Reasons for Loan Rejection Even with Good CIBIL Score

Everybody is aware of the fact that credit score plays a vital role in building a good credit history. You have spent a lot of time and energy in maintaining your credit score and now you are confident in getting the loan easily with the lowest interest rates. But wonder what? Unfortunately, your loan application was rejected! It can be confusing, right? As we have always learned, a good credit score is the main factor that helps you to avail of any type of loan. So, now you must be in a dilemma of what must be the reasons for loan rejection.

Well, it is important to know that numerous other factors can be the reason for loan rejection. In this article, we will see all the important factors that result in loan rejection despite having a good credit score. So, make sure to go through all the reasons and factors before applying for a loan so that your loan can get approved quickly and you can get a personal loan without any obstacles and wasting time. Let's discuss them one by one:

Reasons for Loan Rejection Even If You Have a Good CIBIL Score

Check out the below-mentioned reasons to know in detail how your loan applications got rejected even if you have a good Credit Score:

Instability in Job:

When lenders see that the borrower has stability in a job with a steady flow of monthly income, then they will have trust in your creditworthiness and will easily approve your loan application. On the other hand, if they find that you keep changing your job and also have an unstable monthly income, they might not consider you to be an eligible applicant.

If You Keep Borrowing Credit Frequently

Another reason for loan rejection is borrowing loans from various lenders and banks. This is the reason why banks and financial institutions start doubting your capability to repay the loan amount on time, which results in trust issues in your repayment process. The lender also believes that giving a loan to such an individual will increase the borrower’s credit debt and will lead to defaults.

If you keep borrowing credit frequently, it will directly impact your credit report and you will be a risky borrower to them. In such cases, the lenders conclude that you are not capable of it, and an additional loan will overburden your financial status. This results in the lender to reject the loan request of such a candidate.

Comments In Your CIBIL Score

Sometimes the reason for loan rejection can be the ignored comments on your CIBIL report, which generally people ignore. This can include delays in your EMI payment or a request to lower the interest rate on the loan amount. Thus, the reports which are generated by CIBIL mention your credit scores and Credit Information Reports play an important role in securing loans for you from different lenders. Hence, this credit report is noticed by the lenders, in addition to the three-digit numerical CIBIL Score. The comments on the CIBIL-generated report badly affect your ability to get a loan. Hence, you must not ignore the comments on your credit score and you must resolve them by negotiating with your creditors or another can pay off your debt balance.

Too many unsecured loans

The ratio of unsecured loans to secured ones must be balanced by you because an unfavorable ratio of them can result in the rejection of the loan application even if you have a high CIBIL score. As we already know, secured loans are considered less risky than unsecured ones by the lender. So it is advised to have a good balance between secured loans and unsecured loans.

If You Become a Guarantor to a Defaulter Loan

Being a part of the loan defaults your credit history will get affected even if you are just a guarantor for the loan.

If you apply for any type of loan, this loan default can be caused by not getting your loan application approved. Hence, it is a must to keep in mind to have a look at the borrower’s repayment capacity if you will become a guarantor for their loans.

Details do not Match Your Accurate Information

When applying for an instant personal loan, before applying make sure to fill in all the details very carefully, such as your name, age, address, current employment status, company name, and other identifying information, even when you are filling the payment and any credit-related information. Hence the banks and other financial institutions will check out the given information below. If any of the provided information does not match, then your loan application will be rejected even if your CIBIL Score is excellent, as all the banks prefer not to approve fake loan applications.

Weak credit score of co-applicant

A credit score of a co-applicant will also be considered in case you are applying for a loan with another applicant. If your co-applicant holds a poor credit score then in such case this can be the reason for loan rejection. Therefore it is highly recommended to go through the complete credit history of your co-applicant before applying for a joint loan application.

Many inquiries

You are identified as a “frequent inquirer” by the CIBIL when you apply for various credit cards or loans from numerous lenders. There is a high possibility that a lender will reject your loan application even if you’ve got a good Cibil score.

Conclusion

If you want to avail an instant personal loan without any rejection then you must maintain all your financial factors carefully. Always keep in mind to check the CIBIL score frequently before applying for a loan. You must wonder whether your application can be rejected even if you work in such a company that pays its employees late even if there is any default on loan or have a poor CIBIL score of any of your colleagues.

In addition to the above factors, many other factors influence your credit: the applicant's income, age, and job stability, as well as the credit report. The factors discussed above and other factors may be the reason for loan rejection. So it's the best decision to keep all the factors in mind to get an instant personal loan approval quickly. To make sure your loan isn’t rejected, you can even get expert financial advice from My Mudra, which will help you in giving financial advice to make an informed decision when obtaining a loan.

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Also read: Apply for a ₹5 Lakh Personal Loan with Flexible EMIs