It can be frustrating when you have worked hard to build and maintain a good credit score and still face a loan application rejection. If you have an excellent credit score but were refused a loan, you are not alone. Many people face this issue and it is essential to understand that a good credit score is just one piece of the financial puzzle. So, let us look into the reasons why your loan application might get turned down even when your credit score appears solid.
High debt-to-income ratio
One significant factor that can lead to a loan rejection, even with a good CIBIL Score, is your debt-to-income (DTI) ratio. This ratio represents the percentage of your income that goes towards paying debts. If your income is not sufficient to cover your existing debts and the proposed loan's Equated Monthly Instalment (EMI), lenders might not be keen on approving your application. They want to ensure you have enough financial breathing room to handle additional debt responsibly.
Unstable employment history
Lenders tend to favour applicants with a stable employment history. Frequent job changes or extended periods of unemployment can be seen as a sign of financial instability. It is essential to show consistency in your employment history to assure lenders of your ability to repay the loan.
Too many loan enquiries
While shopping around for the best loan deal is a wise move, applying for multiple loans in a short period can backfire. Each time you apply for a loan, a lender makes a hard enquiry on your credit report. Too many enquiries in a short span can raise concerns with lenders. They might perceive it as a sign of financial distress, which could lead to your loan application being declined.
Mismatch in personal details
In the digital age, precision matters. A minor mismatch in personal details on your loan application can trigger rejection, despite a good CIBIL Score. Lenders thoroughly compare your provided information with their database and credit report, flagging any disparities. Ensuring precise alignment in your application details is vital to avoid unintended obstacles in securing the loan.
Poor relationship with the bank
Beyond a good CIBIL Score, maintaining a positive rapport with your bank is essential. Past issues like bounced cheques or late payments can lead to loan rejection. Lenders prioritise customers with a history of responsible financial conduct, emphasising the importance of a favourable relationship with the bank for a seamless loan approval process.
While a good CIBIL Score is crucial, it is not the sole factor that lenders consider when you apply for a loan. Maintaining a balance between the aspects mentioned above will increase your chances of approval by supporting your credit score. So, remember to manage your finances wisely and make informed loan applications to achieve your financial goals. And if you need some help, the Bajaj Finserv Credit Pass has got your back. It allows you to track your credit factors, including your credit utilisation and credit enquiries and provides real-time insights into your Credit Health Report. You can leverage this unique CIBIL-powered subscription to optimise your credit profile and secure the best financial products by striking the right balance for financial success. Sign up today and make the most of the limited-period offer to enjoy Credit Pass benefits free of cost for the initial year.
