Is CIBIL Score Required for Education Loan?: An education loan is given by banks to provide financial assistance to students who want to pursue quality education. CIBIL score is one of the important factors that is considered by banks while reviewing the student loan application. So, know the importance of CIBIL score for education loan approval.
Here we are giving detailed information on what is CIBIL score, credit reports, how is CIBIL score calculated, its importance and how the CIBIL score affects education loans. Also, know the simple ways to increase the low CIBIL score from this page.
What is the CIBIL Credit Score?
CIBIL Score is a three-digit number that represents the summary of your credit history, report, and rating. The score ranges from 300 to 900. The highest score means your credit rating is better and you get quick approval and better deals on loans and credit cards. The minimum credit score needed for loan approval is 685 or more.
CIBIL is Credit Information Bureau India Limited a third-party private organisation, an American multinational group operating in India. It handles all the records of the banks and financial institutions in India about loan enquiries.
What is Credit Report?
A credit report is a detailed record of a person’s credit history and financial activities. It is given by CIBIL to banks and financial institutions. It contains the summary of an individual’s creditworthiness and is used by most banks and other lenders to asses their creditworthiness and financial responsibility before going into financial agreements.
A credit report contains the following areas:
- Personal details: Name, address, PAN card number, date of birth, and employment data.
- Credit history: Type of accounts, credit limit, account current balance and payment history.
- Public records: legal suits, garnishments, foreclosures and judgements.
- Inquiries: List of lenders that have the person’s credit report before.
How is CIBIL Score Calculated?
Based on the credit information report and the past 6 months’ financial data, the CIBIL algorithm finds the CIBIL credit score depending on 258 variables and each having an appropriate weight. The main 4 factors that determine credit score are here.
- Number of Loans: The total number of secured or unsecured loans you have taken in the past.
- Repayment Track Record: Your past performance and consistency in paying the loan EMI payments timely.
- Credit Limit: How best you have managed and used your credit limit on credit cards.
- Credit Activity Frequency: The frequency of taking or applying for loans within a short span of time.
Importance of CIBIL Score While Taking Education Loan
CIBIL credit score of students and their co-applicants affect the education loan approval. As it is the main factor to check the applicants creditworthiness. The importance of CIBIL score increases for an unsecured education loan. NBFCs and private banks consider students and their co-applicant’s CIBIL score while they are giving unsecured education loans as they need assurance about loan repayment.
The dependance of CIBIL score in case of education loan are here. Good CIBIL credit scores have the following advantages.
- A lower rate of interest for your education loan.
- A higher education loan amount
- A quicker loan approval from the bank
- A higher credit limit
- A longer tenure
Is CIBIL Score Required for Education Loan? – Minimum Required CIBIL Score for Student Loan
Yes, CIBIL score is required for an education loan approval. A minimum of 685 CIBIL score is helpful to get the student loan easily. Few govt banks accept lesser CIBIL scores if the reason is not so serious. Private banks and NBFCs are more particular about the CIBIL score. Just remember that getting an unsecured student loan with low CIBIL means you have to pay a higher rate of interest, as higher the risk for banks, and higher return they want from you.
Banks or financial institutions never approve your loan application if your credit score has serious issues like cheque bounces, loan waive off and so on. The banks will always ask you the good reason for the low CIBIL score.
CIBIL Score Range
| CIBIL score range | Education loan approval chances |
| < 600 | Low |
| 600 – 649 | Difficult |
| 650 – 699 | Possible |
| 700 – 749 | Good |
| 750 – 900 | Very high |
How to Improve Low CIBIL Score?
The following listed are the simple ways to improve your CIBIL score.
- Avoid taking too many credit cards and loans.
- Clear all your loan dues.
- Try to pay all your dues on time when you get a credit card statement. Instead of paying just the amount due, pay the full amount.
- Never delay your EMIs, do ECS on them. That helps you to estimate the chances of forgetting months’ payments of EMIs.
How to Get Abroad Education Loan with Low CIBIL Score?
It is not easy to get an education loan with less CIBIL score but it is possible. Here are the tips to avail of a loan with a low CIBIL credit score.
- Pay Current Bills Timely: Maintain a record of timely payment of current bills like credit cards, EMIs, utility bills, etc as it will help in building a good credit score, which is helpful in loan approval. So, before applying for an education loan, ensure that you have paid your current bills.
- Show Proof of Income: A good income will prove to the lender that the applicant can repay the loan. Even with a low CIBIL score, a good income shows that you can repay the loan.
- Apply for an Education Loan From NBFCs: NBFCs can offer the education loan with a low CIBIL score.
- Apply for a Secured Education Loan Instead of an Unsecured Loan: In secured loans, the CIBIL score becomes the secondary factor. So students can get loan approval easily.
- Resolve Credit Report Errors: The best method to ensure that your bad credit score does not affect the loan approval process is by resolving the issues. A mistake or an error in the report is also possible. So review your credit report for every 6 months to ensure that no mistakes happen.
FAQs on Is CIBIL Score Required for Education Loan
- Is education loan linked with CIBIL score?
Yes, an education loan is linked with CIBIL score. Candidates with a good CIBIL score can get a loan quickly and easily.
- What is the minimum credit score needed for an education loan?
The minimum CIBIL credit score needed for an education loan is 685.
- Can an education loan be rejected?
Yes, an education loan can be rejected if the co-applicant’s credit score is poor.
- How long is a CIBIL score report valid?
The Credit Information Report is valid for 7 years from the date it was taken.
Conclusion
Expecting that you got the answer for the question Is CIBIL Score Required for Education Loan. Try to maintain a good CIBIL score by making the current bills timely and paying EMIs regularly to get loan approvals. Students can visit our site regularly to learn more articles like How to Apply for Education Loan for Abroad Studies, How To Pay Education Loan Without Interest, and so on.