Are you looking for funds to buy a home, a new vehicle, or expand your business? Banks and NBFCs provide credit to fulfil individuals’ personal and business needs with specific eligibility conditions to eliminate the risk of recovery. To monitor individuals’ credit behaviour, credit agencies compile data on all loans, credit cards, and other credit tools, the most authentic of which is the CIBIL (Credit Bureau of India Ltd).

What are the Measures of the CIBIL Score?

With the data received, the CIBIL creates an account with a reference number under which all credit-related dealings are accumulated. To grade the creditworthiness scores are allotted as follows:

Why is it Mandatory to have a Good Credit Score and Rating?

Lenders use the score allotted by CIBIL as a ready reckoner to issue further credit to loan seekers. Banks now need a minimal credit score to process a loan request; the score required varies from lender to lender according to individual norms and the type of credit applied for.

HDFC Bank emphasises the individual’s credit history, not only the credit score. There is no minimal score requirement, and each case is judged on individual merit. There should be no delays or defaults in the repayment tracks and no settled accounts. In contrast, AXIS Bank has a scoring method to confirm eligibility, including the current CIBIL Score.

Other premium Banks, such as ICICI Bank, YES Bank, and NBFCs, such as Aditya Birla, have fixed eligibility norms and will only accept a request if the credit score is at least 730 or 750 points, per the requirement.

Does the CIBIL Score Vary for Secure and Unsecured Credit? 

Lenders judge customers’ ability to handle credit based on their records and current credit usage, as recorded by the CIBIL. Personal Loans and Credit Cards are issued without any security or collateral based on the customer profile, unlike mortgage and auto loans, for which the lender holds on to the ownership documents until the loan is repaid.

Therefore, repayment records and credit history are a priority in unsecured lending. Before processing a Personal Loan or Credit Card, the lender inquires to CIBIL to retrieve and report the score. An applicant Applying for an ICICI Bank Credit Card needs to have a CIBIL Score of 750 points and above to process the request a similar scorecard is required for an ICICI Bank Personal Loan. The YES Bank requires a mandatory score of 730 points and above to further a YES Bank Personal Loan, Balance Transfer Personal Loan or a Personal Loan Top Up.

Applicants seeking a home loan are also subjected to a CIBIL inquiry. Banks may consider a mortgage request for an applicant with a below-average CIBIL record, but a delinquent history can create issues. The application can be rejected, and the customer may have to apply to an NBFC and pay a higher interest or provide a guarantor. At the same time, a repayment history of timely EMI payments will ensure an enhanced loan amount with a longer tenure.

Have the CIBIL Score Requirements Changed?

The CIBIL Score has steadily become a priority for lenders. Banks and NBFCs closely check their averages, and keeping delinquencies and defaults below the acceptable percentage is essential. The RBI (Reserve Bank of India) also monitors the effects of the credit industry on the economy and issues directives.

In the recent past, a CIBIL Score of 720+ was an acceptable score to procure unsecured credit, such as a Credit Card or a Personal Loan. However, due to the increase in defaults and non-payments, this score has now increased to 750+ therefore, be vigilant about your EMI dates and pay your credit card bills timely. A CIBIL Score of 750+ is now the acceptable benchmark to secure easy credit and lower interest.

Can You Get a Loan with a Lower Score or Without a CIBIL Rating?

If you have yet to start using a Credit Card or building a credit history, do not stress. First-time loan seekers are eligible for secure and unsecured credit if the lender’s guidelines are fulfilled. The primary guidelines include:

• The net salary of the applicant must be above the minimum required of 30k per month.
• The employer should feature in the HDFC Company Category List of Approved Companies.
• The salary should be transferred to the Bank account monthly on a fixed date.

If, for some reason, your score is below the required norms, you can take steps to work on the same before Applying for a Personal Loan or a Credit Card. If you need funds urgently, apply for a gold loan or a Loan Against Property. Used Car loans are also forwarded with a lower score a loan against a commodity will help you raise funds, and you can regenerate your score with a timely repayment track.

In Conclusion

With the digitalisation of Banking systems and government guidelines linking all KYC Documents and Bank accounts, consumer data is being promptly updated. Credit agencies regularly record credit usage, which is readily available for Lenders to check customer credentials. Therefore, understanding the CIBIL ratings and maintaining a healthy CIBIL Score is necessary to procure secured and unsecured credit.

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