The CIBIL score is a personal credit score that reflects a borrower’s solvency. The scale runs from 300 to 900. The higher the score, the greater the chances of getting a loan approved. A personal loan with a CIBIL score of 550 is tough to get. Banks and NBFCs want a CIBIL score of 750 or above to grant a personal loan. Yet, a few banks may authorise the loan with a credit score of 550 but at a greater rate of interest, taxes, and penalties.
Ways to Get a Loan with a 550 CIBIL Score
- Determine Whether Your CIBIL Score Is Truly Low
The CIBIL score might not always include the most recent update. You must verify your CIBIL score on a regular basis and get any faults corrected.
- Request for Joint Credit with a Co-Applicant
Getting a co-applicant with a good credit score might improve your chances of getting a loan.
- Find a Guarantor
If a borrower fails, the guarantor is liable for repaying the debt. Lenders value having a guarantor with a strong credit score.
- Provide Proof of Income
Evidence of high-paying employment, a supplementary source of income, or consistent cash flow might boost the odds of loan approval.
- Apply for a Lower Loan Sum
When the loan sum is less, a lender might be less hesitant to authorise it. A larger loan sum is riskier for the lender.
What Should You Remember about a CIBIL Score of 550?
Your credit score might vary as a result of financial activities such as EMI payments, missed/delayed payments, credit card bill payments, account closures, and more. As a result, your credit score is not a fixed number. It may rise and fall with each of the transactions stated.
A CIBIL score of 550 shows that your economic behaviour needs to be improved. You have made a few consistent payments but have defaulted on or missed numerous others. Remember the below points about a CIBIL score of 550:
- Your CIBIL score shows your credit habits. It is one of the key factors used by lenders to determine your creditworthiness.
- Lenders often determine whether or not to offer you a loan based on this rating. As a result, obtaining a personal loan with a CIBIL Score of 550 is quite tough.
- Lenders that give loans with a low credit rating do exist. However, the interest rate will be on the high side.
- To enhance your CIBIL score, you must regulate your economic behaviour and pay your EMIs/bills on time. Eventually, your credit score will improve.
Can You Obtain a Personal Loan with a CIBIL Score of 550?
A CIBIL score of 550 is insufficient to qualify for a personal loan from a major bank or NBFC. It indicates that you have done a few blunders while dealing with credit, resulting in a poor score.
A poor CIBIL score is a red flag for lenders. It may dissuade the loan company from giving you credit. To consider your loan application, most banks need a minimum credit score of 750. Remember the below points when you ask for a personal loan with a low CIBIL score:
- If your credit score falls below 750, you might strive to raise it before requesting a new loan.
- You may persuade the lender to authorise the loan based on your present financial control.
- A strong income, a recent wage increase, fewer financial duties, and cautious spending may also work in your favour.
Seeking a new personal loan before improving your CIBIL score is not wise. It will reduce your credit score further. When you apply for a new credit card or loan, the bank retrieves your credit report. This is referred to as a hard inquiry, and the bigger the amount of recent hard inquiries, the worse your credit score will be. Thus, if you want an emergency loan, contact short-term lenders or microfinance firms which may offer a personal loan with a CIBIL score of 550.
Factors Contributing to a Poor Credit Score
A strong CIBIL score might assist you in times of financial difficulty. It may provide access to financing in favourable conditions. As a result, if your credit score is as low as 550, you must work hard to increase it. Once you know your score, you may focus on the causes that are causing it to fall. The following are the causes of a poor credit score:
- A high credit usage ratio (exceeding the limit on a credit card).
- An increase in the number of hard inquiries on your credit history.
- Missed or delayed repayments (missed EMIs, delayed EMI, non-payment of other dues).
- Unhealthy credit combination (there are more unsecured loans than secured loans).
How Can You Raise Your CIBIL Score if it is Only 550?
Here are some pointers to help you raise your CIBIL score:
- Examine the Results
You may check your CIBIL score before applying for a loan. Check for flaws in the CIBIL report. The errors might be related to your transactional history, facts, and numbers. If you notice any, get them fixed since mistakes might affect your score. Your score may rise if the problem is rectified.
- Clear Any Outstanding Debts
You must make every effort to pay off your loan/credit card debts. Paying these might help improve your credit score. Keep track of the bill and EMI payment dates. You may also clear a couple of these bills before applying for a new loan.
- Make Timely Payments
Set up EMI reminders and pay them on time. Delaying payments increases interest and makes the loans more expensive. Your CIBIL score will also suffer. To prevent these troubles, you must be sure to repay on time.
- Sound Financial Practice
Make a financial payment plan. It would be best if you aimed to repay the higher-interest debts first, then make minimum payments on all other accounts.
A good credit score or CIBIL score is an important factor for the approval of loans. If your CIBIL score is 550, it suggests a high risk for banks and other lenders. Thus, it is a good idea to improve your CIBIL score. However, if you don’t have time to raise your CIBIL score of 550, it is still possible to get a personal loan. Make sure to go through each method carefully and use what is best for your situation.
If you want to know more about how to get a loan with a low CIBIL score of 550, visit Piramal Finance. You may also explore their products and services.