Are you planning to apply for a loan anytime soon? Well, then you must check your CIBIL score because a good CIBIL score is essential for you to get your loan approved. It is one of the most important criteria when it comes to personal loans. If you have a decent CIBIL score, there is a high chance that your loan will get approved. However, if you have a low CIBIL score, it will be difficult for you to get your personal loan approved.
But what exactly is the CIBIL score?
CIBIL is one of India’s top credit bureaus authorised by RBI. The CIBIL database contains all of your previous credit data. This score varies from 300 to 900 and is a three-digit numerical summary of your credit history, rating and report. Before granting your personal loan, the lender will review your credit score. Ideally, your score should be 750+ to get easy approval for your personal loan. You can check your CIBIL score on the official CIBIL website.
In this article, you will learn how a low CIBIL score can cause your personal loan to get rejected.
Let’s say, you approach a lender or a bank for a personal loan. The first thing that is of utmost importance to them is if you’ll be able to pay back the loan you are taking from them. There is only one possible way to do that. It is through your CIBIL score.
If you have a low score it will showcase your reputation as someone who doesn’t pay their bills on time. Thus, this will lessen your credibility and trustworthiness in front of the lender or bank. There is a high chance of them thinking that you might miss out on EMI payments just like you do with your credit card bills. Hence, your personal loan has a huge possibility of getting rejected.
A low CIBIL score can be due to a variety of reasons. One of them is when you apply for a lot of credit cards or loans within a short period of time. Your score gets impacted by all these applications of yours. You can come across as someone hungry for credit. Thus, your credit score will probably suffer as a result.
In such a scenario, you’re being shown as someone who likes taking a lot of credit, it’ll become much more difficult for the bank to grant you your personal loan. Since you’re taking much more debt than you can handle, you are likely to default in future. Thus, no lender or bank will be able to grant you the loan.
Errors In Your CIBIL Report
A lot of times CIBIL score gets affected due to an error in the credit report. Inaccurate statements of pending instalments, wrong reporting of active loans and long-due credit card bills can cause a severe negative impact on your CIBIL report. These could be mistakes made by your bank, NBFCs or some other reasons as well. Ideally, you should review your credit report regularly and file a CIBIL dispute case to get any errors fixed as soon as possible.
In case you don’t check your CIBIL report checked daily, it can cause various problems for you. Let’s assume, some error has occurred in your final CIBIL report and you don’t get it fixed. The lender or the bank will be going by this CIBIL report only to understand your creditworthiness. Although it might not be your fault, you’ll be having a bad CIBIL report due to the errors. Finally, it will lead to your personal bank loan getting rejected for no good reason. Therefore, practice the habit of checking your CIBIL report.
No Credit History
It may sound a little complex but it’s true. If you do not have a credit history, it’ll become highly difficult for you to get your personal loan approved because in such a case, your credit score is likely to be zero or it’ll show no credit history. Additionally, if you only recently began using credit, then you will be having a very poor score. Therefore, you won’t be able to get a personal loan on terms that are suitable for you.
Unfortunately, banks require your CIBIL score to understand your financial situation. Thus, if you plan on applying for a personal loan, it is better to build a good credit score in your name. You can apply for a secured credit card to start building your credit score.
Moreover, you can get a secondary joint card with a person who has excellent credit, such as one of your parents. This is a great method to take advantage of their high score while simultaneously beginning to establish your decent credit history.
How to Improve CIBIL Score?
A few ways through which you can improve your CIBIL score are listed below:
- Don’t just pay the minimum amount due at the end of the month. Instead, try paying the entire bill.
- Always pay credit card bills on time.
- Try not to use more than 30% of your entire credit card limit.
- Keep checking your credit reports from time to time.
- Avoid using multiple credit cards in a short period of time.These basic rules should be kept in mind while using credit cards.
No doubt, your CIBIL score is of huge importance when it comes to applying for personal loans. We hope the information provided above helped you understand the reasons why a low CIBIL score can lead to your personal loan getting rejected. It is wise to practice financially healthy habits to improve your score.
If you want to learn more about finances and personal loans, check out Piramal Finance. They have a lot of useful and informational blogs that can help you make a good decision regarding your personal finances. Moreover, you can also apply for a personal loan on their website.