Got bad CIBIL score? Here’s a toolkit for you to get hassle-free personal loan

So, what is CIBIL Score?

In simple words, a CIBIL Score is a 3-digit numeric score that is assigned to the summary of your credit history, rating and report. It usually ranges from 300 to 900 and the closer your score is to 900, the better your credit rating is. CIBIL score is given by the Credit Information Bureau (India) Limited (CIBIL), which is a company licensed by the Reserve Bank of India. 

Note: Did you know that there are three more companies whose function is to provide credit information? Well, apart from CIBIL, there is Experian, Equifax and Highmark which are also licensed by the RBI to function as credit information companies. 

Now, what to do if you have a bad CIBIL score?

There can be many reasons why your CIBIL score is on the lower side. From missing an EMI to maintaining a high credit ratio on your credit card, your CIBIL score can be impacted by a lot of factors. And if you see yourself in the lower side of CIBIL score, and the chances of you getting a personal loan diminishes. But there are ways you can counter that – one simple way to do this is by slowly increasing your CIBIL score by doing the following:

• Make it a point to clear all your existing debts,

• Make sure you keep a check on your credit utilization,

• Make sure to pay your EMIs on time – this can take years of constant EMI payments on time,

• Make it a point to borrow a mix of credit,

• Make sure to report any discrepancies in your credit limit.

But in case you still find your CIBIL score on the lower side, there are ways to get a personal loan. Before we discuss the toolkit discussing various ways you can get a personal loan with a bad CIBIL score, first, let’s understand what is a bad and a good CIBIL score for a Personal Loan.

Now, when you have a Bad or Very Bad CIBIL score, the chances of you getting a personal loan approval is very less. However, as discussed above, there are way to overcome this situation. We present a toolkit, a simple methods you can follow if you want a faster approval on your personal loan application. 

Stable Income

Explanation: Lenders are more likely to approve a personal loan if they see that you have a stable and consistent income. This provides them with confidence that you have the financial means to repay the loan, even if your credit score is low. It’s important to provide clear documentation such as salary slips, bank statements, or employment contracts to demonstrate the reliability of your income source.

Additional Tips: Highlight any additional income sources like rental income, freelance work, or bonuses, as these can further reassure lenders of your financial stability.

 
Low Debt-to-Income Ratio

Explanation: Your debt-to-income (DTI) ratio is a measure of how much of your monthly income goes toward debt payments. A lower DTI ratio indicates that you have a better balance between your income and debt, making you less risky in the eyes of lenders. Even with a bad credit score, if your DTI ratio is low, lenders may be more inclined to approve your loan application.

Additional Tips: If your DTI ratio is high, consider paying down existing debts or consolidating them before applying for a new loan. This will improve your DTI ratio and your chances of approval.

Co-applicant

Explanation: Applying for a loan with a co-applicant who has a good credit score can significantly increase your chances of approval. The co-applicant’s strong credit profile can compensate for your bad credit score, providing the lender with added assurance that the loan will be repaid. This is especially helpful if the co-applicant is a close family member, such as a spouse or parent.

Additional Tips: Ensure that the co-applicant fully understands their responsibilities and the impact on their credit score. Joint applications should be entered into with trust and transparency.

Additional Documentation

Explanation: When your credit score is low, providing additional documentation can help strengthen your loan application. This could include proof of assets, detailed budget plans, or a letter explaining the reasons for your credit score issues and how you plan to manage the loan responsibly. This extra documentation can help the lender understand your financial situation better and make a more informed decision.

Additional Tips: Be proactive in gathering and organizing this documentation. Presenting a well-prepared and thorough application can set you apart from other applicants and improve your chances of approval.

In conclusion, while a low CIBIL score can pose significant challenges when applying for a personal loan, it does not necessarily close the door to all possibilities. By demonstrating a stable income, maintaining a low debt-to-income ratio, applying with a co-applicant, and providing additional documentation, you can improve your chances of loan approval even with a less-than-perfect credit score. It’s essential to approach the process with diligence and preparedness, understanding that while your credit score plays a crucial role, lenders also value financial responsibility and transparency. By following the strategies outlined in this guide, you can navigate the lending process more confidently and work towards securing the financial assistance you need.