How to get a loan despite Negative CIBIL score

Small businesses, self-employed professionals and Micro, small and medium enterprises (MSMEs) face a unique challenge while trying to access debt funding from banking system related to their credit history. Every time they are told that there is something wrong about their CIBIL while may be sometimes they have no idea what the CIBIL is!

Many a time they are told that their CIBIL score is – 1 (Minus One) hence they cannot get a credit facility. Here is a guide how to keep your CIBIL score good and how to get a loan despite negative score.  

What is CIBIL score?

The first criterion which is used to determine the eligibility for any kind of loan is the credit score prepared by CIBIL (Credit Information Bureau of India Limited – now part of Trans Union). CIBIL score is a three-digit numeric summary of your entire credit history, based on monthly information provided by banks and other financial organizations. It is usually in the range from 300-900 on the scale of 1000 where having a score of above 750 makes you a decent and reliable borrower. The higher your CIBIL score, the more are your chances of getting a better deal on your loan.

There are 4 major credit information agencies who track the credit history of borrowers as reported by various lenders be it banks or NBFC companies like www.prestloans.com . These agencies are: -

1.     Trans Union CIBIL

2.       Equifax Credit Information Services

3.       Experian Credit Information Company

4.     CRIF High Mark Credit Information Services

How to maintain a decent CIBIL score:

·      Payment History: Delayed payments, dues or defaulting EMIs (loan installments) negatively affect the score. Thus, a business owner needs to keep a check on the payments due and avoid defaulting on EMIs.

·      Keep a check on utilization of Credit Card Limit: Increased spending might not directly affect the score but the increasing outstanding balance of your credit card is seen as repayment burden thereby negatively affecting your score.

·      Percentage of Unsecured Loans: Having a higher percentage of unsecured loans such as credit cards, personal loans etc. than secured loans such as auto loan, home loan etc. could negatively affect the credit score hence avail unsecured loans very carefully.

·      Multiple loans and Credit Cards: Multiple loans and credit cards show an increased debt burden which lower the score hence should be avoided.

·      Overdues: Even a small amount overdue for a long time on credit card or loan will impact the score negatively big time. This one is most important hence don’t keep anything due and take a NOC/ loan/ credit clearance certificate from your lender when you repay the loan.

Even if you have not adhered to the above-mentioned check points, do not despair, one can still be eligible for a loan despite a low or negative CIBIL score.

What is negative CIBIL Score: -

The above credit information companies give a “- 1” (minus one) score which is a negative score if you do not have any credit history; that is when you have not availed any loan or credit card in the past. While you may feel good about it and say you have not taken any loan so far, lenders see it as negative as they don’t get any historical data to depend upon. Most banks or NBFC companies don’t lend to people with “minus one” score. However new age digital lenders like www.prestloans.com consider these profiles also for providing debt facilities to small businesses.

How to be eligible for a loan despite a low or negative CIBIL score?

·      Good and stable source of income: Depicts your ability to repay the loan, and then even a low CIBIL score would not count much.

·      Timely Filing of Taxes: Being a regular tax payer will also work in your favour. Show the tax receipts of the last 3 years to the lenders and it would be an additional point which would show your sincerity to the lender, and thereby assure them of repayment from your end.

·      A secured job with better career prospects: A secured government job or a stable job with a reputed company would prove that you are gainfully employed with a growth in future prospects. One can show the salary slips of past 6 months to assure the lender of your repayment abilities.

·      Utility bills: Pay and show timely payment of all your utility bills like electricity, telephone, water etc. as this is considered a good habit and sincerity in payments.

Concluding remarks:

CIBIL or Credit score is important and plays a significant role in getting a loan sanctioned but it does not remain the only criteria for the eligibility of loan sanction. It is always better to keep at least a healthy CIBIL score by keeping a check on the above factors, but one could even be eligible with a low or negative score by keeping above points in your favor. Most new age companies like www.prestloans.com make their own credit score based on alternate data and lend of eligible businesses and MSME units.