When it comes to applying for a loan, many borrowers worry that their cibil score will make or break their chances. However, the Finance Ministry has recently clarified that a credit score is not mandatory for first-time borrowers.
No Minimum Credit Score Requirement
According to the Finance Ministry, the Reserve Bank of India (RBI) has not prescribed any minimum CIBIL score for loan approval. Instead, banks and financial institutions make decisions based on their internal policies, regulatory guidelines, and overall assessment of the applicant’s profile.
This means that lenders cannot automatically reject an application solely on the basis of the applicant’s CIBIL score. Rather, they are required to evaluate multiple factors, including income, repayment capacity, existing liabilities, and overall financial behavior, before determining creditworthiness.
Due Diligence Still Matters
While the score may not be mandatory, banks are still required to carry out due diligence and background checks. These checks include reviewing:
- Repayment history (if any)
- Past delays or defaults
- Any settled, restructured, or written-off loans
In other words, a credit score is just one of the inputs, not the final word, when deciding on your loan eligibility.
Why Is a CIBIL Score Important?
A CIBIL score ranges from 300 to 900 and represents your creditworthiness. Though not compulsory for first-time borrowers, it plays a big role for repeat borrowers. Lenders use it to assess:
- How reliable you are with repayments
- Your ability to manage multiple credit accounts
- The overall risk of lending to you
A higher score usually means better chances of approval and lower interest rates.
How Much Does It Cost to Check Your Credit Score?
India has four RBI-registered Credit Information Companies (CICs):
- TransUnion CIBIL
- CRIF High Mark
- Equifax
- Experian
The RBI has capped the fee that Credit Information Companies (CICs) can charge at ₹100 per report. Additionally, all CICs must provide one free full credit report every year to individuals who have a credit history.
The Bottom Line
If you are a first-time borrower, don’t worry about having no credit history. Banks must take a holistic approach when evaluating loan applications, especially for first-time borrowers. They often consider other factors when reviewing applications. However, as you begin borrowing, focus on building and maintaining a strong credit score. It will make future loans faster to secure and more affordable. Lenders should look at the bigger picture, not just credit history, especially for newcomers. For you, the key is developing a healthy financial profile and approaching borrowing with preparation and confidence.
Stay informed about credit scores and financial wellness with FixMyScore’s expert guidance and tools designed to help you navigate your credit journey successfully.
