Having no CIBIL score or a credit file with a confined credit history can lead to a number of consequences. Banks typically subject applicants with no credit history to an additional level of screening. Alternatively, they may even ask for additional documentation to assess their creditworthiness. This tends to lengthen and complicate the application process.
That is why it is so vital to build a positive credit history over a period of time, so that your financial situation can improve and you will have access to favorable loan terms in the future.
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Missing a CIBIL score may have the following consequences:
Getting a loan: Banks usually exploit credit scores to assess the creditworthiness of borrowers. If you don’t have a credit score or history, lenders may consider you a higher-risk borrower because they don’t have past data to assess your creditworthiness. As a result, you may experience difficulty obtaining credit cards, loans, or other forms of credit.
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Higher interest rates: Even if you manage to secure a loan without a credit score, lenders may offer less favorable terms, such as higher interest rates or lower credit limits. This is because they may view you as a higher-risk borrower without a proven track record of responsible credit management.
Confined access to financial products: In addition to your creditworthiness, lack of creditworthiness may also affect your ability to access other financial products and services, such as renting an apartment, signing up for a mobile phone contract, or even securing certain jobs. Many organizations exploit credit checks as part of the screening process.
Problem building credit: If you don’t have a credit history, it can be quite complex to start building credit. You may need to explore various credit-building options, which include secured credit cards, loans to a credit builder, or becoming an authorized user of someone else’s credit account.
Frequently asked questions:
How often should you check your creditworthiness?
Most experts recommend checking your credit score at least once a year.
Why is it so vital to pay your bills on time?
Payment history is an vital factor in your credit score. Even a single missed or delayed payment can negatively impact your score.
Is loan repayment enough to maintain good creditworthiness?
Paying off debt is vital to maintaining good creditworthiness. However, it is responsible financial management that leads to a good CIBIL score.
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Does a high CIBIL score ensure good rental opportunities?
Landlords can check your CIBIL score when assessing rental applications. A high CIBIL score can raise your chances of securing a rental property, especially in competitive rental markets.
What is a credit mix?
This refers to the various credit accounts you have on your credit report. These include car loans, student loans, personal loans and credit cards, among others.
Posted: Apr 25, 2024 15:23 EST
