What is CIBIL Score? Is a loan unavailable because of a bad credit score? What are the disadvantages, know from experts

Nowadays, loan has become a necessity for everyone. Be it buying a house or a car. In such a situation, your CIBIL score is checked every time you go for a loan from a bank or a credit card from any bank. Many times, while taking a loan, banks also tell you that your CIBIL i.e. credit score is low, so you cannot get a loan. What is this CIBIL score? Who determines it and what are its disadvantages, let’s know from the experts.

Most banks or lending institutions evaluate the applicant’s CIBIL score while approving a loan or credit card. This CIBIL score is prepared by TransUnion CIBIL, one of the four credit bureaus in India.

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What is CIBIL Score?
CIBIL score is a three digit number. It ranges from Rs 300 to Rs 900 and indicates the borrowing capacity of a person. Whenever someone applies for a new loan or credit card, the lending institution checks the applicant’s credit score to assess their credit risk. Maintaining a good credit score, i.e. one close to 900, increases the chances of being approved for a new loan or credit card application.

Generally, a credit score above 750 is considered good for getting a credit card or loan application approved. If your score is below 750, it may be difficult for you to get a loan. Even if your application is approved, your interest rate is likely to be higher. Furthermore, with a CIBIL score of less than 650, there is little chance that any bank or NBFC will approve your loan or credit card application.

If the CIBIL score is bad, you will also have to bear the loss. You face problems in all bank-related tasks.

1- It will be difficult to get a loan. If you have a bad CIBIL score, you will face difficulty in getting a loan from any bank, small finance bank or NBFC. Banks worry that you have a bad CIBIL score, which means you might default!

2- High interest rate will have to be paid- Even if some banks agree to give you a loan despite a bad CIBIL score, they will charge a higher interest rate. Actually, he tries to manage his risk. They believe that even if a person defaults on the last few EMIs, there is no loss to the bank, so interest rates are kept high.

3- You may have to pay a higher premium. Sometimes insurance companies may even charge you a higher premium if you have a bad CIBIL score. In fact, in such a situation, insurance companies may feel that you can make more claims, in which case they may demand higher premiums. Many companies may also be reluctant to provide insurance.

4- Difficulty in taking home car loan. Just like a personal loan, you may also face difficulties in getting a home loan or a car loan. You may also have to pay more interest. There is also difficulty in leasing property for business. The company may also ask you to put up some collateral in exchange for the loan.

5- There may be a delay in getting the loan. The bank that agrees to give you a loan will check the documents thoroughly before giving you the loan. Even if you apply for gold loan or security loan, there will be strict scrutiny. Even if you give some mortgage, the bank will look at you with suspicion and do a thorough investigation. All of this can take a lot of time, which can delay you getting the 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 keep it 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 low credit score will affect your credit. will adversely affect your eligibility and most banks/credit institutions may not approve your loan/credit card application.

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Tags: Bank Loan, car loan, Debt default, Taking a home loan