How Your CIBIL Score Impacts Education Loan Eligibility

Several factors influence loan approval for an education loan to fund your higher studies. A significant determinant is creditworthiness and the ability to repay the loan, which is reflected in your CIBIL score. As with any other loan application, lenders consider your CIBIL score when reviewing your education loan applications. They assess your credit score to evaluate your capacity to repay the education loan.

When you're planning for an education loan, knowing about the impact of your CIBIL score on education loans is essential. Your and your co-applicants' CIBIL scores can influence whether your loan application is accepted or rejected. 

This article explores about: What is CIBIL? How are CIBIL scores calculated? Does taking an education loan affect the CIBIL score? How your CIBIL score affects education loan approval and how you can improve your chances of getting an education loan with a low CIBIL score.

What is a CIBIL Score?

A CIBIL score or a credit score is a three-digit numerical value that represents an individual’s creditworthiness. It helps lenders in assessing the risk of lending loans to individuals.

• The credit score ranges from 300 to 900.  A score closer to 900 is considered to be a good and a score closer to 300 indicates bad credit history.
• The CIBIL score of those who have not taken any loan yet will -1 or 0, which is nothing to be concerned about.
• It is maintained by the Credit Information Bureau India Limited (CIBIL), a private organization in India, now known as TransUnion CIBIL Limited
• CIBIL maintains the credit records of individuals collected by the banks and financial institutions in India.

How is the CIBIL score calculated?

A CIBIL score is calculated based on factors like Repayment history, credit mix, credit utilization, and credit inquiries.

• Repayment history

  Your consistency of paying earlier EMIs, how regular you were with them, and so on.

• Credit Mix

  The type of loans you've taken In the past (Secured or Unsecured)

• Credit Utilization

   Utilization of the credit limit of your credit card or any credit line.

• Credit enquiries

  The lender enquires if you have taken or applied for too many loans in a short period.

How CIBIL Score Affects Education Loan Approval

• CIBIL score is a critical parameter that lenders assess for approving an education loan, especially for unsecured education loans.
• Having a higher CIBIL score means you will be given better loan terms, such as higher loan amounts, quick approvals, lower interest rates, and longer tenure. 
• Public and private banks have certain CIBIL score requirements. If your CIBIL score doesn’t meet their requirement, getting approval for an education loan might be difficult. Many loans get rejected because of not meeting the CIBIL requirement of the lender.
• Private banks and NBFCs are very particular about the CIBIL score as they primarily offer unsecured education loans, unlike secured loans, where lenders have collateral in the event of a default.

Worried that a low CIBIL score might get your education loan application rejected? Let us help you turn the situation around. With years of experience handling thousands of loan applications, we understand what lenders look for and can guide you in improving your credit profile. Plus, we can assist in finding the right co-applicant or even secure a loan with collateral to make up for a lower score. 

What is the minimum required CIBIL score for Education Loans?

The minimum required credit score for an education loan varies from lender to lender. A CIBIL score of 685 or higher is generally required by most lenders.

However, some public banks such as SBI can accept a score as low as 591 for collateral loans, depending on all other factors. The following table explains the CIBIL score eligibility for education loans from various banks.

• Private lenders can be very strict about CIBIL issues in the credit report.
• They can sometimes accept low CIBIL scores if it is caused by minor reasons like credit card issues or delayed payments.
• However, both public and private lenders will not consider giving you a student loan if any major issues are found in the CIBIL report, such as a Loan written off or a Loan settled. So, make sure your CIBIL report is free of such issues.
• In government banks, deviation can be taken for such issues if the amount written off is less than 50 thousand rupees.

Does an Education Loan affect my CIBIL score?

Yes, and not just yours but also of your co-applicants. When you take an education loan, it immediately doesn't affect either of your CIBIL scores, it reduces or improves as your repayment period starts. Non-repayment or delay in paying EMIs of your education loans will result in a reduction of your credit score and vice versa.

Reasons for a low CIBIL score:

• Defaulting on previous loan payments or delay in paying EMIs can drastically lessen credit scores.
• Taking too many and only unsecured loans (credit cards, personal loans) can also negatively affect the credit score.
• Using credit more than the credit limit and maxing out one's credit also lowers the credit score.
• Applying for too many credit cards or loans in a short period also negatively affects the credit score

How to improve a low CIBIL score

• Avoid taking too many credit cards and loans
• Clear all your outstanding dues.
• Pay all your dues on time and in full when you get your credit card statement. Instead of paying just the minimum amount due, pay the full amount.
• Never miss any of your EMIs. Do an ECS (Electronic Clearing System) on it. That way you can eliminate the chances of forgetting monthly payments of EMIs.

How to get an Education Loan with a low CIBIL score?

• When the CIBIL score is considered low for an education loan, the best option is to go for secured education loans from public banks. When you mortgage your collateral, the lender gives you a loan based on the value of your mortgaged collateral.
• Another solution for when the co-applicant doesn’t meet the CIBIL requirement of the lender is to look for an alternate co-applicant with good income.
• You can also add additional co-applicants to the loan application to solve this issue. Upon doing so, the combined income of all the co-applicants will be considered by the bank, so your chances of loan approval increase. 

Banks can refuse to give you a loan because of a low credit score. However, when you apply via WeMakeScholars. With our experience and knowledge, we can maximize a student’s chance of securing funds even with a low CIBIL score. Do reach out to us by requesting a callback.

Conclusion

This article covers the key information about the impact of CIBIL on education loans. CIBIL score is a crucial factor that influences the approval of an education loan. It represents an individual's creditworthiness and help lenders asses the risk of the loan.

It is essential to understand how your credit score can affect your education loan approval for an education loan process. We have also explored the CIBIL score eligibility for education loans and various issues of low credit score, along with how to overcome or avoid such issues.

WeMakeScholars can make your dream of studying abroad come true by providing you with the best education loan support. We have a dedicated team to help you resolve any CIBIL score issues in education loans. We are here to help! Simply Request a Callback on our website, and one of our expert financial officers will get to you at the earliest.