Your credit score plays a very important role whenever you are applying for a loan. It is recommended that you maintain a credit score of 700 and above if you want to avail a loan at lower interest rates. However, different loan products will require different credit score considered to be ideal. Unsecured loans will require a higher credit score as compared to a secured loan. We will have a look at the ideal credit score for different loan products.
Ideal credit score when applying for a personal loan
It is recommended you maintain a credit score of up to 750 when looking to apply for a personal loan. Though there will be banks who will sanction you a personal loan even if your credit score is below 700, the chances are high that the lender will charge a higher interest rate. Personal loans are unsecured loans. It means that you do not need to pledge any collateral to avail a loan and hence your credit score becomes a very important yardstick for the bank to decide whether they should sanction your application for a personal loan or not.
Credit score considered to be ideal when applying for a business loan
If you are applying for a business loan as an individual then you must maintain a credit score of 700 and above. If your credit score is below 700, the chances are still high that the lender will approve your application for a loan. However, the rate of interest charged will be higher.
You must note that if you are applying for a business loan on behalf of a firm, then your business credit score will also play an important role apart from your personal credit score. Hence, you must maintain a healthy business credit score and personal credit score before applying for a business loan.
Credit score you must maintain before applying for a home loan
Since, home loan is a secured loan, you might be able to avail one even if your credit score is not that high. There is a possibility that you will be able to avail a home loan even if your credit score is below 700 and goes down to 550.
However, you must still look to maintain a healthy credit score if you are looking to avail a home loan where the loan amount is very high. If your credit score in such case is low then the chances are high that the lender may not sanction more than 60% of the value of your property as loan amount. Hence, if you are looking for a higher loan amount, look to maintain a higher credit score of 750 and above.
Ideal credit score to maintain when applying for an auto loan
Lenders offering an auto loan may not demand a very high credit score, however, it is always good to maintain a healthy credit score if you want the bank to offer you a higher loan amount. It is always recommended you maintain a credit score anywhere between 600 to 750 to get an auto loan at affordable interest rates.
An eligible credit score will differ from bank to bank and hence it is highly recommended you compare various loans before applying for one. Once you are sure about the credit score required by the lender fits your criteria, you can apply for a loan. In case you are falling short, you can do simple things such as paying your bills on time, not apply for multiple loans, and check your credit score frequently so that you can improve your credit score and then apply for a loan of your choice.