Most of us live under the impression that having a good Credit Score is all we need to apply for a loan. But guess what? That’s not it! There are a lot of other things that determine whether your loan will get approved or not. Although Credit Score happens to be one of the most important things you need to get a green signal on your loan application, that’s not all. There could be many reasons for your loan application to get rejected despite a good Credit score. Here are a few of them:
Additional Reading: 5 Simple Rules To Improve A Bad CIBIL Score
- You have bad remarks on your Credit Report
Having a 750+ Credit Score is not good enough if you have some derogatory remarks on your Credit Report. If you got lured into making a settlement with the bank instead of paying back the full amount in the past, you could get bad remarks on your report. Since that means that you didn’t opt for a full settlement, it might make things hard for you in future while applying for another loan. Therefore, paying your loan back in full is the best way to ensure that you don’t get any bad remarks on your Credit Report.
- Your guarantor is not good enough
Even if you have a great Credit Score, things could go wrong for you if your guarantor has a bad one. Since the guarantor is considered to be equally responsible for paying the loan back, the bank takes their Credit Score into account as well before approving your loan request. This makes it essential for you to pick your guarantor wisely. Choose someone who’s reliable and has a good Credit Score.
- You’re over-leveraged
Before applying for a new loan, if the bank finds out that you have some loans in your name already (both paid and unpaid), your loan application might get into trouble. Even if you have a great monthly income and assets in your name, banks might consider it a risk. If you’ve availed a Personal Loan in the last three months, the chance of your new application getting rejected is quite high.
- You have a bad tax-paying history
Before approving your loan request, banks need to check your tax-paying history. If they don’t see you filing your income-tax returns properly, your application might get rejected. Therefore, to maximise your chances of getting an approval, it’s essential for you to file your income-tax returns on time. Banks usually need at least two years’ worth of income tax to be filed before approving your loan request.
- You guaranteed a loan that has defaulted
As a guarantor is equally responsible to ensure that the loan is paid back on time, the bank is likely to reject your application if you guaranteed a loan in the past that has defaulted. Become a guarantor for someone who’s responsible enough to pay it back fully, without settling for partial repayments or settlements with the bank.
- Your residential address matches that of a defaulter
All banks usually have a list of areas they consider too risky and, hence, are reluctant to sanction loans to people living in those places. If the bank’s database matches you with a defaulter, your loan application might get rejected. If you’re living in a rented accommodation, it’s possible that the previous tenant was a defaulter. If that’s the case, the bank will automatically identify you as one of the defaulters as well and will reject your loan request too. Life isn’t fair, is it?
Why not check your eligibility before applying for a loan? This will reduce the chances of rejection.