Why Your Loan Can Still Be Rejected Even With a 750 Credit Score: Key Reasons and RBI Guidelines

Many borrowers assume that having a credit score of 750 or higher guarantees an easy loan approval. However, banks often reject applications even when the applicant appears to have a strong score. The reason is simple: lenders evaluate far more than just your credit score. Factors such as employment stability, existing debt burden, repeated loan applications, and a bank’s internal records play a crucial role in the final decision. Recent RBI guidelines have also introduced relief specifically for first-time borrowers.

A Good Credit Score Is Helpful, Not a Guarantee

A credit score reflects your past borrowing behaviour, repayment discipline, and overall financial habits. Although a high score signals reliability, banks do not treat it as the sole criteria. The Reserve Bank of India has clarified that lenders cannot reject first-time loan applicants solely on the basis of credit score, especially if they have no borrowing history. Instead, the assessment must be based on the applicant’s total financial strength, income regularity, and repayment capacity.

This means that even with a 750+ score, banks may still decline your application if other risk parameters are not satisfactory.

How Banks Actually Approve a Loan

1. Stability of Employment

Your income and job consistency are among the most critical factors. If you frequently switch jobs, work in a volatile industry, or have large gaps in employment, the bank may perceive you as a high-risk borrower. On the other hand, long-term employment with a reputable organisation increases the chances of approval.

2. Debt-to-Income Ratio

Banks closely monitor the percentage of your monthly income already going towards EMIs.
If 40–50 percent or more of your income is tied up in existing loans, lenders hesitate to extend additional credit. A high debt burden signals limited repayment capacity, regardless of how strong your credit score may be.

3. Financial Behaviour and Payment Track Record

Even a single missed EMI in the past, especially with the same bank, can affect the decision. Similarly, loan settlements instead of full repayment create red flags in the borrower’s history. Banks prefer applicants who consistently pay bills and EMIs on time.

Multiple Loan Applications Can Work Against You

One of the most common reasons for rejection is applying to several lenders at the same time. Every loan or credit card application generates a hard inquiry in your credit report.
A high number of inquiries suggests financial stress or urgent need for money, which makes lenders cautious. Even with a strong credit score, too many inquiries reduce your approval chances.

Banks also refer to their internal records. If you previously defaulted, settled a loan, or often paid late while dealing with the same bank, it may reject your fresh application despite your overall strong credit profile.

RBI’s New Rules for First-Time Borrowers

To prevent unfair rejections, the RBI has updated guidelines stating that first-time borrowers cannot be denied loans solely because they lack a credit history. In such cases, banks must evaluate:

• The borrower’s income and earning stability

• Existing financial responsibilities

• Ability to repay

• Overall economic strength

This directive aims to make formal credit more accessible, especially to young professionals and individuals new to the lending ecosystem.

What You Should Do to Improve Loan Approval Chances

To ensure your loan application is processed smoothly, consider the following steps:

• Maintain job stability and avoid frequent switches.

• Reduce existing liabilities before applying for new credit.

• Avoid multiple applications within a short period.

• Pay all EMIs and bills on time, without allowing delays.

• Review your credit report regularly to identify errors or outdated information.

Ultimately, a good credit score opens the door, but the final approval depends on your complete financial profile. Banks carefully assess income reliability, debt levels, and past behaviour to decide whether lending to you is safe.