A personal loan can serve a multitude of purposes.
Though the loan application process has gotten simplified over time, there isn't always a guarantee of 100% loan approval. There can be situations when a personal loan application may be rejected and the applicant has no idea why. One of the many primary reasons to reject a personal loan application can be a bad credit score.

A loan applicant must take care of the following factors to minimise the possibility of personal loan rejection:

Credit Score: Every bank considers the credit score to be the primary aspect in order to conclude on processing a loan application. The credit score reflects the behaviour of the applicant in terms of money management in the past.

The ideal credit score is 900, whereas a credit score of 750 is advisable to have to pass the eligibility border. Any credit score less than 750 would give rise to questions and may lead to rejection of the loan application. Therefore, a good credit score is important to ensure the bank that the applicant pays the monthly instalments on time and is trustable.

Income Status: Check the debt to income ratio before applying for a personal loan. Banks count on the possibility of an individual to repay the loan. Banks consider the other commitments of the applicant as well.

Banks check how much of a borrower's income is going towards servicing other commitments and how much they have left to service the loan. Ideally the TDSR or Total Debt Service Ratio should be less than 30% of the gross monthly income of the borrower.

This means, no read more than 30% of the monthly income can go towards paying loan instalments. So if the borrower already has existing loans eating into this share, it would be harder for another loan application to be approved.

Cheque Transactions: One should take care when dealing with cheques. A loan aspirant must make sure that none of his/her cheques were returned in the last 12 months. If there are any cheque returned instances, banks may not entertain the personal loan application. Even if the account associated with the cheque is closed currently, the record still exists and affects all the future transactions.

Income Declaration: If an individual earns a fixed monthly income, then the bank would need a confirmation on EPF and tax payment. The individual needs to provide the necessary documents to assure this. When it comes to a business owner, the bank needs proof on income stability.

Also, a business owner must have been in operation for at least 2 years.

No Credit History: As mentioned above, having a poor credit score is not ideal to get a personal loan approved. On the same lines, having no credit score isn't great too.

Having no credit score may sometimes turn out to be a negative sign and lengthen the loan approval process. As a solution for no credit history, a person can first opt for a credit card and manage the bills systematically to increase his/her credit score.