Loan Denied With a Strong Credit Score? These Red Flags Might Be Why

These days, taking a bank loan is pretty normal. People get them for business, education, or personal needs. When expenses are more than income, loans become a part of life. That’s why getting a loan in India is so common.

A CIBIL score is a key factor for loan approval. A score over 750 is generally seen as good. But sometimes, even with a 700+ score, a loan can be rejected. That’s because the CIBIL score isn’t the only reason for denial; there are many others.

CIBIL stands for Credit Information Bureau (India) Limited. It’s India’s largest credit info company. The RBI has made a CIBIL score mandatory for loans. It gives a score from 300-900 based on bank transactions. Besides CIBIL, there are Experian, Equifax, and Highmark, but CIBIL is preferred in India.

The DTI ratio is as important as the CIBIL score for a loan. It shows what percentage of total income goes to loan repayment. If monthly salary is 50k and EMIs are 20k, DTI = (20,000 / 50,000) × 100 = 40%. Banks usually lend to those with a DTI below 35%. If it exceeds 45%, rejection is likely.

A person wanting a loan must have a minimum income and have worked at the same company for at least 1-2 years. Total work experience is also considered. Past EMI delays and defaults are negative factors. Having deposits in the same bank makes getting a loan easier.

Also, some NBFCs look at degree/professional qualifications. A good CIBIL score isn’t enough; you need a low DTI, stable income, and good credit history. Check these before taking a loan. If needed, clear old loans to lower your DTI. This improves your loan approval chances.