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Here's How CIBIL Score Influences Any Loan Application!

Here's How CIBIL Score Influences Any Loan Application!

A bank or a non-banking finance corporation (NBFC) makes loans with the expectation of full repayment, including all fees and interest.

They can only get the money back by selling collateral, which is only available for secured debts. In such cases, funds are advanced in exchange for the borrower's security pledge of some asset. The lender is reasonably confident that the money lent is secure because the value of the asset being pledged exceeds the loan amount. It is not permitted with an unsecured loan, such as a personal loan or any property mortgage loan. Money is lent without regard for collateral and is based solely on the lender's risk assessment of the borrower.


The credit or CIBIL score, popularised by the first organisation in India to pioneer the practice, represents this creditworthiness. The figure ranges from 300 to 900. The higher the score, the more likely the money will be returned on time and in total, and vice versa.

The figure considers previous and current loans and how the borrower has handled servicing them through EMIs, credit card usage, and a track record of dues repayment. Notably, the entire monthly balance can be paid at a time when using a credit card. The individual must repay the remainder according to the repayment schedule. The same holds for any unsecured personal loan.

How It Impacts Personal Loan

Because a personal loan is an unsecured loan, lenders typically evaluate funding applications based on previous behaviour. While there is agreement on what constitutes a good score, lenders have different thresholds below which they will not lend.

Banks, for example, have strict lending thresholds below which they usually do not lend or take a property mortgage loan. This is usually around a 750 CIBIL score. If a borrower's credit score falls below a certain threshold, their loan application may be denied, even if their income is sufficient to cover the loan's EMIs. This is because they are viewed as a high-risk customer whose past loan and credit card usage indicates a potential default or late payment.

A low credit score raises the chances of rejection, but there are other factors influencing the lender's final decision. NBFCs, on the other hand, have far more options. While NBFCs prefer borrowers with a high CIBIL score, they are much more flexible. A personal loan with a CIBIL score of 650 is likely to be approved, albeit with a higher interest rate, to compensate for the additional risk.

However, even NBFCs avoid those with shallow scores, say less than 500. All lenders believe the money will not be returned in whole or in part at that point. So, the loan application is denied if a borrower goes to a lender with a CIBIL score of 480.

When should you apply for credit?

You can undoubtedly apply for credit or a loan, but you must know when it is appropriate. Before approving a loan, lenders consider various factors, including your credit score. Credit Help India can assist you in determining your credit score and answering the question, "How can I raise my credit score quickly?" Then Credit Help India will assist you in determining your credit score, studying your credit report, identifying areas of concern, and assisting in correcting the same.


A loan may be either secured or unsecured. Lenders can recoup their losses in the first case by selling the collateral. Lenders such as Finway FSC base their decision on the applicant's creditworthiness regarding unsecured debts, such as an unsecured personal loan, and the CIBIL score is critical.

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