Personal loan eligibility is determined by several factors including your monthly income, employment history, age and of course, your credit score and credit history. Personal loans are easier to obtain and do not require any collateral. The borrower should have a credit score of at least 750 or more. The higher one’s credit score is, the greater his/her chances of getting the personal loan approved.
The credit score is worked out on the basis of the credit history of the person including banking, EMI payments, credit card payments and so on. CIBIL is the credit bureau maintaining information on credit based activities of organizations and individuals and this data is used to work out the credit score. Having a good credit score means greater creditworthiness, i.e. the borrower is more likely to repay the loan in a timely manner. Before applying for a personal loan, you should check your credit score and if it is low, you can work to improve the same.
You should always make payments in a timely manner since any delayed or missed credit card or EMI payments may impact your credit score adversely. Do not spend more than 50% of your entire credit limit. You should also refrain from applying for multiple loans or credit cards simultaneously. A balance should be maintained between unsecured and secured loans. Personal loans are mostly unsecured and these are balanced out by secured loans like home loans or car loans.
However, what if you need a personal loan without factoring in the credit score? There are newer methods of evaluation that lenders often use while ascertaining creditworthiness. Mobile phone usage such as the number of calls and messages can be used to ascertain the economic activity level of a borrower along with questionnaires which are tailored to evaluate the borrowing and economic habits of any individual. Social media presence may be monitored in order to work out a social credit score of sorts. This includes posts and network on social media platforms such as LinkedIn, Facebook and Twitter among others. Funding access may steadily be easier with lenders tapping new methods for ascertaining overall creditworthiness of a borrower. This may make it easier for financial institutions to offer credit to individuals who do not have a traditionally valid credit history or credit score.