Nowadays, loan has become a necessity for everyone. Be it buying a house or a car. In such a situation, whenever you go to take a loan from a bank or take a credit card from a bank, your CIBIL score is checked. Many times while taking a loan, the bank also tells that your CIBIL i.e. credit score is low, so you cannot get a loan. After all, what is this CIBIL score? Who determines it and what are the disadvantages of it being bad, let’s know from the experts.
Most banks or loan institutions evaluate the CIBIL score of the applicant while approving a loan or credit card. This CIBIL score is generated by TransUnion CIBIL, one of the four credit bureaus in India.
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what is cibil score
The CIBIL score is a three-digit number. It ranges from 300 to 900 and indicates a person’s loan eligibility. Whenever someone applies for a new loan or credit card, the lending institution checks his/her credit score to evaluate the risk of lending to the applicant. Maintaining a good credit score, i.e. one that is close to 900, increases the chances of approval of a new loan or credit card application.
Generally, a credit score of more than 750 is considered good for getting a credit card or loan application approved. Having a score below 750 may make it difficult for you to get a loan. Even if your application is approved, the interest rates are likely to be higher for you. Also, having a CIBIL score below 650 makes it very unlikely that any bank or NBFC will approve your loan or credit card application.
If your CIBIL score is bad, then you have to bear its losses. You have to face problems in all the bank related work.
1- There will be problem in getting loan- If your CIBIL score is bad, you will have trouble getting a loan from any bank, small finance bank or NBFC. Banks fear that your CIBIL score is bad, meaning you may default!
2- Higher interest rate will have to be paid- Even if some banks agree to give you a loan despite a poor CIBIL score, they will charge a higher interest rate. Actually, they try to manage their risk. They think that even if the person defaults on the last few EMIs, the bank should not incur any loss, so the interest rate is kept high.
3- You may have to pay higher premium- Many times insurance companies can also demand a higher premium from you if your CIBIL score is poor. Actually, in such a situation, insurance companies feel that you can make more claims, so they can demand a higher premium. Many companies can even refuse to give insurance.
4- Difficulty in taking home-car loan- Just like a personal loan, you may face problems in getting a home loan or a car loan. You may even have to pay higher interest. There are also problems in getting a property on lease for business. The company may also ask you to mortgage something in exchange for giving you a loan.
5- There may be delay in getting loan- The bank which agrees to give you a loan will also check your documents thoroughly before giving you the loan. Even if you apply for a gold loan or a security loan, there will be a thorough investigation. Even if you mortgage something, the bank will look at you with suspicion and will do a thorough investigation. All this can take a lot of time, which can delay your loan.
Rajeev Das, CEO, I-Loan Credit says, ‘A low credit score is not only detrimental to your finances but you also miss out on many other benefits and offers on loans and banking services. Try to keep a close eye on your credit score and maintain the number above 700. If you have not paid your EMI/credit card bills on time or have not managed them well, there are high chances that your credit score will be low and a low credit score will negatively impact your creditworthiness and most banks/lending institutions will not approve your loan/credit card application.’
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Tags: Bank Loan, Car loan, Loan default, Taking a home loan
FIRST PUBLISHED : July 13, 2024, 18:28 IST