CIBIL scores, generated by TransUnion CIBIL, generally vary from 300 to 900. Anything less than 650 is a bad score. A low Score has a variety of drawbacks, including the risk that your loan application may be refused directly. You might need to wait longer than usual and there can be more paperwork involved. You might have to pay a much higher rate of interest.
Where having a high score gives you a lot of advantages, a Low score on the other hand can create a lot of difficulties for you. Whenever you decide to apply for a loan in bank or financial institution, lenders tend to check your credit score. Then decide the terms and conditions for the loan as well as the loan’s interest rate. Therefore, it is necessary to check your score before you apply for any loan or credit card. Even the loan amount that you are requesting for depends on your CIBIL score.
CIBIL score basically gives a brief idea about your repayment capacity to the bank. Based on your creditworthiness and factors like your repayment histories, income, age, existing loans, etc banks process your loan application. There are a lot of disadvantages that come along with a low score. Some of the disadvantages of a Low CIBIL score are:
- Loan Application Rejection:- When you apply for a loan, one of the first and most essential elements evaluated is your CIBIL Score. The additional criteria such as your salary, existing debts, and your job status varies from bank to bank. On the other hand, your credit Score acts as a direct indicator of your creditworthiness. It also reveals how likely you are to repay the loan. As a result, no lender will lend to someone with a bad credit history. Therefore your loan application would not be approved if you have a low credit score.
- Higher Rate of Interests:- While some banks may just turn you down, others may be prepared to lend to you despite your low credit score. To compensate for the higher risk of lending to you, they may agree to lend at higher rate of interest.
- Difficulty in Obtaining Credit Card:- With a low credit score it is extremely difficult to obtain a credit card as most of the credit card providers in India generally check your CIBIL score whenever you apply for a credit card. If you have a low credit score the credit card companies are most likely to reject your application. However, if your credit score is not that low, the company might consider and approve your application. The credit limit approved would not be that high. Apart from the credit limit, the credit card companies might charge a higher premium on your card.
The above mentioned are some of the disadvantages that come along with a low CIBIL score. A low CIBIL score can affect you in various ways, even if you are not aware about your credit score. You can also do a free CIBIL score check online. Therefore you should always keep an eye on your credit score. Avoid these disadvantages to enjoy all the benefits that come along with a high CIBIL score.