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A very important factor for personal loan eligibility is having a healthy credit score. However, having a low credit score is not the end of the world. Yes, with a CIBIL score of 690 you can avail of an instant loan with instant app-based loan lenders. They offer loans ranging even from Rs 3000 to Rs 3 lakh to borrowers with a low CIBIL score. Good CIBIL score is not the only deciding factor for the approval or rejection of the loan. Fintech companies have emerged hugely popular in lending instant personal loans due to the quick disbursal of funds. 

Do not get discouraged if your score is below the set benchmark in getting a competitive interest rate for a personal loan. You’ll find lenders who are willing to work with borrowers who have less than perfect credit score. It’s vital to remember that the number reflected on the credit score isn’t permanent, so use it as a motivation to make a positive change that will give it a much-needed boost.

Ways to Improve Credit Score

If your credit score is lower than you’d like, then working on what’s holding it down can get it back relatively quickly. A credit score is not a simple calculation of your bill payments or credit lines you have but an aggregate of multiple factors. Measures mentioned below is going to get your CIBIL score from average to excellent, thereby projecting you as a person of financial integrity in the eyes of the lender. 

Dispute Credit Report Errors – Mistake on your credit report could pull down the score negatively. An individual is entitled to a free credit report from any of the Credit Bureau Agencies, as well as it is now also available for free at the website of financial lenders. You can request for the report and check for the mistakes. It may be possible that payments are marked late although it was paid by you on time. List them out and get them removed. Credit bureaus will investigate and respond with a month.

Build up a good credit history – A perfect mix of different forms of credit is what will showcase your financial management skills. Have a healthy mix of credits of both secure and unsecured loans, of a long and short tenor to build a strong credit score. Availing a pre-approved loan will simplify the process and saving time as well. If you have only credit cards loan, consider getting a Gold Loan or a Home loan. With a revolving credit, you can boost your creditworthiness.

Balancing the Credit Utilization Ratio - By adding all the outstanding credit, it should be only 20% to 30% of the total credit availability. It will earn brownie points in getting a positive score. While an increase of more than 30% is an indication of high debt and your poor management skills. Having said this, it cannot be a generalized statement for everyone. Gradually, over time it will improve the credit score.

Pay Every Bill On-Time – When the loan instalment payments itself are not on time, every other strategy to build up your score is not going to work. Timely payment of an instalment is reflected on your credit score for long enabling it to build a positive report. Set reminders or opt for auto debt facility of payments, thus making timely payments.

Maintain Older Credit Cards – Closing older credit cards will only make your job harder in building a good credit score. When an overall credit utilization is calculated, you will lose that credit card’s limit. This will lead to a lower score. Use the card occasionally to score higher.

Don’t opt for too much debt at a time – Availing multiple loans at a time is going to spiral your CIBIL score downwards. It is a reflection of always dealing with the insufficiency of funds.  This will result in falling of the credit score further. Contrarily if you avail a loan and pay off successfully, it will create a positive impact. 

When you opt for the above-stated measures, you have to be patient as building an excellent credit score takes time. Over a span of six months, you can notice the difference with scores pointing to the mark of excellent from average. Then you are a better grade to apply for loans at competitive interest rates.

 Why the CIBIL score is important for availing a Personal Loan?

A personal loan is an unsecured loan, requiring no collateral of any kind to be pledged as security. Lenders approving personal loans are highly concerned about their repayment from borrowers. Hence, before sanctioning the loan to the applicant, the credit history of the applicant is scrutinized critically to avoid any kind of loan default in the future. This is where the CIBIL score plays a role. 

A CIBIL score is a 3-digit number ranging from 300 to 900 that speaks for the credit history of the borrower. The loan sanction amount greatly depends on how good your CIBIL score is. 

| Top 10 Best Ways to Improve Your Credit Score

Ways to get through the loan approval with a low CIBIL score?

Getting a loan approval with a low CIBIL score will require creativity on your part to get through it. Securing a personal loan at an affordable rate of interest, using the traditional route might not be possible. So, here’s a few alternative ideas:

Shop around – It is wise to not fall for the first offer that comes your way, which stands especially true if your credit isn’t the best. Research lenders in your area as well as online. Brick and mortar banks have the overhead costs which is not the case with online lenders thus making it a cheap option. 

Find a co-signer – A family member or a friend with a good credit score and a solid financial standing who is willing to co-sign your loan can be monumentally helpful. A co-signer taking the full responsibility of the loan repayment will provide peace of mind to lenders. Consequently, this can help you qualify for a loan with an affordable interest rate. 

Do not ask for a favour unless you’re certain you can fulfil the obligation. It will harm your cosigner's credit score.

Offer collateral as security – Using collateral can be of help when you’re looking for a personal loan with a low CIBIL score. Backing a loan with assets will be considered a low-risk profile by the lender. Lenders can seize the collateral in case of default. This can help you qualify for a loan at affordable interest rates.

You should proceed with caution while taking this route, as you’ll have to pay a high price in case of default in payments.

Reducing the loan amount – All hope is not lost when you’re applying for a loan with a low CIBIL score. You may still be able to apply for a personal loan of a slightly lower amount. However, the rate of interest rate may be on the higher side.

Good Income – Having a handsome income makes the chances of loan approval better. Individuals showing additional side-income can also benefit from it. It gives the lender a positive sign of loan repayment on time.

Use instant loan apps -Many lending apps don’t require borrowers to compulsorily have a credit score or offer loans with a low credit score. For example, you can get a personal without credit score using the EarlySalary app, CASHe app, etc.

Latest Update of New CIBIL Algorithm

Well, the CIBIL algorithm has been updated recently incorporating new features. With this new feature, lenders will have a better-predicting capability of consumer’s creditworthiness, his/her likelihood of repaying a loan and predicting the loan defaults.

So, let’s find out below what are the recent updates of CIBIL algorithm:

• The new CIBIL algorithm is now based on 36 months of credit history, which was earlier based on 24 months.
• Consumers with less than 6 months of credit history will also be benefitted.
• Usage of credit cards will now play a significant role in impacting the CIBIL score with the new update.

Calculation of CIBIL score will now have data points included:

• Depth of credit (from the day when a borrower’s oldest credit account was opened)
• The ratio of actual repayment amount to the total amount due
• Long term trends of outstanding balances
• Transaction history on credit cards
• Total number of accounts operated

The impact of a new scoring algorithm has mixed reviews. Few have claimed it has improved for them, while many of the users have registered a drop in their CIBIL score post the update.

A sudden drop in CIBIL score might be a cause of inconvenience to users, but with time banks and financial institutions will gradually imbibe the new scoring algorithm, by updating their policies and system.

Avail Instant loan with Afinoz

Borrowers with low CIBIL score can apply for Personal loan with www.afinoz.com. Multiple financial lenders have come up who offer instant personal loan to borrowers with an average credit score. You can also download our app from the Google play store for free and apply from the comfort of your home or office 24/7. We at Afinoz has partnered with various instant loan app-based lenders such as Cashe, Paysense, Shubh Loans, IndiaBulls, Moneyview who access your loan application on a real-time basis and come up with offers.  

Afinoz is a marketplace which gives the borrower a platform to compare several instant loan offers under one roof, thus saving the user from the hassle of downloading multiple apps and filling the same details over and over again. You can compare the features and benefits of multiple lenders at one place and choose as per your suitability to avail loan. With Afinoz you can be assured of getting an instant loan at an affordable rate of interest and better features.