TransUnion CIBIL generates CIBIL scores that range from 300 to 900. Anything less than 650 is considered a poor score. A low Score has a number of disadvantages, including the possibility that your loan application would be rejected outright. You may have to wait longer than normal, and there may be additional paperwork. You may have to pay a substantially higher interest rate. Whereas having a high score provides you many advantages, having a low score might cause you a lot of problems. Lenders often examine your CIBIL score when you apply for a loan at a bank or financial institution. Then, decide on the loan’s terms and conditions, as well as the interest rate. As a result, you should check your credit score before applying for a loan or credit card. Even the loan amount you request is determined by your CIBIL score.
Common Disadvantages of Low CIBIL Score
The credit score essentially provides a concise indication of your ability to repay the bank. Banks analyse your loan application based on your creditworthiness and other variables such as your repayment history, income, age, current debts, and so on. A low score has a number of downsides. The following are some of the drawbacks of a low credit score:
1. Rejection of a Loan Application
When you apply for a loan, one of the first and most important factors considered is your CIBIL Score. The extra requirements, such as your salary, previous debts, and work status, differ from one bank to the next. Your credit Score, on the other hand, is a clear reflection of your creditworthiness. It also displays your likelihood of repaying the loan. As a result, no lender will make a loan to someone with a poor credit history. As a result, if you have a low credit score, your loan application will be denied.
2. Higher Interest Rates
While some banks may just refuse you, others may be willing to lend to you despite your poor credit score. They may agree to lend at a higher interest rate to compensate for the increased risk of lending to you.
3. Difficulties Obtaining a Credit Card
It is incredibly difficult to acquire a credit card with a poor credit score because most credit card issuers in India examine your CIBIL score whenever you apply for a credit card. Credit card providers are more likely to reject your application if you have a poor credit score. However, if your credit score is not too poor, the corporation may take your application into account and accept it. The allowed credit limit would not be that high. In addition to the credit limit, credit card firms may levy a higher premium on your card.
The drawbacks listed above are some of the consequences of a low CIBIL score. Even if you are unaware of your credit score, a low CIBIL score can have a negative impact on you in a variety of ways. Your CIBIL score can also be low due to any error in your credit report and there is a chance that you might not be aware about that error as well. Therefore, it is advisable to make a CIBIL score login in order to keep a check on your credit report as well as on your credit score. There are a number of websites that let you check your CIBIL score for free online. As a result, you should always monitor your credit score in order to avoid any discrepancies that can lower your CIBIL score. Avoiding these drawbacks would enable you to reap the rewards of a high CIBIL score.