You are not alone. So many others, just like you have had their loans rejected despite having a cibil score of 750, 780 and so on. Although, it is a fact that higher your score, better are your chances of getting your loan approved; it is not a guarantee for your loan to get approved! So, what are the factors to ensure your loan could get approved? Well, that’s a whole other story.
If you have a high cibil score and are rejected a loan – there could be a number of reasons for this. Knowing and understanding these factors will help in getting a better grasp of what could really happen should you try to apply for a loan. Following are some of the common reasons:
When you have too many active loans, i.e. mathematically if you are paying more than 60% of your monthly income towards your various dues (including your housing loan, car loan & credit card bills) you are considered to be “overleveraged” by banks. Simply because, you are expected to have at least 40% of your income towards your everyday living expenses.
Even though you may be prompt in paying all your dues, and your cibil score is well above average – if you are applying for more credit (i.e. loans), it might probably be rejected for the very same reason mentioned above.
- Credit Hungry
When we are in urgent need of money, we never stop to think the fatal mistakes we make – which result in not getting the much required money at all in the end. One such mistake would be applying in multiple banks and financial institutions in one go. For instance, if you have applied for a loan in Bank A, B as well as C. You might probably be thinking that they might not be aware of you applying in the other two banks. However, you couldn’t be more wrong – because every time you apply; be it at Bank A or B or C – it will be recorded as an enquiry for credit.
Now, this could result in two things: One, your cibil score will be lowered by at least 10 – 17 points (approximately) every time you even enquire for a loan. And this will give the impression to your lenders that you are always borrowing beyond your comfort level.
- Derogatory remarks in your report
If there is even a slightest mention of Days Past Dues (DPDs) [ which basically means late payments] or a written off or settled status (which means you have merely closed your card/loan without paying the full amount due), banks will reject your loan right away. Even if you happen to have a score of 780 or 790 or even 800 if such remarks are recorded in your cibil report, you will not be granted a loan.
- Guaranteeing a defaulter
If you have signed as a guarantor for a friend or a relative, and in case if they have defaulted in repaying, it is not only his cibil score & report that will be affected, yours will be lowered as well. Even this is viewed negatively by several lenders.
- Wrongly matched credit report data
Sometimes, because of some kind of technical glitch there are chances that your data is matched with another person’s when the bank runs a cibil check. And if this person turns out to be a defaulter, your name will be marked off as defaulter. However, you can very well set this straight, after which you will be free to apply for a loan.
To sum it off, having a high cibil or credit score does not necessarily mean you would get your loan approved. However, knowing the various reasons for rejection will help you be prepared accordingly in the future.