Limited salary and unlimited expenses to take care of? Taking a loan seems like a viable option if you have a large expense looming over your head. If only, you have been to a bank with a loan application. A huge list of documents, verifications, and attestations and lastly, the credit score… phew!

Getting your loan application rejected on basis of a poor credit score or zero credit history is quite common when it comes to established banks and NBFCs. Wondering what is a credit score? Read on to know more about credit score and its impact on your loan eligibility.

Credit Score is a 3-digit number which decides your creditworthiness In simpler terms, banks and NBFCs calculate the risk associated on providing a loan to a user on basis of his/her credit score – the credit score defines the ability of loan applicant to pay the loan back on time.

The credit worthiness of a person depends on his previous track record of taking loans (or credit) and repaying them. The different credit score ranges and their grade are as follows

Credit Score Ranges
Range Grade
0 or -1 No Credit History
550 – 300 Bad
551-649 Poor
650-699 Fair
700-749 Good
750 and above Excellent

Different countries have different credit score rating systems, issued by credit bureau functional in the said country. Popular credit score systems in India include CIBIL and Equifax CRIF, which range from 300-900 and 300-850, respectively.

In general, the higher your credit score is, the better chances you have of loan approvals. Banks and NBFCs reject loan applications if an applicant has zero or poor credit score. Anybody with a credit score of 750 or more has a high rate of loan approval.

A credit score of 0 or -1 signifies that the person has never taken a loan or used credit cards previously. Such loan applicants are considered ‘New to Credit’ and have ‘Zero Credit History’ and are by default denied a loan sanction by big financial establishments. Do you also fall under the same category? Chances are you would be denied a loan if you don’t build or improve your credit score.

The two common methods of building and improving credit score is by taking a personal loanor using credit cards and paying their dues on time. However, credit cards charge a high interest rate and due to our tendency of swiping the credit card everywhere for all the purchases, people end up getting higher bills than expected.

Which is why, taking a short-term personal loan makes much more sense. With PaySense, you can get a personal loan in a few clicks and the best part is that they serve people with zero credit history as well.

How a personal loan can help improve CIBIL Score?

To start buildingyour CIBIL score, you can use a personal loan of the small affordable amount and pay all your EMIs on time. Such small personal loans are easier to pay and help improve your CIBIL score eventually and incrementally. This method of improving your CIBIL Score or any other credit score in small incremental values is also known as ‘Snowball Effect’.

For instance, if you have a salary of 18,000 INR per month and have never taken a loan or used a credit card previously, your credit score will be 0 or -1. That makes it very difficult for you to get a loan, since banks and NBFCs reject the loan application.

However, PaySense can offer you an instant personal loan of Rs. 5,000 to Rs. 2,00,000; which you have to repay in a duration ranging from 3 months to 24 months. Let’s assume that you take a loan of 5,000 for 3 months and pay your EMIs regularly on time, your credit score will start increasing. After 3 or 4 such short-term instant personal loans which are easy and affordable to pay, your credit score will improve to 650 and above within a year.

So if you choose wisely, you can start building your credit score today with short-term personal loans and be loan-ready in the future for bigger expenses and emergencies.