How Does a Personal Loan Impact Your Credit Score

How Does a Personal Loan Impact Your Credit Score?

Most of the person love to take personal loans. This is the easy & instant way to get a loan. But the question is does a personal loan impact your credit score?

Some people will say yes & some people will say no.

We will learn more in-depth how a personal loan impacts your credit score.

What is a Credit Score?

Credit score means a score that is measured with a number from 300 – 900. This number will depend on the previous loan repayment track. So, if you have good repayment history, your credit score will be good. But if you don’t pay the loan on time, your CIBIL (Credit Information Bureau India Limited) score will bad impact.

Some person not taken the loan in the past. That means they don’t have a credit score. They are the minus one (-1) customer on the term of credit score.

Here are the four credit bureaus authorize to regulate the credit score in India:

  • Transunion CIBIL
  • Experian 
  • CRIF High Mark
  • Equifax
Also Read: How to check CIBIL Score for free

How Does a Personal Loan Impact Your Credit Score?

A personal loan can fall a negative impact on your credit score. We will discuss below how personal loans affect your CIBIL Score.

Too Many Enquiries

When you are going to apply for a personal loan, lenders check the CIBIL score. It is ok if you have 1 or 2 credit inquiries. But, multiple inquiries will affect your credit score.

So, before applying for a personal loan, you should check the eligibility criteria first. If you are going to apply, read the eligibility first, or if you are going to apply through brunch, talk about bank employees before submitting your loan application.

Running Too Many Loans

Many times, I saw the customer taking too many personal loans. Most people take the loan for luxury. But it will ruin your credit score.

Let’s say, you have Rs. 30,000 monthly salary and you giving a total EMI of Rs. 20,000. So, you have Rs. 10,000 which is for your family expenses & other expenses also. At this time, you cannot get a personal loan because of debt-to-income.

 Lenders will calculate your debt-of-income before giving loans. If I take the above example, the customer has Rs. 30,000 salary. Lenders will calculate with a 50:50 ratio which means Rs. 15,000 salaries for loan & the rest 15,000 for family expenses.  Already, customers cross the debt–to–income ratio because of total loan EMI is Rs. 20,000.

So, always take a loan for emergency purposes only. It will help also to maintain the good credit score.

Also Read: Personal Loan for Minimum Salary 14,000

Late Repayment

My friend takes a loan of Rs. 2 lakhs and the money EMI is Rs. 4,500. The EMI date is the 3rd of the month. But, he always repays the EMI on the 10th of the month because salary credit is on the 10th of every month.

So, this is 7-day delay loan repayment. It will defiantly impact your credit score and your CIBIL score will down.

Always, pay the loan on time to maintain a healthy credit score.

High-Interest Rate

Sometimes, you take a loan without knowing the interest rate. Most people take the loan on hearing friends or colic suggestions. You should check the lender’s interest rate before taking the personal loans.

These days you can easily get a loan through apps. But, these instant loan applications take a high-interest rate. For this reason, monthly EMI going high. If you fail to pay the EMI on time, your credit score will impact.

Also Read: 10+ Best Loan apps for Low Credit Scores


A personal loan is an easy way to manage expenses or pay consolidated debt. If you use a personal loan in the proper way, your credit score will be healthy. But, It can destroy your CIBIL score if you can’t maintain it.

Always, try to pay the loan EMI on time & don’t apply for too much loan. This will give you positive impact on your credit score.

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