A credit score is a three-digit number that indicates how responsible you have been in the past in repaying debt. It’s a major factor in determining your creditworthiness, the foundation for lenders’ risk-based pricing, and increasingly a part of background checks in the hiring process. Borrowers who have a high credit score after a CIBIL score check SBI will still need to satisfy the following five criteria or their loan application will be declined.
Applicant’s Age
Your age now, as well as your projected age at the end of the loan term, will be factored in by the lender when deciding whether or not to grant you a loan. Borrowers who fall below the minimum and maximum age requirements often find their loan applications rejected. Loan applications from those who are getting near to retirement age are often more difficult to approve. This is because it is in the best interest of the lender for the loan to be paid up before the borrower retires. This is due to the fact that once the borrower retires, he or she will no longer be receiving any income at all, or at least a drastically reduced amount.
Failing to make enough income to qualify
Lenders evaluate your credit history and apply other criteria, but the minimum income requirement is one of the first filters they use. The borrower’s place of residence (urban, suburban, rural) is usually the deciding factor. Even if you meet all of the other qualifying standards, such as having a decent credit score upon going to CIBIL score check SBI and being of a specific age, your application for a credit card or a loan may be promptly declined if your monthly income is below the required amount.
Even with a stellar credit history as per credit report provided by credit bureau of India, the minimum income criteria may vary from lender to lender; therefore, it is in your best interest to check out a financial website online. Your eligibility and precise financial needs can be communicated to potential lenders, and they in turn can make loan offers that can be readily compared and selected. Consider adding a co-applicant to increase both your total loan eligibility and the likelihood of approval. However, be sure that the co-income applicant’s is significant and consistent, in addition to meeting the other critical eligibility conditions provided by the lender.
Having a high proportion of emi to income ratio
Even if your credit score was good when you saw through CIBIL score check SBI your loan application could still be denied because of this. The ratio of your monthly EMI payments (including those for the new loan) to your monthly gross income is known as your EMI to income proportion. A loan application may be declined if the applicant’s monthly EMI payments represent more than 40–50% of their monthly gross income. Lenders like borrowers whose EMI to income ratio is between 40% and 50%.
If your ratio is above this threshold, you may want to consider prepaying part or all of your current loans. Doing so would reduce the percentage of your income that goes toward your EMIs, making you more eligible for a loan. This could be something you accomplish in whole or in part. A longer payback term for the new loan means a smaller EMI, but only if the total EMIs paid out each month remain at or below the minimum allowed percentage of your net monthly income. You should try to make prepayments if you have extra cash because doing so will reduce the total interest paid out.
This is because the longer the term, the greater the interest will be. You can make prepayments whenever you have the funds available. Keep in mind that your CIBIL report will provide you with a comprehensive breakdown of all loans and EMIs.
Job profile and history
Many banks and credit bureau of India evaluate your job security, company reputation, and industry standing before deciding whether or not to extend loans to you. Because of the greater presence of employment certainty among individuals working in either the public sector or with top corporate entities and MNCs, lenders may have a bias for lending to all of those working in either sector.
This is in contrast to people whose day-to-day responsibilities include similar tasks in companies that are either lesser known or financially unstable. The likelihood of a loan being authorised for a candidate whose occupation has a high risk may be lower. Lenders may interpret a history of job switching as a sign of professional and financial insecurity.
Signing on as a co-signer on a loan for another person
The guarantor is liable for repaying the debt in full if the primary borrowers or borrowers fail to do so and the default shows up on the credit bureau report. When you sign on as a guarantor on someone else’s loan, you take on shared responsibility for its repayment along with the borrower. Lenders will consider the unpaid balance of a guaranteed loan to be a contingent obligation when assessing the guarantor’s ability to repay the loan, so decreasing the guarantor’s borrowing capacity and increasing the risk that the loan application would be denied.
It’s important to develop the habit of calculating the possibility that you’ll need financial help in the short and intermediate future before committing to serve as a loan guarantor. In the event of a delay or failure in the payment of the guaranteed loan, both the principal borrower(s) and the guarantor’s credit score and CIBIL report would take a hit, as will be visible when you do CIBIL score check SBI wherein credit bureau of India must have mentioned the relevant credit information. Therefore, it is crucial to keep a close eye on the guaranteed loan’s repayment activities in the account.
Concluding all this, remember that credit score is indeed crucial but not the sole factor that makes or breaks your loan application approval chances. So ensure to focus on all the parameters mentioned above to sail through!
