Even though your CIBIL score is good, why are loans getting rejected repeatedly? Find out the reason.

Credit Score: The first thing that comes to mind when you think about taking a loan is your CIBIL score. Without it, it becomes difficult for the bank to trust you, and then your payment history is checked.

Credit Score: A CIBIL score is crucial for obtaining a loan from a bank. Without it, you may face many difficulties in getting a loan. Although you can get a loan without a CIBIL score. The bank checks your background and payment history. However, a good CIBIL score makes it easier to get a loan.

What is a CIBIL score?

The CIBIL score, also known as a credit score, is a three-digit number between 300 and 900 that indicates whether you have ever used a credit card or taken out a loan. If so, how responsibly you have repaid the loan amount or made EMI payments.

Generally, 300 is considered the worst score, and 900 is considered the best. A good score can result in quick loan approvals, often at a good interest rate. However, even with a good CIBIL score, loan requests are often rejected. For example, if your CIBIL score is 750, it would be considered good. However, sometimes even a 750 CIBIL score can lead to a loan rejection. Do you know the reason behind this?

Debt-to-Income Ratio

Your debt-to-income ratio is a major factor. Banks expect less than 40% of your monthly income to be spent on EMIs. Financial advisor Ritesh Sabharwal explains that if you have a salary of ₹1 lakh and ₹45,000 goes towards EMIs, your DTI would be 45%. In such a situation, even if your CIBIL score is 750, the bank will still refuse you a loan because it will consider you overly indebted. A high DTI means you may have difficulty repaying your loan, which makes the bank cautious.

Applying for a Loan More Than Once

Applying for a credit card or loan multiple times in a short period of time also worsens the situation. If you have submitted more than three loan requests in three months, the bank views it negatively. The bank sees signs of financial stress and a risk of financial risk. People who frequently change jobs also often face difficulties in getting a loan.

How to Improve?

Sabharwal says that you can increase your chances of getting a loan by keeping your debt-to-income ratio below 40%, maintaining a record of staying in the same job for a long time, using 30% of your credit limit, making consistent loan payments from time to time and not applying for loans repeatedly.