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tanvi Patel made post

Why is my credit score so important for taking a personal loan?

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Tarun Madaan answered.
2 years ago

I’d like to clarify one point before I answer your question. A credit score is important for taking any kind of a loan, and not just for a personal loan. Other than a gold loan, your credit score will be taken into consideration for every type of loan you want.

A personal loan is an unsecured loan. This means that you don't provide the bank or the non-banking financial company (NBFC) any collateral in return of the money they lend to you. When the borrower doesn't hold any of your asset or security, how can it distinguish between a safe (one who will repay in time) borrower and an unsafe (one who might default on the loan)? That's where credit score comes into play.

A credit score reflects your credibility or your ability to repay the loan amount in time. A credit score, which ranges between 300 and 900, helps the borrower decide whether to lend to you or not.

Credit score

Borrowers haven't, as yet, defined a bare minimum credit score for eligibility criteria, but it is said that anything above 800 is a good credit score.