Having a low CIBIL™ Score is not the end of the world. There are umpteen ways to improve your credit score, only if you are willing to put in the effort. Fixing your credit score may take some time, but it’s worth the effort.
What if you need a loan or credit during this period? Not to worry. Here’s how you can still borrow smartly, in spite of a low CIBIL Score!
What is a CIBIL™ score, and how do I get one?
Credit Information Bureau (India) Limited, or CIBIL™, is a credit information company. It keeps track of credit-related behaviours, such as loans and credit cards of individuals. A CIBIL™ score is used to determine whether lending to borrowers is safe or risky. When opposed to a person with a low CIBIL™ score, a person with a high score has a better chance of getting loans. A CIBIL™ score is a number that goes from 300 to 900.
You can check your latest credit score for free, within a few minutes, right here on CreditMantri.
Tips To Borrow Smartly With Low CIBIL™ Score
1. Provide proof of timely repayments – Your repayment history is a key deciding factor in any loan application. Even if you have a low CIBIL™ Score, if you have made prompt repayments on all your previous loans or credit, the lender would be inclined to consider your application.
So, make sure to submit proof of your credit card bills or other loans where you have been making timely repayments. Your credit score would suffer if you have previously defaulted on any loan or EMI repayment. Make sure you have a proven history of timely payments on all of your outstanding debts, such as credit cards, loan EMIs, and utility bills, before applying for a loan. This will assist you in raising your credit score and increasing your chances of approval.
2. Assure them of your income stability – If the lender is assured that you have a stable income and can meet your EMI commitments, your low CIBIL™ Score might be ignored. A steady career at a reputable company, such as a multinational corporation, can give lenders more confidence in clearing your loan application.
Similarly, if you can show that you've been earning consistently for the past year at a position with a growth path and forthcoming promotions, you'll be able to borrow on more favourable conditions. To reassure lenders, submit your last six months' worth of payslips.
3. You can go for secured loans - Credit cards or personal loans are unsecured loans, forcing lenders to be stringent with the application process. Instead, if you opt for secured loans like gold loans or pledge some kind of collateral, they may approve your application easily. Collateral or security assures them of their money back and it will increase your loan prospects.
Some banks and NBFCs are willing to lend to people with bad credit if they qualify for a mortgage-backed loan. Property, gold, fixed deposits, and other assets are commonly accepted as collateral by lenders to issue a secured loan, even to applicants with a low CIBIL™ score.
4. Add a co-applicant on your loan application - If there are siblings, parents or spouse, who have a higher income than you, or have a better CIBIL™ score than you, you can add them as a co-applicant on your loan application. This will increase your chances of landing the loan, that too with better terms.
Lenders will feel safe knowing that the payments will be split between two borrowers, and they will consider the additional income as well as the co-credit applicant's score. The lender will be more eager to aid you with a better deal on the loan amount if the guarantor has a strong credit history and a high credit score. Make sure you have the necessary permissions and have completed the KYC requirements.
5. Go for lenders with simpler loan terms – If possible, apply with lenders who have set very basic requirements for borrowers to qualify for loans, if possible. This way, you'll be able to easily meet the other criteria and explain your current financial situation, including your bank account balances, IT returns, and job prospects.
However, check to see if the lender has any unfavourable terms or a high interest rate. You can also choose a lower loan amount and repay it on a regular basis to improve your credit score. This will increase the lender's confidence in your creditworthiness, allowing you to apply for a larger loan. In addition, repaying a lower loan amount will be less taxing on your finances.
Additional Reading: Learn how to improve your CIBIL Score.
Though it’s true that a low CIBIL™ score indicates poor creditworthiness of the borrower and makes it difficult to get a loan, there are some ways through which one can get a loan even with a low credit score. The first step towards this is to get a detailed credit report. Then follow the above tips to get a loan that meets your needs.
- What is the ideal CIBIL™ Score to get a loan?
A CIBIL™ Score of 750 and above will get you any kind of loan with favorable terms.
- Can I achieve an 850 and above CIBIL™ Score?
Yes, you can very well achieve a CIBIL™ Score of 850 and above. It needs disciplined debt management, consistent repayments and smart usage of credit to achieve such a high score.
- Are there lenders who lend to individuals with a low CIBIL™ Score?
Definitely. There are many banks and NBFCs that will lend to you even if you have a low CIBIL™ Score. You may have to submit additional documents to establish your income stability and repayment capacity for that.
- Is it wise to go for online lending apps if my CIBIL™ Score is low?
Yes, instant loan apps are a good option if your CIBIL™ Score is low. However, these lenders charge a very high interest rate and if you fail to repay on time, you may fall into a debt trap.
- What’s the easiest loan to get with a low CIBIL™ Score?
Payday loans and secured loans are the best choice if you have a low CIBIL™ Score.