Loan applications can be rejected by banks and lending institutions for a variety of reasons. One factor that influences a borrower’s eligibility is their CIBIL score. According to studies, nearly 72 percent of all loans are denied due to low credit scores. As a result, maintaining the proper CIBIL score is critical in order to be eligible to borrow in times of need. So, what do you need to improve your CIBIL score? Here’s everything you need to know to keep or improve your CIBIL score, so you never have to worry about loan rejection.
What is CIBIL Score -1?
A CIBIL score – 1 indicates that there is no information regarding the borrower’s credit history. Because there is no information to report, this score is frequently referred to as “NH” or “no history.”
The Credit Information Bureau of India Limited (CIBIL) is preparing to launch a new scoring system called CIBIL TransUnion.
The new scoring system will assign a score from 1 to 5, with 1 representing the highest likelihood of default and 5 representing the lowest likelihood of default. This new system will provide credit scores to new borrowers after considering information such as:
- Loan Types (secured or unsecured).
- Credit requests from the past (volume of loan requests).
- Any past loan may be up to three months overdue.
- Demographic information such as age, location, income, and so on.
These factors will determine your score as a number ranging from 1 to 5, which is why some people have reported a CIBIL TransUnion score of 0 or -1.
If you have no (or little) previous borrowing history and no track record to assess your creditworthiness, CIBIL will assign you a score of 0 or -1:
A CIBIL score of 0 indicates that information about the borrower’s credit history is only available for a period of fewer than 6 months. Also abbreviated as “NA” or “not applicable.”
A CIBIL score of 1 indicates that there is no information about the borrower’s credit history. Because there is no information to report, this score is also known as “NH” or “no history.”
Although you are not in a bad situation, most banks and NBFC lenders will only lend to those who they believe can repay them. A CIBIL score of 0 or -1 may indicate that you will not be approved for a loan, but some good banks and NBFC lenders are looking at credit appraisals, income proofs, employer and employment details, and other factors before lending despite a CIBIL score of 0 or -1.
Other credit information agencies in India are also implementing a credit rating system for prospective borrowers with less than six months of credit history. Equifax, for example, assigns credit scores ranging from 300 to 900, which are comparable to those assigned to people with a good credit history. Experian uses a scale of 1–6 to rate borrowers with less than 6 months of credit history, with 1 being the riskiest and 6 being the least risky in terms of loan default.
How to Get a Loan Even if Your CIBIL Score Is 0 or -1?
Simply contact the bank and explain how and why you are an eligible candidate who is stuck in the unfortunate position of having no credit history, and the process will begin. Submit proof of income, a letter from your employer, and other documents to persuade the bank that a CIBIL score of 0 or -1 is an inaccurate representation of your creditworthiness.
Once you’ve secured your new loan, making timely payments will result in a higher credit score and positive remarks on your CIBIL TransUnion credit report. You must pay each and every EMI on time; this will not only save you from penalties and fines but will also help you improve your credit rating. It states that the first loan you obtained was successfully repaid in full and on the same terms under which you obtained the loan (try not to foreclose or reach a “settlement” with your bank).
Your loan repayment details and bank remarks will be included in your new CIBIL TransUnion credit report.
Today, most banks use these scores to determine creditworthiness for borrowers with less than six months of borrowing history and/or no credit history at all.
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