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Will Education Loan Affect CIBIL™?

Education loans, just like any other loan, must be repaid to keep up with a good credit score. The only difference is that it can be paid once the applicant completes his/her course and gains employment.

A lender looks at an education loan just like any other line of credit—a loan that needs to be repaid. And just like any other loans and credit cards, education loans are also reported to the bureaus that get reflected in the borrower's credit report and can have a negative or positive impact on your credit score, depending on your repayment behavior. Non-repayment of education loan can and will affect your credit score.

People don't know the importance of a good credit score until they apply for a loan and get rejected. Following are some of the most common reasons that contribute to a bad credit score:

  • Missed / delayed payments – Not paying EMIs or loan installments on time
  • A consistent history of delayed credit card payments.
  • Not paying your credit card dues in full
  • Applying for credit at multiple lenders within a short period of time
  • Getting close to or crossing credit limit.
  • Cheque bounce.
  • Avoiding the above will help raise your credit score.

    How to get an education loan with a low CIBIL™ score

    CIBIL™ is one of the four authorized credit bureaus in India which provide a credit score, the others being Equifax, Experian and CRIF High Mark.

    It is very difficult to secure any form of credit with a bad credit score since your lender depends on your credit history to ascertain whether you are a creditworthy person or not. Hence it becomes doubly important to have a good credit score.

    However, since an education loan is generally a secured loan, the lender might disregard your score. Lenders also look at other factors like your annual income.

    They might be willing to lend to you if you withdraw a handsome annual salary. That is because you would be in a better position to make repayments, and your loan application might be approved, albeit at highly unattractive interest rate.

    Try to improve your credit score to at least 700 and above in order for your education loan application to be accepted.

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