What is the minimum credit score required for a personal loan application?

The credit score of the borrower plays a major role when it comes to securing a personal loan in India. Whether you’re planning to meet some big-ticket expenditure like a home renovation, a wedding, or an unexpected medical expense, personal loans can offer the financial support you need. With the advent of completely digital lending platforms access to personal loan offers has become quite convenient.  However, to successfully obtain a personal loan, lenders closely assess your creditworthiness through your credit score. With a higher credit score you can get quick approval for a personal loan and cheaper interest rates. Further, lenders also look for a minimum credit score before approving your loan application.

So, what’s the minimum credit score required for a personal loan? Let’s take a look at what affects your score and how you can improve it to increase your chances of getting approval for a personal loan.

What is a credit score?

A credit score is a three-digit number that reflects your creditworthiness, based on your credit history. It usually ranges between 300 and 900, with a higher score indicating better financial responsibility. The credit score is calculated by credit bureaus like TransUnion CIBIL, CRIF High Mark, Equifax and Experian, that take into account factors such as repayment history, credit utilisation and the length of credit history. A good credit score is essential for smooth approval of a personal loan as it reassures lenders of your ability to repay the loan on time. You can check your credit score for free on platforms like Moneycontrol. It also offers the option to download a detailed credit report instantly.

Why is credit score important for personal loans?

When applying for a personal loan, your credit score acts as the first filter for lenders. Since personal loans are unsecured — not backed by any collateral — banks and financial institutions rely heavily on your credit score to assess your risk profile. A higher credit score for personal loans not only increases your chances of easy approval but can also help you negotiate better interest rates and loan terms.

Many lenders in India have a minimum credit score requirement that you must meet to be eligible for a personal loan. On the other hand, a higher credit score increases your chances of personal loan approval.

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Credit score range and its impact on personal loan eligibility

• 300-549: It’s a poor score indicating that your loan application is likely to be rejected. So, it’s essential to work on improving your credit score before applying for a new personal loan.


• 550-699: This is an average score and may allow you to qualify for a personal loan, but the lenders may charge higher interest rates and provide less favourable terms.


• 700-749: This is a good score, and it increases your chances of getting a quick approval. The lenders generally offer competitive interest rates and more favourable terms for borrowers with credit score in this range.


• 750-900: Any score above 750 is considered as excellent. This may allow you to avail easy approval, lower interest rates and more flexible loan conditions.

Credit score range needed for personal loan

While the minimum credit score for a personal loan in India usually ranges from 650 to 750, many lenders prefer applicants with a credit score of 750 or above. Those with lower scores might still be eligible depending on the lender’s criteria, but they may have to settle with higher interest rates.

ALSO READ: What is a good personal loan interest rate?

Factors that affect your credit score

• Payment history: Timely repayment of loans and credit card bills is the most significant factor affecting your credit score. Missed payments, defaults or late payments can severely impact your credit score.


• Credit utilisation ratio: This is the percentage of your available credit that you’re currently using. A high credit utilisation ratio indicates an over-reliance on credit, which can negatively impact your score. Aim to keep this ratio within 30% of your credit limit.


• Credit history length: Lenders prefer a longer credit history. The personal loan applicants with a proven track record of managing credit responsibly over time are more likely to get approval from lenders compared to others.


• Credit mix: A healthy mix of secured (home loans, car loans) and unsecured credit (personal loans, credit cards) can positively affect your credit score. It shows that you can manage different types of credit effectively and responsibly handle your money.


• Number of credit inquiries: Frequent applications for loans or credit cards can lower your credit score temporarily due to hard inquiries. It’s best to limit the number of credit applications within a short period.

ALSO READ: What is a good credit score? Here’s your checklist for a healthy credit score

Easy ways to improve your credit score

• Pay bills on time: Ensure that your loan EMIs and credit card bills are paid on or before the due date.


• Reduce outstanding debt: Try to pay off your existing debts or keep them as low as possible to improve your credit utilisation ratio.


• Check your credit report regularly: Monitoring your credit report for errors or discrepancies can help maintain a healthy credit score. Your score may suffer if your report contains errors.


• Limit new credit applications: Avoid applying for too many loans or credit cards within a short span of time, as this can lead to multiple hard inquiries that lower your score.

Improving your credit score is important if you wish to increase your chances of personal loan approval.

Checking your credit score

It's essential to check your credit score regularly to stay informed about your credit health. Moneycontrol offers the feature to check credit score and receive a detailed credit report. You can also apply for an instant loan of up to Rs. 15 Lakhs on the Moneycontrol app. This loan is offered in partnership with top lenders including Aditya Birla FInance Ltd., L&T Finance Ltd., Fibe (EarlySalary Services Pvt. Ltd.) and Niro Money.

Importance of credit score for personal loan

In conclusion, while applying for a personal loan, your credit score is one of the most important factors that lenders consider. A higher credit score increases your chances of approval, gets you better interest rates, and simplifies the loan approval process. Use the resources provided by Moneycontrol, including the free credit score tracking service, to monitor your score and make informed financial decisions.