When applying for a Loan, be it any type of loan, lenders firstly look for some kind of assurance that you will without a doubt, repay your loan in time. So, what could be the yardstick with which, one could know your tenacity when it comes to repaying your loans? Well, just as tradition goes this too is determined by a – Score of course. Well, this requires no examinations or anything, but it does require something else entirely. Let us break it down further to understand better -
Say you are applying for a Personal loan today. You fulfil all the eligibility criteria put forth by the bank and thankfully are granted a loan. It doesn’t matter if you are earning 50,000 or even 20,000 per month, the pressing factor when it comes to loan approval is your cibil or credit score which is nothing but a numerical summary of your credit history. You will have a credit history only if you have held any previous loans or credit cards. Quite obviously, if you have repaid your emis / credit card dues on time – then chances are high that your score is good – or if you have skipped a payment or two – the same will be reflected in your score.
Now, what if you have never had a any credit history (which means no loans or cards in the past), but are still looking to apply for a loan? This is when some lenders become wary, because if you haven’t had any experience in repaying, how can they be sure you will successfully repay the loan they are about to grant you?
Its not that all banks are against lending to people with no repaying experience, however, there are other criteria that need to be met in order to be eligible. Like for instance, some banks expect your income to be more than 30,000 or sometimes they expect you to have a residential stability of more than a year and so on. Different banks have different criteria, and then there are some others whose policy does not allow them to lend at all to newbies.
You see, cibil score is a numerical summary of all your credit activity as captured in the past 2 years only. Technically, such a score is referred to as “cibil -1 or 0”. However there are several types that come under this particular category:
- no loans or credit cards in case a loan availed is reported to cibil
- only enquiries* are found, but no loans or credit cards were actually availed
- has held loans or credit cards, but not in the past 2 years.
Even if you have held a credit card in the past 3 or 4 months and haven’t used it much, then there is little chance for it to reflect in cibil which again brings you under the category mentioned above.
So, the bottomline is – yes you can avail a loan, at least you can apply for one – even if you don’t happen to have a credit score.
enquiries* – means, you have applied for a loan but the amount hasn’t been credit in your account or your loan may have been rejected.
To understand more about the cibil score or report, go here