Even if you have a good CIBIL score, a loan application may get rejected for various reasons. This blog discusses all of the possible reasons that may be negatively affecting your ability to obtain a loan amount.
Reasons for Loan Rejection with a Good CIBIL Score
Here we have listed the top 12 reasons that can hamper your loan approval process. Examine all of the reasons carefully, and if any of them sound familiar, make sure to resolve them before applying for another loan.
Frequent Credit Borrowing
Even if you have a good CIBIL score, borrowing regularly is one of the reasons for loan rejection. It causes banks and financial institutions to have doubts about your ability to repay. Even if you repay multiple loans EMIs and/or credit amounts on time, lenders will still question your credit dependence, and you will remain a risky applicant for them. Furthermore, they will be hesitant to offer you a new loan amount because they believe you will become overburdened with a new credit amount, resulting in missed or delayed credit repayment.
CIBIL Reports Comment
The comments mentioned in the CIBIL report are another reason for a loan application being rejected. The comments can include things like paying EMIs after the due date, requesting a lower interest rate, and so on. Any comment in the report demonstrates the applicant’s careless behavior or poor repayment habits. As a result, it is strongly advised not to disregard the comments in a CIBIL report, as lenders check the applicant’s credit report before offering a loan or credit. An individual should attempt to dissolve the comments either by negotiating with the creditors, requesting a goodwill deletion or by paying off the debts in full.
Career or Salary Instability
A loan application may still be rejected if your salary or job is unstable, or if your organization is blacklisted by the bank. Besides this, if you change your work address or job too frequently, you will leave a negative impression on your credit report, which will hamper your loan approval process. Any form of insecurity makes lenders and financial institutions cautious of your application.
Information Matching Defaulter’s Details
The credit report includes the user’s information such as date of birth, PAN, residential address, age, gender, employment, and other relevant information. If any of the aforementioned information matches the defaulter’s details, the chances of loan application rejection increase even if the borrower has a good CIBIL score.
Tax Payment History
Another reason for loan application rejection is irregular tax payment. A person who has failed to pay their income tax returns on time in the last couple of years is more likely to have their loan application rejected.
Previous Loan Rejection History
Your credit report keeps track of all loan applications that have been rejected or approved in the past. Whenever you apply for a new loan the lenders check your credit report to check the credit history. If you have a history of loan rejections, your new loan application request could be rejected as well. As a result, you should apply for a new loan only after you have paid off all of your previous ones.
Poor CIBIL Record of Co-Applicant
If you are applying for a joint loan, the CIBIL record (if any) of your co-applicant is also taken into consideration. In case of a low CIBIL score of your co-applicant, chances are high that your loan application might get rejected. Thus, it is advised to check the CIBIL record of the co-applicant before applying for a loan.
Unbalanced Secured & Unsecured Loans
To maintain a good credit score, maintain a healthy mix of unsecured and secured loans. If you are unable to maintain a balance between secured and unsecured loans, lenders will consider you an applicant with credit-based debt, which might result in the rejection of your loan application.
Multiple Hard Inquiries
Soft inquiries are those that are made to check a person’s credit score or credit report. These inquiries do not affect your credit score. A hard inquiry, on the other hand, is when a lender pulls your credit report to check your credit history. If lenders make frequent hard inquiries, it indicates that you have applied for a loan multiple times, which might result in loan application rejection. To avoid hard inquiries, it is best to wait a while before applying for a new loan.
Failure to submit complete financial information is another reason for a loan application being rejected. Lenders always review your financial summary, and if there is a flaw in it, the chances of loan application rejection become high, even if you have a high credit score.
Inability to verify details
Your loan application may also be rejected if the bank or financial institution is unable to verify your information, such as income, address, employment proof, and so on.
Applicant’s loan application might get rejected if he/she is approaching retirement age. Lenders, banks, and financial institutions feel hesitant to offer loans to such applicants due to the possibility of zero repayment ability. As a result, an applicant’s age plays a significant role in the acceptance or rejection of loan applications.
- Make payments on time
- Don’t settle for a loan that is only half paid off
- Don’t leave any outstanding loan amount
- Don’t get rid of old credit cards
- Check your credit report to ensure that there are no errors
- Ensure not to make hard inquiries
- Make good use of the credit utilization ratio
- Maintain a healthy balance of unsecured and secured loans
- Refrain from requesting additional credit