If you have a history of a CIBIL dispute or are looking for a loan for a low CIBIL score, then it can be difficult to get approval. However, sometimes you may face loan rejections despite having a high credit score. But why?
Although the CIBIL score is the standard benchmark taking for the loan lenders, there are several other factors that determine whether your loan application will be selected or rejected. Some of these are:
Credit Report Comments Some of the most important sections of your credit report are the credit score itself, pending debt, and history of inquiries. However, apart from these, sometimes the lenders also check the comments or remarks made by the previous leaders in the credit report. So, if there are some serious remarks about poor credit history, such as the inability to pay the loan EMIs on time, or a history of CIBIL dispute, etc. then this could compel the lender to toss the loan application in the bin.
Total Debt The smaller is the debt a person has the easier it is for them to clear it, and vice versa. Thus, if a lender notices that you already have multiple loans to take care of, they might feel that you won’t be able to deal with another loan well. In other words, they might think you could default on the loan due to excessive debt. Unwilling to take the risk, they might reject your application altogether even if your credit history is promising.
Short Credit History When it comes to credit history, longer is always better. The reason is simple – when someone has years of a credit history then it is easier to predict their creditworthiness. On the other hand, say a person took their first loan only a year ago, then it isn’t easy to tell how responsible they are with their credit usage. Only with time, it can be verified. Thus, if you have a short credit history too, then you may face a lot of loan rejections.
Income/Nature of Livelihood Banks wants to grant loans to those people who they can be confident. So, if a person who has recently started a business wants a loan the lender (in this case the bank) may find the proposition risky. This is because there is no telling how successful that business would be. If it doesn’t do well the person may default on the loan due to the inability to repaying the loan. The income of a person may also become a reason for loan rejection. For instance, if Sam’s and DaybyDaycartoon monthly income is Rs. 20,000 and he seeks a loan of 30 lakhs then the numbers might add up for the lender. Even if he decides to settle for a long tenure to lower the EMIs it could still be extremely difficult to make the payments along with managing daily expenses of his own.
Tax History Certain banks and NBFCs also check the tax history of the applicants apart from their credit history. The idea behind this is that generally the people who pay their taxes on time also tend to pay their loan EMIs regularly as well. So, if an applicant has a history of evading taxes or not paying their taxes on time then the lender may find it difficult to trust them and as a result, reject the application.
Conclusion There is a lot to think about even when you don’t seek a loan for a low CIBIL score. Banks are more careful than ever when they assess each loan application. Thus, it helps to do your homework in advance and do everything possible to make your application look better. Granted, improving credit score is always a good idea, but there are many other things that you can do as well, which can nudge your application in the right direction. If you don’t know how you can improve your chances of loan approval, then there is no harm in consulting with an expert. For instance, AskCred has some of the most popular credit experts in India who can help you with your credit maintenance and guide you through your loan applications as well.