To determine a credit score, several factors are considered as the type of employment, repayment potential, personal assets are verified before providing a loan. Practically a credit score of 650 is quite low, yet it is optimistic to take your chance. It is equally important to know that a prospective borrower will have no history if he hasn’t taken a loan in the past.
What is the possibility of a personal loan or credit card with a credit score of 650?
As discussed, it is difficult to get a loan with a credit score below 650. Most banks expect a credit score of 750 or above to approve a loan application. Likewise, if you for a credit score of 650 or lower and want to apply for a loan, then it’s possible to have unfavorable terms and conditions. This is also plausible if your application stands approved.
Let’s closely look at the credit score range in India The credit score falls in a 3-digit bracket, between 300-900. It is considered favorable to qualify with a score above 750 and get a loan easily. With a score lower than 750, you can be least hopeful about instant personal loans.
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Disadvantages of applying for a credit card/personal loans with a score below 750 can be viewed as under:
- Rejection of your application- With a credit score below 750, you’re at risk of application rejection. This will further impact your standing CIBIL score in your future borrowings.
- Higher interest rate: When your credit score is low, lending institutions prefer a score above 750. However, the interest rates go high with a lower score. To them, you’re less trustworthy compared to someone with a credit score above 750. This is the case across all lending institutions to ensure admittance of credible lenders into their system. A high rate of interest will compensate for the opportunity cost in case the borrower defaults. Of course, this is an additional cost for the ambitious borrower. This will be an addition to the existing financial risks for the lender and the borrower too.
- Bargained credit limit: A low credit score is symbolic of defaulted payments and bad financial history. This encourages lenders to keep a low credit offer and make a one-time payment.
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It is already evident that the pitfalls mentioned can disrupt your long term need for borrowings. Not only will your credit score be damaged, but it will also dent your market credibility for the future. Hence, it’s intelligent to keep your credit score above 750 to successfully apply for a loan and claim your required amount from the institutions.
Apply for a personal loan from Home Credit India to enhance your credit score and be better access to credit.
