This data remains on the credit report for two long years. If individuals apply for multiple credit options within a short period, the number of hard inquiries will increase and affect their credit score. Hence, it is ideal to restrict loan applications as well as hard inquiries.
● Keep credit utilization ratio low
The credit utilization ratio is the amount of revolving credit individuals is using divided by the amount of revolving credit available. Keeping the credit utilization ratio below 30% will help a borrower improve their credit score.
Apart from these, maintaining old accounts help borrowers increase their credit score.
The above-mentioned sections thoroughly talk about the ways individuals can follow to get a personal loan with a CIBIL Score of 600. Alternatively, prospective borrowers can start working on improving their credit score, wait for some time to see results and then apply for a personal loan.
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