CIBIL scores become very tempting to most people, even if it has little importance to their lives, until they encounter loan rejection paved by their credit history. One frequent query: Is it possible for a CIBIL score to be zero? And if it is, then what could that mean?
Let’s take a closer look at a CIBIL score and the five primary negatives of low credit scores.
Can a CIBIL score be zero?
A CIBIL score represents a three-digit number that varies according to a range, from 300 to 900. The lowest score or even a poor score that you can have in your CIBIL score cannot go lower than 300, never reduced to zero. If you do not have any credit history, lenders will find you “credit invisible,” but you will not be scored zero.
How Is Your CIBIL Score Calculated?
Your credit score is about how well you discipline your finances. It is calculated according to various factors like:
- Loan repayment history
- Payment of credit card bills
- Outstanding debts
- Credit utilization ratio
Pay bills on time, and your score will go up. Miss or delay a payment, and that will hurt your rating.
Why It’s Significant to Possess a Good CIBIL Score
Having a good credit score (ideally scoring more than 750) will only grant you ample perks:
- Easy loans
- Gives you less interest
- Provides pre-approved loans
- Immediate loan disbursement
But what happens if your score in CIBIL doesn’t hold well?
5 Grave Disadvantages of a Bad CIBIL Score
1. Loan Rejections This Is Commonnow
Banks, NBFCs, and even small finance institutions hesitate to lend if your credit score is low. Low scores indicate high default risks, so lenders will usually be very cautious about lending to affected individuals.
2. With High Interest Rates on Loans
Even if a bank gives you the loan, you will certainly pay much higher interest rates. Loans are given at higher interest rates because the lenders need to offset their costs in case of any possible defaults.
3. Increased Insurance Premiums
Some insurance companies check their members to see how good or bad their credit scores are before selling simple products. Hence, a defective score may lead to things like:
- Higher premiums
- Rejected applications
When insurers have a customer with weak financial health, they assume he or she is more likely to file claims against the insuring company.
4. Trouble with Home and Vehicle Loans
A good CIBIL score poses a challenge to getting a home or a car loan. You may be required to provide:
- A co-signer.
- Higher down payments.
- Pledging collateral (like property or gold).
5. Delayed Loan Processing
Banks scrutinize applications from low-score borrowers more strictly. Even for gold loans or secured loans, expect:
- Extended verification.
- Multiple document checks.
- Longer waiting period.