Clix > Personal > Getting a Personal Loan with a Credit Score of 725. Is it Good or Bad?

Getting a Personal Loan with a Credit Score of 725. Is it Good or Bad?

Clix May 28, 2021

 

A credit score of 725 is regarded by credit scoring models as a ‘good’ score and it meets most lenders’ minimum requirements for personal loans. If you are looking for a personal loan to meet any of your expenses related to a wedding, home renovation, education, travel, debt consolidation, or medical emergency, then a credit score of 725 or above can increase your chances of getting loan approval. Let’s see how important credit score is for your personal loan approval and where you stand when it is 725 or above.

Is 725 a Good Credit Score?

On the credit score scale of 300 to 900, the higher score you have, the greater is your creditworthiness and the stronger likelihood you have to repay your loan. A credit score of 725 is considered good and is accepted positively by most personal loan lenders. They assign your interest rates based on your risk level and creditworthiness. If you have a credit score of 725 or above, you are seen as lower credit risks and are charged lower rates than high-risk borrowers. Ultimately, 725 is a credit score that can fetch you the best available interest rate on your personal loan application.

Additional Factors That Affect Your Loan Approval

Many lenders evaluate your borrowing risk based on your credit score. But it is only one of the many factors that they use to decide your loan approval. These include:

Your Eligibility: Lenders have specific eligibility conditions that you need to meet to get their loan approval. For Clix Capital, you need to be between 25 and 58 years of age, must be earning minimum ₹ 25,000 per month, should be employed in the current company for at least 6 months, and should have a work experience of minimum 12 months in the industry.

Debt-to-Income Ratio: Lenders typically need income proof in the form of tax returns and payslips. They also give close attention to your other EMIs and outstanding debts. The debt-to-income ratio is the percentage of your monthly earnings you pay towards your debt payments and other financial obligations. Therefore, it is an important factor to measure your capacity to handle new debts. The lower your DTI ratio is, the lower risk you have and the better chances you have of loan approval.

Documents: Lenders also check some basic documents to verify your identity, address, and income. You have to share with them your identity proof, address proof, income proof, and passport size photograph. If your KYC is updated with Aadhaar and PAN, you don’t even need to upload them anywhere. Keep your documents ready to ensure and accelerate your loan approval process.

Prepare Yourself and Check Your Credit Before Applying for a Personal Loan

Your credit score is calculated based on the details of your credit report, which includes your debt payments, credit payments, and credit history. While screening through your loan application, lenders usually use your credit score as a parameter to evaluate your creditworthiness. So, before you apply for a personal loan, check your credit score and look at your credit report carefully. Spot any inaccurate entries in your report and get them fixed immediately.

Entries in your credit report that may give a negative impression include:

Missed or late payments: Each missed or late payment in your credit report gives a negative impression and reduces your credit score. An isolated incident may be ignored as an honest mistake, but if you are habitual of missing payments, you may have your loan rejected.

Charge-offs or collection: If you do not repay your loan, your lender may close your account with a charge-off or sell your loan to a collection agency. Both these instances get recorded in your credit report and give a negative impression.

Derogatory entries: If there is a foreclosure, bankruptcy, or repossession in your credit report, lenders may see it as a red flag. All these indicate that you failed to repay your loan and make your prospective lenders wary.

Tips to Improve Your Credit Score if it is Less Than 725

While a credit score of 725 is sufficient to get a personal loan, you may use these tips to improve it further and increase your chances of getting loan approval with better interest rates:

Pay Off Your Debts: Reducing your debts may improve your debt-to-income ratio and make you more attractive to lenders. If it is not possible to pay off your loans now, at least pay your outstanding amounts.

Use Credit Card Sparingly: Reducing your credit card debt helps in improving your credit profile, particularly the ones that make the most of your credit utilization ratio. Keep your credit utilization ratio down, which will ultimately improve your credit score.

Avoid Any New Debts: When you apply for a new loan, you invite a credit check that may temporarily reduce your credit score. It may catch up soon if you keep paying your bills on time, but you must have a high credit score while applying for a loan. So, avoid taking any new debts or credit cards in the last few months of seeking a personal loan.

Pay Your EMIs and Bills on Time: Missed or late payments can have major negative effects on your credit score and personal loan lenders often see them as bad signs. Adopt a habit of paying your bills and EMIs on time each month without fail.

A credit score of 725 or above can be a good platform to get the personal loan you need. It helps in qualifying for a loan at a low steep interest rate. It is a credit score that you may build easily using the tips above and get an affordable loan.

Clix Capital is an NBFC that offers personal loans for varied purposes as per the borrower’s needs. If you have a credit score of 725, you have a high chance of getting loan approval at competitive interest rates. Apply now and get a personal loan approval of up to ₹ 25 lakhs within 15 minutes*.

For any queries, find us on Facebook, Instagram, LinkedIn, Twitter, or WhatsApp

You can also reach out to us at hello@clix.capital or call us at 1800 200 9898

* T & C Apply

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