Credit score is one of the primary factors considered at the time of availing loans and credit cards. It is calculated based on a borrower’s credit history. However, new-to-credit applicants who have never taken a loan or credit card do not have a credit score. Without a credit score, it can get difficult to avail any credit product.
| RBI has advised credit institutions that loan applications of first-time borrowers should not be rejected just because they have no credit history. |
However, new-to-credit consumers may not be eligible for the following:
- Pre-approved loan and credit card offers
- High-ticket loans such as business loans or some home loans
- Premium credit cards
- Relaxed loan terms and conditions
- Low interest rates and cost of credit
Also Read: What’s New in 2025: 5 Major Credit Score Changes
What is the Government’s Clarification?
In response to a set of question regarding the CIBIL score, the Minister of State in the Ministry of Finance, Shri Pankaj Chaudhary, made a few clarifications that impact borrowers and lenders.
For First-Time Borrowers
For Existing Borrowers
For Lenders
|
Why is it Difficult for First-Time Borrowers to Avail Credit?
- New to credit consumers do not have a history so no credit score is assigned to them.
- Even if a lender checks the applicant’s credit report, the bureau mentions NH/NS in their report.
- The risk of loan approval for such applicants cannot be assessed by a bureau or the lender.
- Under such circumstances, they may not get most credit applications approved.
Suggested Read: How Credit Score Impacts Pre-approved Offers
Alternative to Private Credit Bureaus
The minister was also asked whether the Indian Government had any plans to set up a government credit agency replacing CIBIL and other credit bureaus to do due diligence before lending loans. His response has been summarised below:
- Currently, there are 4 Credit Information Companies that have been granted Certificate of Registration by RBI –
- TransUnion CIBIL and other bureaus are private institutions, and many organisations are wary of data theft/breach
- Any such breach can lead to serious financial implications within the country
- This led to the proposal of a government institution that can handle both credit and financial data for an applicant’s better risk assessment
- As of now, there is no proposal to replace any bureau with an alternate mechanism
- But setting up of NFIR (National Financial Information Registry) has been proposed in the Union Budget 23-24
- NFIR’s framework shall be designed in consultation with the Reserve Bank of India
- NFIR shall act as a central repository of all credit and ancillary information of all residents
What should New-to-Credit Consumers Do?
If you are a first-time borrower, you may find it difficult to avail various credit facilities. Follow the suggestions mentioned below and be credit-ready to fulfill your life goals and financial requirements in future.
- Opt for a secured credit card or small loans if you are new to credit.
- Follow a disciplined credit behaviour and build your credit score.
- A good credit score built now will help you get better credit offers when you actually need them.
Latest Credit Score Articles
