How Your CIBIL Score Affects Loan Approval

Ever wondered why some people seem to get loan approvals instantly while others are left waiting, or worse, rejected? The answer often lies in a small but powerful number: your CIBIL score. Whether you are dreaming of a new car, planning a wedding, or looking to renovate your home, your CIBIL score plays a big role in turning that dream into reality. It’s more than just a number, it’s a reflection of your financial habits and can open door to faster approvals, better interest rates, and higher loan amounts.
Let’s explore how this three-digit score influences your loan journey and how you can make it work in your favour. Read on!

What is a CIBIL Score?

CIBIL score is your credit score issued by a leading credit bureau, TransUnion CIBIL. It is a three-digit number ranging from 300 to 900. It reflects your creditworthiness based on your credit history which includes your past repayment behaviour, number of credit applications, debt-to-income ratio, and if there is any loan default.

How Lenders Use Your CIBIL Score During Loan Evaluation

When you apply for a loan, lenders check your CIBIL score before reviewing any other documents. It is a quick snapshot of your financial discipline. A high score signals lower risk, making lenders more confident while offering you a loan. A low score, however, raises red flags and may prompt further scrutiny or even rejection.

Why Your CIBIL Score Matters

Lenders want to minimise their risk. A high CIBIL score portrays you as a reliable borrower, giving the lender the confidence to approve your loan quickly and on better terms. According to TransUnion CIBIL, loan approval rates for borrowers with a credit score of 750 are over 80%, while those with lower score often face delays or outright rejections. Simply put, the higher the score, the better your chances of loan approval.

What a Good CIBIL Score Can Do For You

Besides smoother approvals, here’s what a good score can get you:
•    Higher Loan Amount: Lenders trust you more with larger sums.
•    Lower Interest Rates: Over the loan duration, this can save you a substantial amount.
•    Quicker Disbursal: Less documentation and fewer checks mean faster access to funds.
•    Stronger Negotiation Power: You are in a better position to negotiate terms and rates.

How to Improve or Maintain Your CIBIL Score

Even if your score is not where you would like to be, you can still take measures to improve it gradually. Here’s how:

•    Pay your bills on time. Even a single missed payment can hurt your credit score.
•    Maintain a healthy credit mix. A balance of secured (like home loans) and unsecured credit (personal loans) is ideal.
•    Keep your credit utilisation low. Try to keep your credit use below 30% of your limit.
•    Avoid multiple loan applications. Multiple inquiries can reduce your credit score.
•    Check your credit report regularly. Errors may reflect in your credit report, raise any discrepancies quickly.

What to Do If Your Loan Get Rejected Due to a Low CIBIL score

Here’s what you can do:
•    Check your credit report for any inaccuracies
•    Clear your outstanding debts
•    Reduce your debt-to-income ratio
•    Consider smaller loans to build your score
•    Avoid reapplying immediately – wait and rebuild your score first

How to Check Your CIBIL Score for Free

You can check your CIBIL score for free once a year on the official CIBIL website. Many NBFCs and financial institutions also offer free score checks. Just make sure you are choosing a trusted source to avoid fishing or data misuse. Check your CIBIL score for free with your trusted partner, Poonawalla Fincorp.

To Conclude

Your CIBIL score is more than just a number. It is ticket to easier, faster, and affordable access to credit. Whether you are planning a dream vacation, buying a home, or covering an unexpected expense, a strong score makes the process seamless and more affordable. So, if you are aiming for a loan in the near future, start focusing on your score today. Every smart move you make today is a step towards a better financial future tomorrow.

Frequently Asked Questions

1.    Does CIBIL score affect loan approval?
Yes, your CIBIL score is the first thing that lenders check before making a lending decision. A high credit score of 750 and above improves your chances of loan approval with favourable loan terms.
2.    Can I get a loan with low CIBIL score?
Yes, it is possible but may be challenging. You may be offered loans with higher interest rates, lower amounts, or may be asked to provide a collateral or guarantor.
3.    How often is the CIBIL score updated?
Your CIBIL score is updated once a month based on the latest information provided by banks and financial institutions.