Is a CIBIL report necessary to apply for a loan?

Most lenders prior to approving a loan or credit card application run a Credit Information Report (CIR) check on the applicant. This report gives them an indication as to the creditworthiness of the individual, and helps them take an informed decision as to whether lending to the said customer would be prudent.

Once you apply for a loan and submit the application to the financial institution, they run a check with the Credit Information Company (CIC), or credit bureau for information such as the applicant’s previous credit history, repayment track record, number of loan and card accounts, EMI to income ratio etc. in the CIR. Higher the credit score on the report, higher are the chances of your loan being approved. Should the score be low, the lender may not consider the case further and reject it outright.

Financial institutions also broadly look out for other parameters, such as written-off cases reported in the CIR. Employment is also taken into consideration, as most institutions have an approved list basis which they extend loans/ credit cards.

I don’t have a CIR. Will I not get a loan?
No, there is always the possibility that an applicant is applying for a loan for the first time! In such cases, there would not be much data available to a prospective lender in the CIR. While this is not viewed negatively by a lender, it is likely that their credit policy prevents them from approving a loan to such individuals (i.e. those with no previous track record).

CIBIL score is India’s oldest CIC, with three newer entrants namely Equifax, Experian and CRIF High Mark also providing CIRs. Bureaus now generate reports basis demographic information that can help them gauge the applicant’s creditworthiness, in the absence of past history.

In conclusion, while having a CIR does make it easier to apply for a loan, it also needs to be a healthy report for a lender to extend credit facilities.