Your CIBIL Score is one of the most vital components in determining loan eligibility. Banks will censure and put value on the significance of this score as a determinant of one’s creditworthiness. But does a zero CIBIL score mean you should discount everything? Certainly not! In this article, you will learn how to get financing with either a bad or nonexistent CIBIL score while working toward repairing your creditworthiness.
What You Need to Know About CIBIL Score
A CIBIL score is a number calculated between the range of 300 and 900, which signifies one’s credit history and repayment behavior. Generally speaking, those above 750 with a score would find loan disbursement easier with a favorable interest rate. If, on the contrary, your score is low or nonexistent, the lender might consider you a high-risk borrower.
Here’s the point: A zero CIBIL score does not mean you have defaulted on payments. It usually indicates you have no credit history. This arises when you have never borrowed a loan or used a credit card. Banks, with no history to judge, have no option other than to grant a zero score or -1.
Is Getting a Loan With Zero CIBIL Score Possible?
Well, the answer is: yes! A loan is possible with loans that have a zero or poor CIBIL score. One of the safest ways to go about it would be to procure a loan against a Fixed Deposit (FD).
What is Loan Against FD?
A loan against FD is one in which the FD acts as collateral for a secured loan. Since the banks hold the FD as security, there is no need to check the CIBIL score of the credit applicant. Therefore, this becomes a very good option for all individuals who carry a low credit score or do not have any credit history.
How to Apply for a Loan Against FD
Check Your FD Eligibility: Check that your fixed deposit is not a loan ineligible one. Most banks offer loans up to 75-90% of your FD value.
- Make an Application: Walk into your bank and apply for a loan against your FD.
- Minimal Documentation: The documentation process is quick and easy since it is secured.
- Instant Approval: Banks approve it within hours, usually because of the absence of a credit check.
Benefits of Loan Against FD
- No CIBIL Score Check: Your zero or poor CIBIL score won’t affect your eligibility.
- Lower Interest Rates: The interest costs on loans against FD are usually 2% more than the FD interest rate; thus, they are cheaper than unsecured loans.
- No Processing Fees: Most banks do not charge processing fees for such loans, sparing you extra expenses.
- Build Your Credit History: Timely repayment of this loan could help your CIBIL score, allowing you a better chance for future loans.
How to Improve CIBIL Score
If you are starting from zero CIBIL score, you can follow these steps to build your creditworthiness:
- Take a Small Loan: Start with a small loan, like a personal loan or a loan against FD, and repay it on time.
- Use a Credit Card Responsibly: If you’re eligible, apply for a credit card and use it for small purchases. Pay the bill in full and on time every month.
- Avoid Multiple Applications: Applying for multiple loans or credit cards within a short period can negatively impact your score.
- Monitor Your Credit Report: Regularly check your CIBIL report for errors and discrepancies.