A Credit Bureau Report, and a credit score , which is an integral part of the CIR play a crucial role in the loan approval process and a bad credit score can be detrimental in having access to loans or other credit facilities.
Why is the score critical?
Since the credit score is reflective of the credit worthiness of an applicant, the lenders in general check it prior to having the application processed. Depending upon the product and the policies, a lender may decide not to process the loan application at all in case the score is lower than a certain point. Generally a score of 750 is treated to a good score.
Will I get a loan in case my score is low?
There are multiple factors that impact the decision of underwriting on a credit request. Score is one of them. As mentioned above a low score may at times lead to outright rejection but there may be instances where a loan still may get approved despite a low score.
It is important to understand that the score is an outcome of various factors. There is a possibility that one may have a low score despite being a good pay master.
Also in case of a secured loan like a Home Loan, Loan against a Property or a Gold Loan a person with low score still might be able to get an approval.
Let us take an example. An applicant has a score of say 650, and wants to apply for a home loan of Rs. 60.0 lakhs. The rate of interest is currently 9%. Keeping in mind the low score, a lender may choose to sanction a loan of Rs. 45 lakhs, and with a higher rate of interest, instead of downright rejecting the loan.
This means that while the loan has got sanctioned, it will come at a steep cost.
The conclusion while is that a person might be able to get a loan even with a low score but he may not have access to complete suite of loan products or shall get charged a higher rate of interest.
Thus one must work towards improving his cibil score. Either through self-study or through taking services of a qualified advisory company.