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What is the Minimum Credit Score Required to Get a Loan?

  • Dec-16-2022
  • 3393 Views

Lenders these days are looking for a Credit score before they give out a loan. The minimum Credit score required depends on the type of loan and the bank issuing the loan. Generally, a Credit score of 600 is considered to be an ideal score when applying for home loans. Some banks require a Credit score of 700 or 800. Other banks will not accept any applicant with less than 500 in their Credit Score.

A high Credit score indicates that you have a good credit history and are less likely to default on a loan. This makes it easier for you to get approved for loans, be eligible for lower rates, and qualify for better loan conditions (e.g., more flexible repayment plans).

The minimum Credit score required to get a loan depends on the type of loan. For example, for personal loans and home loans, it is about 680 or more. But for business loans, it maybe more than that required. Here we will tell you about two types of loans that are most common in India.

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Know the minimum Credit score for Personal Loan.

For personal loans, the minimum Credit score required is 700 . This means that any applicant with a credit score of 700 may be able to get approved for personal loans if matching other criteria of financer. If you have good credit history, then your chances of getting approved are higher than those with lower scores. So, if you have good credit history and want to get a personal loan, then your chances of getting approved are high.

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Know the minimum Credit score for Home Loan

For home loans too, there is no fixed minimum Credit score required for approval purposes. However, your chances of getting approved are more if you have low scores than if you have high scores. The reason behind this is that most lenders prefer individuals who can afford their loan without any problem as they believe that these individuals will pay back on time and thus give them good returns over time.

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Can You Get a loan with Zero Credit score?

Having zero credit score or no credit history is still a better situation than a poor Credit score. When you have a bad Credit score, lenders straightforwardly reject your application since your score shows your ill-treatment with past payments. Coming back to the scenario when you have zero Credit score, there are many financial institutions that offer credit facilities to such score holders. For instance, some Bank does give credit cards and personal loan to no Credit score holders on the basis of their present income and other relevant factors. Thus, lenders look for other factors to fulfill your repayment burden despite your middling score and consider your application for the approval.

The minimum average credit score required by various lenders varies from one lender to another. However, it is always advisable to have at least some form of credit history as it will help you in consolidating all your financial details in one place and make it easier for lenders when they review your application.

How is Credit score calculation done?

Generally speaking, the higher your Credit score is, the better it will be for you.

Let’s take a look at how a Credit score is calculated and what factors determine its final value.

There are two key steps in calculating a Credit score:

  1. Pre-approval-You can get one when you apply for a loan from a bank or any other financial institution. This step is used to determine your creditworthiness and calculate your borrowing capacity. The pre-approval helps lenders decide how much money they will offer you based on their assessment of your creditworthiness.
  2. Credit History –This refers to how long you have been working, paying bills on time and repaying debts in full each month. Your credit history includes all the accounts that you have opened (including credit cards), loans taken out, failed payments and outstanding debts owed to different creditors. It also includes any defaults that have occurred during the course of your history with these accounts/loans/payments/debts.

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