Need cash urgently, but is your low credit score a hindrance?

4 MinsJan 16, 2023

Need cash urgently, but is your low credit score a hindrance?


Credit scores provide lenders with information about the borrower's ability to repay the loan. A credit score influences the creditworthiness of the borrower. It summarises credit history, the amount owed and repayment details, among many other factors.

A personal loan has no collateral, so the lender cannot rely on any other asset if the borrower does not repay the loan. Therefore, credit scores play a significant role in faster personal loan approvals. There is a misconception that you can't get a personal loan without a good credit score. Let's first understand what CIBIL score is.

What is CIBIL Score?

CIBIL or Credit Information Bureau (India) Limited is the credit rating agency in India. It provides banks and financial institutions with information regarding consumers' credit histories.

Financial institutions and banks use CIBIL scores to determine an individual's trustworthiness. Your credit score reflects how responsible you are when it comes to loans and credit cards.

How does CIBIL Score work?

The CIBIL score system operates like most credit scoring systems around the world. The score ranges between 300 and 900.

Banks forward the loan repayment information of their borrower to CIBIL. Based on the data, CIBIL determines the score for all individuals.

If you have a credit card or loan history and have repaid the bills or EMIs on time, you can expect a good credit score. On the other hand, failure to pay credit card bills or EMIs can negatively impact your credit score.

CIBIL or Credit Information Bureau (India) Limited is the credit rating agency in India. It provides banks and financial institutions with information regarding consumers' credit histories.

Financial institutions and banks use CIBIL scores to determine an individual's trustworthiness. Your credit score reflects how responsible you are when it comes to loans and credit cards.

Get personal loan with low credit score

You can implement the following measures to get a personal loan with a low credit score -

1. Provide proof of income

Are you unable to establish a credit history or have a low credit score? If you have a regular monthly income or additional income sources, presenting proof of steady income may increase your loan approval chances. However, low CIBIL loans may be subject to a higher interest rate. Nevertheless, it can be a promising opportunity for you to establish or improve your credit score.

 

2. Apply for a personal loan with a low amount

Lenders may view loan applicants as high risk if they request high personal loan amounts with low CIBIL scores. Lenders weigh this factor because they anticipate a higher default rate when an applicant applies for a larger loan with a poor credit score.
However, a low CIBIL personal loan could be possible if you ask for a lower loan amount. This will decrease default risk and make it easier for lenders to sanction personal loans.

 

3. Ensure that credit reports are accurate

Check for errors in CIBIL reports. Ensure that the CIBIL report is error-free and contains the latest information about your credit record. If there are any errors, contact the appropriate authorities immediately and have them corrected.

 

[Also ReadChoose a personal loan interest rate that fits your pocket]

4. Apply for a loan against a collateral

Despite low credit scores, lenders may approve loans with collateral as security. There are several assets that might serve as collateral, including shares, properties, fixed deposits and gold.
When nothing else works, a credit card can be an effective way to build a credit history. A credit card against a fixed deposit is the fastest way to obtain one.

 

Conclusion

Using a credit card regularly and paying the credit card bills on time can boost your credit score. Moreover, avoid applying for multiple loans since it may negatively affect your credit score.

 

Still unsure about eligibility? Check the personal loan eligibility criteria at Axis Bank's intuitive website.
Axis Bank offers personal loans from ₹ 50,000 up to ₹ 40,00,000 with minimal documentation and speedy approval. You can choose a tenure between 12 to 60 months.
Want to calculate the monthly EMI on a personal loan? Check out Axis Bank's interactive personal loan EMI calculator & interest rates on personal loan.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.