How does a personal loan impact my credit score?

Almost every available Bank/NBFC offers personal loans to every person; it has both positive and negative effects on the credit score of one; it is possible it may affect your overall credit score in the short run and make it more difficult for you to take new loans if not repaid as per the tenure decision.


To take a personal loan, one doesn't have to mention the reason behind availing of the credit facility; one can use the loan for any purpose as per one wishes. The credit score of the profile is determined by how one is repaying the loan he has borrowed; if not repaid, the score will decline, and there are chances you may not get a credit facility again in your lifetime. 

In today’s discussion, we’’ are talking about “How does a personal loan can impact your credit score” and one can maintain a good credit score.  




Do personal loans really impact credit scores negatively?

Just like any other loan personal loan is also a kind of credit facility that one avails from a credit institution, and there is a misconception in people that taking a personal loan will degrade their credit score, which is entirely false and untrue. 


Personal loans are not any different from other loans; they are just loans like any other, although personal loans will negatively impact the person’s credit profile only if it is left unpaid within the decided tenure. Repay the loan on time and enjoy the benefits of the personal loan facility.  

How does credit score work?

Credit Information Bureau Limited (CIBIL) is responsible for operating and managing the credit score of one, the score which ranges from 300-900 tells financial institutions the creditworthiness of the borrower

  • Below 580 - Risky borrower (Poor)

  • 580-669 - Below average (Fair)

  • 670-739 -Near or slightly above average (Good)

  • 740-799 - Above average, Worthy Borrower (Very Good)

  • 800+ - Well above average (Exceptionally well)


The credit bureau keeps various factors in consideration when calculating the credit score of one; some crucial factors involved are 

  • New Credit 

  • Credit History 

  • Credit mix 

  • Credit utilisation 

  • Credit History length 


Get a Free Credit Report using OneNDF - One stop solution for all your credit needs.


The higher the credit score, the more likely your personal loan will get approved; if your credit score is good, you may get the loan approved at a lower interest rate. 

Is a Personal loan better than other loans ?

Many people prefer personal loans over credit card usage, as the credit card has a short duration, and the amount must be paid following that tenure. Credit cards are also avoided due to credit rating concerns. also, personal loans help reduce credit utilisation, which is an essential factor a credit bureau considers. 


If you take a personal loan, you can have a blend of credit that fulfils the requirement of a credit mix in the profile; the Most importantly personal loan is an unsecured form of a loan; Hence no collateral/security is required. If you are willing to take a personal loan, get in touch with OneNDF and get it approved at competitive rates, as nearly 100 lenders are associated.  

Why should one avoid multiple enquiries?

Whenever you are willing to apply for new credit and inquiring multiple lenders within a short duration, it negatively impacts the CIBIL, and the score falls slightly. Institutions do notice the borrower's behaviour, and if you apply for personal everywhere, you may not get it approved, hence avoid approaching more than one lender if one has disapproved your profile; there is a high possibility that the other one will do the same. However, fall is only temporary and may get recovered once you start repaying your EMIs on time.

How a Personal loan is different from other loans, and where is it used?

The name itself suggests the loan was used for personal purposes to fulfil financial goals without pledging collateral/security, disbursed based on individual income, repaying capacity, history, or score etc.; the personal loan is comparatively a much more popular form of loan because, unlike any other loan, it does not ask for the specific reason. 


People generally use personal loans for Weddings, vacations, medical urgencies, Home renovation, etc. Some people also take personal loans to meet professional needs and bridge the funding gaps. 

How can personal loans help improve the credit score?

Personal loans can effectively improve credit scores in the following ways.

  • Debt consolidation 

  • Credit Mix 

  • Builds credit history

  • Timely repayment 

  • Reduce the burden on credit limits

Where can I get the best Personal loan?

One can get India’s best personal loan facility using OneNDF, India’s leading loan marketplace associated with top Banks/NBFCs, and contact leading lenders.

Contact our experts using the OneNDF portal; the team will revert within 24 hours. 

What rate will I get a personal loan using OneNDF?

One can get their loan approved at less rate of interest, which starts from 10.90%; the rest depends on your history, profile and credit score.

Winding Up

Personal loans can impact credit scores positively and negatively; one should maintain good credit scores, as discussed above and avoid skipping payments, inquiring too much, not choosing the right lender, and adding more debt.

In the article above, we have thoroughly analysed all aspects of credit scores and personal loans. Also, don’t forget your credit score represents your creditworthiness and your discipline, as well as your seriousness towards finance, borrowed, so always be attentive till it is not fully repaid. 


Suggested Read:

10 easy tips to improve CIBIL score!

Ocen - A way to digital lending

Small Businesses in Rural areas 

How does a personal loan impact my credit score: Frequently Asked Questions

Q.1 Does taking a personal loan impact the credit score?

When you apply, your profile may take a slight turn, but it will get corrected once you start repaying EMIs on time. 

Q.2 Where can I use a personal loan?

Personal loans can be used for any purpose; no need to mention the purpose to the lending institution. 

Q.3 How much credit score is good?

700+ is considered a good credit score.

Q.4 What is blacklisted credit?

When someone is denied credit due to a bad credit score/history. 

Q.5 Who offers the best personal loan facility in India?

Personal loan with OneNDF is the first priority for loan seekers because of the convenience and facilities offered.


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