Your CIBIL score is over 750, you’ve paid EMIs on time, yet the bank refused you a loan? This question troubles millions of people. In fact, banks don’t just look at your score, but also deeply examine your overall financial status, job stability, and current liabilities.
If any weaknesses are found in these key parameters, even an excellent CIBIL score can lead to loan rejection. This Google Search-friendly content will thoroughly explain the latest RBI regulations and unexpected aspects of banks’ internal audits.
Banks Don’t Just Look at Scores
Before granting a loan, banks or financial institutions want to be sure that you will be able to repay the loan on time without any interruptions. To do this, they conduct a detailed analysis of your income and liabilities, in addition to your CIBIL score. Your income and job stability play a crucial role in loan approval. If you frequently change jobs or have been unemployed for a long time, banks may consider you a risky customer.
Conversely, if you consistently work in the same field and are associated with a reputable company, the bank’s confidence increases. Your existing loans also matter. If 40% to 50% of your monthly income is already going towards EMIs, banks may hesitate to grant you a new loan. They may consider your repayment capacity to be weak.
Applying for multiple loans/cards simultaneously
A major reason for loan rejections despite having a high CIBIL score is that people apply for multiple loans or credit cards at the same time. When you apply for a loan or card, the bank conducts a ‘hard inquiry’ on your credit report. When multiple hard inquiries appear on your report simultaneously, banks consider it a sign of financial stress or an urgent need for money.
In such a situation, the bank may suspect you of being trapped in a debt trap, increasing the likelihood of loan rejection. Furthermore, if you have a poor track record with the bank you’re applying to—such as defaulting on a previous loan or delaying EMI payments—this can also work against you, even if your current CIBIL score is excellent.
Relief in New Rules
The Reserve Bank of India’s (RBI) latest guidelines have made a significant change for first-time loan borrowers. The new rules have completely removed the minimum credit score requirement for first-time borrowers. This means that banks can no longer reject an application based solely on a low CIBIL score.
They must make their decision based solely on the customer’s overall financial situation, repayment capacity, and job stability. This change is a significant relief for those who, despite having a good or stable income, were unable to obtain a loan due to a lack of credit history.