Have you ever applied for a loan? You must be aware of the fact that the bank does analyze and evaluate your eligibility before offering a loan. This factor is not actually based on an individual’s personality but is judged by the bank which focuses on the borrower’s finances and previous credit records.
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In India, the manner in which bank and other financial institutions can track your credit worthiness is managed through your CIBIL score. It is basically a numeric value that is associated with an individual and updates the bank about his/her responsible nature towards their loans and credit cards. What makes CIBIL so important? CIBIL score is considered as one of the prime parameters that play a crucial role in the approval of a loan. It is interesting to know that, CIBIL score was India’s primary or initial credit rating system and at present is actively recognized by all the banks as a trusted authority on an individual’s credit report.
Factors Considered Before Offering Loan
According to RBI guidelines, the various banks and other financial institutions are mandatorily certified to check with CIBIL before sanctioning any loan application or credit request. There are two major considerations before lending to a borrower that are given preference:
- Payment Abilities (analysis of financial data)
- Payment Patterns (analysis of credit repayment history)
CIBIL acts as a useful source that offers assistance in understanding these two parameters through CIR (Credit Information Report), which offers insight about the credit score of an applicant. In simple terms, CIBIL works to successfully track an individual’s loans, credit cards, EMI dues, defaults in payments, EMI overdue, and much more. A loan with low CIBIL score does become a hassle for the individual. Even if your Gross Annual Income and current EMIs record is decent, a bad CIBIL score can surely prove as a major hindrance.
Also Read about: What are the Reasons for Low CIBIL Score?
If you are struggling with a poor credit repayment history or CIBIL score, the foremost task should be to improve your score and then apply for a loan. Generally, a CIBIL score above 750 is considered acceptable for reviewing a borrower’s credit worth.
Loans for Bad CIBIL Score
If in case you have failed in making the credit card or loan payments, then you would be tagged as a defaulter. A defaulter’s name is listed with CIBIL and should be taken as a warning. Furthermore, for a defaulter or a person with a low CIBIL score, the chances of loan approval do get hampered. The banks and financial institutions tend to reject your loan applications and credit card requests.
Can I get a loan with credit score of 550? It is usually difficult for a person with low CIBIL score to get loans or credit cards. In India, most banks aren’t fully ready to offer loans to CIBIL defaulters. However, there are some banks which do provide assistance to such individuals. Hence, loan without CIBIL score concern can be an option but under limited cases.
Loan Approval Tips for Bad CIBIL Score
For a person holding a bad CIBIL score there are certain methods that can prove beneficial. In this case, loan without CIBIL verification or analysis is the general basis. Moreover, other relating factors linked to the defaulter are taken into consideration. Here are few tips which may prove as an alternative to help you get a personal loan regardless of your poor CIBIL score.
1. Good Salary
A person’s salary does act as a helping source in case his/her CIBIL is extremely low. If you are earning good enough in the present scenario and hold enough capability to repay your loan then it would guide you to getting your loan application approved without focusing on the CIBIL score.
2. Spouse’ CIBIL Record
In case your CIBIL score reflects a bad number but your spouse manages a good CIBIL score, then you can seek their assistance for accessing a loan. You can easily get your loan application sanctioned by making your partner a joint loan holder.
3. Search HFCs that Offer Loan with Low CIBIL Scores
You need not panic since there are certain companies and organizations that do offer loans to individuals holding bad CIBIL scores. But, the only issue is that they offer higher interest rates on the repayment of loan.
4. Lending Peer to Peer
It is a practice which is quite common in foreign countries. If you are in need for a loan and it is urgent, then peer to peer lending can be considered. It is important to note that, the interest rates on such loan are significantly high and the amount under reflection is small as well. These platforms prefer categorizing the individuals (borrowers) based on their CIBIL scores, namely high risk, medium risk and low-risk. You can avail loan from these sources easily if you fall in the medium or low-risk segments.
What are the reasons for low CIBIL Score?
CBIL scores are seen as an indicator of your financial habits and reveal how you handle your loans and credit cards. And it is quite clear that non-maintenance of your CIBIL score does become a hassle in terms of accessing a loan. Therefore, it is important to follow measures so as to keep your CIBIL score under check.
1. Personal Loans
One should always keep in mind that, personal loans are unsecured loans and issuing too many personal loans can cause a dip in your credit score.
2. Skipping Loan Installments
If in case you miss an installment regarding your loan then it would be seen as part of a poor financial planning. Hence, your credit rating will suffer causing a trouble for you to acquire loans in the future.
3. Credit Card Dues on Time
It is seen that, if you fail to repay your credit card dues under the specified duration, then it can cause a negative impact on your credit history.
4. Semi Fulfillment of Credit Card Dues
There are people who think that paying the minimum due on the card is enough to manage things under control. In reality, it is a totally false assumption! Although the banks might not offer serious concern when you have an outstanding balance, but CIBIL does take it as a negative indication. Outstanding balance isn’t a good sign for CIBIL and tends to reduce your scores.