Credit Information Bureau (India) Limited, or CIBIL, is entrusted with the preparation of a credit score, which in turn serves as the first criteria to check the eligibility of an individual while applying for a personal loan. The credit score ranges from 300 to 900. A score lower than 750 is considered as a bad credit score. Usually, it becomes quite tough for a financial lender to process a Personal loan application if an individual has a low CIBIL score.
A personal loan is usually availed by an individual for dealing with personal emergencies. As no collateral is associated with the personal loan, it becomes quite important for the financial lender to check the credit history of the individual in terms of the CIBIL score. It’s not the end of the world if your score is low. There are ways you may still be eligible for personal loans. Let’s look at how you can improve your chances of availing a loan with a bad credit score.
Factors Affecting Your CIBIL Score
- Availing multiple loans
- Settling the credit cards with the financial lender by paying an amount lower than the due amount
- Very high utilization of the credit limit
- Rejected credit cards or loan requests
- Untimely payment of credit card bills and loan EMIs
- Non-availability of credit history
- A high percentage of unsecured loans
7 Ways to avail a Personal Loan even with a Low CIBIL Score
A low CIBIL score can undoubtedly reduce your chances of getting a personal loan availed. In case you have a bad credit history, then the following are some of the options which could assist you in getting a personal loan:
You can always try to avail a secured loan if your loan application does not get approved. Any collateral in the form of gold, fixed deposits, mutual fund investments, property, and so on can be used for availing a secured loan even if you have a low CIBIL score.
Look for tie-ups between the financial lender and your employer
If you are employed by a reputed firm, then there is a good chance that you might find a relationship between the financial lender and your employer as part of corporate relations. Due to such tie-ups, the financial lender can offer you special facilities on banking and loan products. This, in turn, can help you get a personal loan smoothly.
Applying for a Joint Personal Loan with any family member or your spouse
You can check with any family member or your spouse to see if they have a good CIBIL score. In case they do have, then you can opt for a joint personal loan which could be easily approved based on the CIBIL score of both applicants.
By having a Guarantor
You can manage to get a guarantor amongst your friends or family members who have an excellent credit history. In such cases, there is a high possibility that you can get your personal loan approved based on the CIBIL score of the guarantor.
Asking for a lower personal loan amount
If you ask for a higher loan amount while having a low credit score, it only indicates more risk to the financial lender. From their point of view, this is an indicator that you can default on the repayment of the loan. Financial lenders are usually more comfortable to process your application when you ask for a lower loan amount as it is easy to pay the same back.
Provide proof that your income can support the monthly instalments
If you have received an increment in your salary or have an additional source of income, then the financial lender might consider processing your application even if you have a poor credit history. However, in this case, you might have to end up paying a higher rate of interest.
Correcting any mistakes present in your credit report
It is quite possible that some errors might be present in your credit report. This usually happens when the most recent information has not been updated in your report. Such mistakes can easily affect your credit score without any fault of yours. Therefore, it is important for you to periodically check your CIBIL report and correct all possible mistakes. This will improve your credit score and make it easier for you to avail a personal loan.