₹3 lakh personal loan eligibility: Is a credit score of 510 good enough? | Mint

Securing a personal loan with a credit score of 510 poses significant difficulties for aspirational borrowers. Generally, a credit score below 600 is considered poor and inadequate.

It indicates improper financial planning on the borrowers part and a possible history of defaults or high credit utilisation. Most of the banks and financial institutions prefer applicants with a credit score of 750 or above for personal loans, as this score reflects responsible credit behaviour and a lower risk of default.

Animesh Hardia, Senior Vice President, Quantitative Research at 1 Finance, says “With a credit score as low as 510, qualifying for a ₹3 lakh personal loan from banks or major NBFCs is extremely unlikely. Such a low score signals a troubled credit history-missed payments, defaults, settlements or a high debt load-which makes lenders wary. If you do find a lender willing to offer a loan, it will likely come with a very high interest rate, often through riskier channels like P2P lending. In this situation, it’s wise to focus on improving your credit situation before seeking new loans.”

Alternative options to consider

• Co-applicant: Applying with a co-applicant like a spouse or a near one who has a strong credit profile can boost your chances of credit approval.
• Applying for loans that are secured: Providing collateral such as property or fixed deposits can reduce the lenders risk. This will potentially make loan approvals easier.
• Peer to peer lending: Platforms such as CRED Mint, Faircent among others might consider your application based on alternative credit assessments, still interest rates can be higher along with other terms and conditions.

Straightforward ways to improve your credit score

To boost your creditworthiness:

• Timely payments: Do make sure all existing debts, home loan EMIs, credit card bills etc., are paid on time.
• Credit utilisation: Focus on maintaining a credit utilisation ratio of less than 30%. This means on a credit limit of ₹1,00,000 you should never use more than ₹30,000 to keep your credit utilisation ratio in check.
• Consistent monitoring: Carefully go through your credit report on a consistent basis. This will help you in checking it for disputes and errors along with protecting your credit history. If you do find any inaccuracies, address the same promptly.

Conclusion

It is therefore amply clear that a credit score of 510 poses serious challenges in helping and assisting aspirational borrowers in securing their desired personal loans or credit cards.

That is why looking out for alternative lending opportunities and focusing on improving your credit profile along with building on your credit score can boost your loan approval chances in a positive way.

Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit scores. Mint does not promote or encourage taking credit, as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.