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Business News/ Money / CIBIL score: What are the consequences of having no credit history?
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CIBIL score: What are the consequences of having no credit history?

If a borrower has no credit score or history, banks may consider him/her as a higher risk borrower since they have no past data to evaluate their creditworthiness.

Even if you manage to secure credit with no credit score, banks may offer you less favourable terms.Premium
Even if you manage to secure credit with no credit score, banks may offer you less favourable terms.

Having no CIBIL score, or a credit file with limited credit history, can lead to a number of consequences. Banks usually subject applicants with no credit history to additional layer of scrutiny. Alternatively, they can even ask for additional documentation to evaluate their creditworthiness. This tends to make the application process lengthier and cumbersome.

So, it is vital to build a positive credit history over a period of time so that your financial standing can be improved and you can access favourable credit terms in the future.

ALSO READ: Here's how you can use credit cards to build your credit history

Having no CIBIL score can have these consequences: 

Procuring credit: Banks usually use credit scores to assess the creditworthiness of borrowers. If you have no credit score or history, lenders may consider you as a higher risk borrower since they have no past data to evaluate your creditworthiness. As a result, you may face challenges in obtaining credit cards, loans, or other forms of credit.

ALSO READ: CIBIL: 4 ways in which credit score affects your rental applications

Higher rates of interest: Even if you manage to secure credit with no credit score, lenders may offer you less favourable terms, such as higher interest rates or lower credit limits. This is because they may view you as a higher-risk borrower without a proven track record of managing credit responsibly.

Limited access to financial products: Beyond credit, having no credit score may also affect your ability to access other financial products and services, such as renting an apartment, getting a mobile phone contract, or even securing certain jobs. Many organisations use credit checks as part of their screening process.

Problem in building credit: If you don’t have any credit history, it can be quite challenging to start building credit. You may need to explore different credit-building options, which include secured credit cards, credit-builder loans, or becoming an authorised user of someone else's credit account.

Frequently Asked Questions:

How often should you check your credit score?

Most experts recommend to check the credit score at least once a year.

Why is it vital to pay bills on time?

Payment history is a significant factor in determining your credit score. Even a single missed or late payment can negatively impact your score.

Is payment of loan sufficient to maintain a good credit score?

Paying off debt is indispensable to maintain a good credit score. However, it is the responsible financial management that leads to a good CIBIL score.

ALSO READ: How to build a 3 crore corpus to start a business?

Does a high CIBIL score offer good rental opportunities?

Landlords may check your CIBIL score at the time of evaluating rental applications. A high CIBIL score can raise your chances of securing rental housing, specially in competitive rental markets.

What is a credit mix?

This refers to the different credit accounts which you have on your credit report. These include car loans, student loans, personal loans and credit cards, among others.

 

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Published: 25 Apr 2024, 03:23 PM IST
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