Can you get a personal loan even when your CIBIL Score <750?
Published on : June 23, 2021

Are you apprehensive about applying for a personal loan? Have you applied for a personal loan and did not get it? Does your low CIBIL score haunt you? If your answer is yes, we have some good news for you. Chin up and let’s see what the possible solutions are, under such circumstances. For those who do not understand the CIBIL score and how it works, here is a short explanation.

What is a CIBIL score?

Simply put, a CIBIL score is a numerical summary of your credit history calculated by TransUnion CIBIL, India’s leading credit bureau. They collect information from all financial institutions regarding your credit history in the form of a credit information report. These are compiled and a numerical score from 300-900 is calculated. This is the credit score or CIBIL score. As you can see a score closer to 300 is bad while a score closer to 900 is excellent as a measure of creditworthiness. 

What happens when the CIBIL score is high or low?

Usually, a score above 750 is considered good by lenders and 90-95% of loans get approved easily. A score below 550 is considered iffy by most lenders. The bigger lenders would normally be a little cautious while assessing these applications  and applications may get rejected because lenders look to minimise the additional risk of default. However, one should remember that the credit score cannot be the single factor on which a loan is approved or rejected. Some lenders consider all factors like the quality of job, repayment capacity, recent pay hike etc.

How can you secure a personal loan in spite of a low CIBIL score?

  • Analyse the CIBIL score and check for misreporting
  • Explore a wide range of online lenders
  • Explain the NA/NH on your credit report for dormant periods
  • Show proof of your repayment capacity
  • Apply for the loan with a co applicant
  • Go for a lower personal loan

Analyse the CIBIL score and check for misreporting

It is better to understand the details of how the CIBIL score became low. You can check your own credit history and check whether you have ever defaulted on a loan. If you do not recall any instance, it is possible that you did not obtain the No Dues Certificate from the lender when you closed the loan. This is one of the main reasons why credit scores get muddled. Unless this certificate is obtained, the loan shows as open and defaulted due to no fault of yours. You realize this only when you apply for the next loan and it gets rejected. Under such circumstances, you have to immediately obtain the No Dues Certificate from the lender by showing proof of payment in order to get your file closed. The updated credit score will reflect the change and improve it drastically.

Explore a wide range of online lenders

It is incorrect to assume that if one lender rejects your personal loan, all lenders will do the same. It would be beneficial for you to explore all the lender options available on the net to see if someone is willing to lend to you with your existing credit score. It is quite possible that they may charge a slightly higher interest rate but the loan does stand a chance of being approved. There is no need to be disappointed without trying the entire range of options available in the market.

Explain the NA/NH on your credit report for dormant periods

In case you have been inactive for over three years, your credit score may not have been calculated and the report is generated with NA or NH. In such a case, you are better off discussing with your lender and explaining the reason for the inactivity. It is quite possible that the lender will take into account your circumstances and approve the loan at a higher interest rate.

Show proof of your repayment capacity

What is a lender’s biggest worry? It is the fear that the borrower will not be able to repay the personal loan. It is the fear of default that makes lenders so stringent in evaluating loan applications and we cannot blame them for trying to protect their companies  against risk. On the other hand, it is possible that your credit history got tarnished due to unavoidable circumstances. It could be a medical emergency or family issues that made you slip a payment or two. It is quite possible that the situation has improved since then. You may be expecting a promotion or pay hike or a better job is in the offing. These could change your repayment capacity drastically although it will not reflect in your credit score. Lenders may be willing to consider these genuine reasons and grant you the personal loan.

Apply for the loan with a co-applicant

The lender has every right to protect his money and is at liberty to reject loan applications where he perceives a risk. In order to boost your chances of getting loan approval, you can apply for the loan along with a co-applicant who has a good credit score. This will be treated favourably by the lender as the chances of repayment improve and there are two applicants who will be equally responsible to ensure repayment.

Go for a lower personal loan

In case the loan amount you need is small, you stand a better chance of getting the loan approved as the risk is limited. So, you may consider applying for a lower amount and repaying it on time to boost your credit score. Over a period of time, you will be able to erase the past and improve your credit score that will increase your chances of getting a fresh personal loan.

In case you are stuck with a low credit score, do not fret. Explore the solutions given above and see if the situation can be salvaged. A low credit score is not the end of the world. You can visit our website and get in touch with our team and we will see how we can help.