Low CIBIL score? You can still get a loan – Here’s how

A valid CIBIL score falls within the range of 300 to 900, with anything above 750 considered as excellent.

Credit score plays a vital role during the loan approval process. A high credit score not only ensures quick disbursal of a loan, but it also helps in getting a loan at a lower rate of interest. Though it’s true that a low credit score indicates poor credit worthiness 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.

A credit/CIBIL score, in fact, is one of the first markers that lenders consider when granting you a loan — like a personal loan or a credit line. A high credit score signifies a high repayment ability. In other words, your credit score is an indication of your creditworthiness. A valid CIBIL score falls within the range of 300 to 900, with anything above 750 considered as excellent. The higher your score, the higher is the chance that your personal loan application will get approved.

However, what happens if you have a low/poor credit score and you need to take a loan for any emergency? How can you get a loan if you are new to credit and do not have an existing credit score? It will be challenging, but here are just a few small things you can do to avail a loan even with a low credit score or no credit score:

1. Show Records of Timely Repayments on Existing Bills

Your CIBIL score depends on timely repayment of your existing debts. “If you have defaulted earlier on any loan/ EMI repayment, your credit score will take a hit. Before you apply for a loan, ensure that you have a record of timely payments on all your outstanding debts like your credit cards, loan EMIs and utility bills. This will help you build a higher credit score and improve your chances of being approved,” says Anuj Kacker, Co-Founder, MoneyTap.

2. Present Evidence of Income to Support Loan Repayment Ability

Most lenders consider other factors such as your current salary or income sources, along with your credit score. If you have a low credit rating, you can still provide bank statements with evidence of a hike in your salary, annual bonus or other additional income sources. This proves that you are financially secure enough to repay the loan on time – this will help you get approval faster.

3. Apply for a Loan From an NBFC

If you have a weak CIBIL score and you are in urgent need of credit, it’s better not to apply for a loan from a bank as each loan application evaluation is backed by your credit report examination which results into hard inquiries.

“Multiple hard inquiries may negatively affect your credit score, and also in case your application gets rejected (chances are high in case of commercial banks), it may further downgrade your CIBIL score. So, it’s better to apply for a loan from an NBFC as they tend to have more relaxed policies towards customers with low credit scores. However, an important thing to note here is that the interest rate charged by NBFCs are higher than what is offered by banks,” says Pranjal Kamra,CEO, Finology.

4. Opt For A Low Personal Loan Amount

The lender may consider you a risky customer if you are borrowing a huge sum of money with a poor credit score. You can opt for a lower amount and repay it regularly, to build a higher credit score. This will earn the lender’s trust in your creditworthiness and you can go back for a loan of a higher amount. Also, repayment of a lower amount will be easier on your pocket.

5. Get A Guarantor Or Apply for a Joint Loan

Even if you have a low CIBIL score or are new to credit, you can get approved for a loan faster with a co-applicant or a guarantor. “Provided the guarantor has a good credit history and a high credit score, the lender will be more inclined to help you with a better deal on the loan amount. Ensure you have the right permissions and complete the required KYC formalities,” says Kacker.

6. Apply for a Secured Loan

Another easy way is to apply against some collateral to secure the loan repayment – this can be against collateral like gold or privately-owned property/other valuable assets.

“There are some banks and financial institutions which easily offer loans to low credit score holders provided you apply for a mortgage-backed loan. Assets such as property, gold, fixed deposits etc. are generally accepted by lenders as collateral to disburse a secured loan even to applicants with a low CIBIL score,” says Kamra.

7. Resolve Errors in Your Credit Report

Often, there are genuine cases when there have been errors or misreporting on your credit report. Check your CIBIL score once in 6 months to ensure that such errors are not happening and your credit report is updated. “Your credit score can be low even when you are a victim of fraud – take immediate measures to report the fraud or crime with your banking partners so it doesn’t affect your CIBIL ratings,” says Kacker.

Maintaining a good credit score is often a matter of doing a few essential checks on our repayment patterns.

This way you may end up getting a loan without your credit score restricting you.