Top 12 Reasons For Loan Rejection With Good CIBIL Score

Even after having a good CIBIL score on the side, there could be multiple reasons behind a rejected loan application. This blog highlights all those possible reasons that are probably blocking your way to acquire a loan amount.

Reasons For Good CIBIL Score But a Rejected Loan Application

Explained below is a list of the top 12 reasons that may block your way in the loan approval process. Go through all the reasons carefully and in case you find any of the reasons familiar, make sure to resolve it before applying for a loan further.

Frequent Credit Borrowing

The habit of borrowing frequently is one of the reasons for rejection of loan applications even after having a good CIBIL score. It makes banks, and financial institutions doubtful of your repayment power. Even if you make timely repayment of multiple loan EMIs and/or credit amounts, the lenders would still doubt your credit dependence and thus, you will remain a risky applicant for them. Furthermore, they will be reluctant to offer you a new loan amount as they believe that you would be overburdened with a new credit amount, resulting in missed or slower credit repayment.

CIBIL Reports Comment

Another reason for a rejected loan application is the comments mentioned in the CIBIL report. The comments can be anything like paying EMIs after due dates, requesting a lower rate of interest, and others. Any kind of comment stated in the report shows the casual behaviour or poor repayment habits of the applicant. Thus, it is strictly advised not to overlook the comments in a CIBIL report as lenders mandatorily pull out the applicant’s credit report before offering a loan or credit. Try to dissolve the comments either by negotiating with the creditors, asking for a goodwill deletion or paying off the debt in full amount.

READ MORE: Credit Card Loan vs Personal Loan: What’s the Difference?

Career or Salary Instability

A loan application can still be rejected if there is any instability in your salary or job or if your organization is blacklisted by the bank. Apart from that, if you are too frequent with changing your work address or job, you bring a negative impression to your credit report and ultimately hamper your loan approval process. Any form of instability makes lenders, financial institutions more cautious of your application.

Information Matching Defaulter’s Details

The credit report consists of the user’s details like Date of Birth, PAN, residential address, age, gender, employment and other necessary details. In case, any of the aforementioned information matches the details of the defaulter like address, the chances of loan application rejection get high even after a good CIBIL score.

Tax Payment History

Irregular payment of taxes is another reason for the rejection of loan applications. A person who has failed to pay the income tax returns timely for the last couple of years is on the higher verge of loan application rejection.

Previous Loan Rejection History

Your credit report keeps a track of all the rejected/approved loan applications in the past. Whenever you request a new loan, lenders pull out your credit report to check your credit history. In case of frequent loan rejections, your new loan application request can also get rejected. Hence, apply for a new loan only after you have settled all your previous loans.

READ MORE: Personal Loan Eligibility Criteria: All you Need to Know

Poor CIBIL Record of Co-Applicant

If you are applying for a joint loan, your co-applicant’s CIBIL record (if any) 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 co-applicant’s CIBIL record before applying for a loan.

Unbalanced Secured & Unsecured Loans

To get a good credit score, one should always have a healthy mix of unsecured and secured loans. If you are not able to maintain a balance between secured and unsecured loans, lenders will consider you an applicant with credit-based debt, leading to rejection of your loan application.

READ MORE: Can I Get a Loan With a Credit Score of 550

Multiple Hard Inquiries

Soft inquiries are those which are made to check the credit score or credit report. Such inquiries do not affect your credit score. On the other hand, if the credit report is pulled by a lender to check your credit history, it is called a hard inquiry. If there are frequent hard inquiries made by the lenders, it means that you must have applied for a loan multiple times, which is not considered a good practice as it might result in a rejected loan application. Thus, it is advised to wait for some time before applying for a new loan to avoid hard inquiries.

Financial Information

Another reason for a rejected loan application is failing to submit the complete financial information. Lenders always get a look at your financial summary and in case there is a loophole in the same, the chances of loan application rejection are pretty high even if you have a high credit score.

Inability to verify details

Your loan application can also get rejected if the bank or financial institution is not able to verify your information such as income, address, employment proof, etc.

Applicant’s Age

Applicant’s loan application might be rejected if he/she is closer to the retirement period. Lenders, banks, and financial institutions feel hesitant to offer loans to such applicants due to the chances of zero repayment ability. That is why an applicant’s age plays a huge role when it comes to the acceptance or rejection of loan applications.

How to achieve a good credit score?
To achieve a good credit score, one needs to follow a few things-
  • Make timely payments
  • Don’t settling for half paid loan amount
  • Don’t leave any outstanding loan amount
  • Ensure not to make hard inquiries
  • Make right use of credit utilization ratio
  • Maintain a balance between an unsecured and secured loan
  • Resist oneself from asking for more credit amount
  • Don’t closing old credit accounts
  • Make sure that there are no errors in your credit report
What are the top factors affecting credit score?
Here are the factors that affect credit score-
  • Missed/delayed payments
  • Pending Outstanding amount
  • Half-settled payments
  • Unbalances secured and unsecured loans
  • Multiple hard inquiries
  • Closure of old credit accounts
  • Unresolved errors in CIBIL report
  • Using more than recommended percentage of credit utilization ratio
What is considered the best credit score?
Every financial institution has a different set of algorithms for determining the best credit score, however, a credit score above 750 or closer to 900 is considered the best.
If CIBIL can change or delete my credit records?
CIBIL can neither change nor delete anyone’s credit records reflected on the CIR.
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