Important Facts About Customers With No CIBIL, Low CIBIL or Bad Credit Score


For most people, intending to take benefit of the various opportunities available for assured business growth, the availability of enough funds is a primary concern. Most such people rely on availing a personal loan to arrange the requisite money in a simple and convenient manner. However, getting a loan might not always be as simple as it seems. This is especially true in case of individuals having a low or no CIBIL score. In fact, until quite recently, people in general were often unaware of the important role played by a good credit and CIBIL score for the approval of a loan application. Whether the borrowers choose to secured or unsecured no credit check loans from banks, insurance companies or other financial institutions, having a good CIBIL score enhances their creditworthiness in a significant manner.

Significance of Credit Information Bureau

Despite being aware of the importance of credit score for availing a loan, most applicants are unaware about how banks and financial institutions obtain this vital information. This is where the credit information bureau plays a vital role. The bureau, which was established in the year 2000, is better known as the Credit Information Bureau (India) Limited also referred to as CIBIL in short. The bureau is responsible for handling the credit records of the consumers, companies and other institutions besides enhancing the transparency, efficiency and credibility on issues related to credit access. This is ensured by monitoring of the credit activities and doing follow ups about the history of credit card and loan repayments by CIBIL.

How CIBIL Develops Credit Score

The credit score offered by CIBIL is developed on the basis of the data obtained from the credit records of the clients submitted by the various financial institutions on a regular basis. In general these records are submitted by the financial institutions after a predefined period, which in most cases is 30 days. It is this Credit Information Report for individuals that are used by banks, insurance companies and other financial institutions to assess the creditworthiness of the loan applicants. The Report also provides an insight about the risk factors of providing loans to the clients of various financial institutions.

Good & Bad Credit Score

As the financial institutions submit the credit history of their individual clients to CIBIL periodically, the bureau gains a clear understanding about their borrowing habits, repayment patterns and tendencies of defaulting on repayment. This information is then used by the bureau to generate a three-digit number that is referred to as the credit score of an individual and which can range from 300 to 900. The higher the credit score of an individual, the better they stand the chance of obtaining different types of loans. However for people with low credit scores, regular loan approval might be somewhat difficult, even though they might easily avail bad credit loans for smaller amounts.

Factors That Play Vital Role in Defining Credit Score

It is important for the loan applicants to understand that the data used for generating their credit score, often comprises of only the past six months of their financial history. Moreover, the following factors play a vital role in generating the score:

  • The repayment history of the applicants comprises up to 35% of the credit score and even a single default can influence the score in a negative manner.
  • The amount repaid to the creditors forms another 30% of the score and this information is obtained by comparing the available credit limit with the percentage usage of the same by the loan applicants.
  • The time remaining to pay back the remaining loan amount in a regular manner forms the basis for another 15% of the score, and a longer time period is generally preferred.
  • The amount of the new loan applied for makes up for 10% of the credit score and applying for a greater number of loans tends to negatively impact this factor for the applicants.
  • The remaining 10% of the credit score is determined by the various types of credits that the applicants have availed, with CIBIL giving a greater preference to a diverse credit mix.

What does No CIBIL Score Mean?

CIBIL generates a credit score only for those individuals who avail different types of loans, whether it is a secured personal loan or the unsecured no credit check loans. The bureau may also use the credit card payment history to generate the score. However, the lack of any of these two types of data indicates financial inactivity of the individuals and results in them getting a zero or no credit score. This can deeply impact their ability to get a loan from renowned financial institutions. Thankfully, it is possible to raise the CIBIL score from zero to a positive value by availing credit card facility or even by taking an EMI free loan from a reliable lender and repaying any outstanding amounts well in time.