Reasons For Loan Rejection With Good Cibil Score


We all know that if we have a good credit score and a good source of income, we can get any loan easily but this is not true every time. Having an excellent credit score doesn’t guarantee you a loan. A score of 800+ is considered as an excellent credit score. It shows your detail planning and management of finances that means you will pay off debts on time and avoid defaults. Maintaining a good credit score will make you highly eligible for a loan. However, in some cases, your loan can be rejected regardless of your high credit score.

If you have ever been baffled by rejection of your loan application even though your CIBIL report has boasted of a high TransUnion Score, then you must read this! Here’s why you must go back and check your CIBIL report thoroughly.

“An individual’s CIBIL Report shows past 36 months of credit history. The CIBIL TransUnion Score although is calculated based on 24 months of credit history.

If an individual’s credit report is based on his credit history of 36 months and if it reflects the status as ‘settled’ against any of his previous accounts during any point at that time, it impacts the applicant’s credit history.

“Even though an individual may have a high CIBIL TransUnion Score owing to good and timely credit payment behavior in the past 24 months, his loan application gets evaluated based on his overall credit history as reflected in the report,” she explains.

However, the good news is that a ‘settled’ status may not necessarily have an adverse impact on the individual’s loan application. “However if the customer has fully paid the dues and the loan provider has closed this account then the status should reflect as "Closed" in the customer’s credit report”.

Let us see some reasons for Loan Rejection:

Guarantor for a defaulted loan:

A Guarantor is a person who has signed the loan documents of another person, that means if the primary borrower failed to repay the loan, then the guarantor should pay the remaining amount on his or her behalf. In such cases, lenders reject your loan application if you apply for a loan.

Past Rejections:

If you have past loan rejections, it will visible in your credit history forever. Whatever may be the reason for the loan rejection, it will reflect badly and will leave a negative impression on your future lender. It shows that you have not been financially responsible in the past, even if your current history depicts fully paid loans.

Co-applicant’s poor Credit history:

If you are not eligible to borrow a big loan amount, lenders advise you to take co-applicant. Don’t take anyone blindly as co-applicant. Make sure that their credit history is good or better than yours. If their credit history is poor, then your loan application gets rejected or you will be offered a less loan amount.

Details match with the defaulters:

NBFCS and banks maintain all the personal

financial and professional details of the defaulters. So if your age, name, address and employment details match with that of any defaulter, then your loan application either stuck for a longer period or get rejected.

Living in an area surrounded by defaulters:

Loans can also get rejected if you are living in the home of a defaulter or you are working in the company where even fewer of your colleagues have defaulted. Lending institutes and banks keep a detailed record of the houses, localities, and companies that have a high risk of defaulting.


Some persons take too many loans at the same time. Suppose, if a person is paying more than 50% of his income as EMI, then what he will pay for his new loan as EMI. In such cases, new loan application gets rejected by the financial institutes to avoid the risk.

Job Stability:

If you change your job frequently, then lenders show less interest to provide you a loan. Banks and financial institutes give a loan to the person who is stable in their job positions for at least 3 years.

Don’t feel bad, if your loan application was rejected. You would have worked hard to improve your credit score, but there are certain factors that affect your loan approval. See what the problem is and try to fix it. If your problem is not getting fixed quickly, you can choose other sources for borrowing.

There’s an Error on Your Credit Report

Credit reporting errors are more common than you think and they can easily prevent you from getting a personal loan. The kinds of errors that can cause you to lose out on a personal loan include things like payments being reported incorrectly and closed accounts still showing up as open. Inaccuracies involving late payments are particularly dangerous since these can cause your credit score to drop.

If you’ve been denied a personal loan, it’s a good idea to check your credit report for errors. If you see something that doesn’t look right, the next step is to initiate a dispute with the credit bureau that’s reporting the information.

Your Credit File Is Thin

Building good credit can be somewhat of a catch-22. You need a good credit score to get approved for a loan but you need to be making payments on a loan or another form of debt to improve your score.

If you’re having trouble getting a personal loan and you don’t have a lot of experience with using credit, that could be the problem. So what can you do to fix it? Instead of trying to get a personal loan, you may want to apply for a credit card first.

Credit cards come in two flavors: secured and unsecured. Secured cards are geared toward people with bad credit or no credit and they require you to pony up a cash deposit to get approved. If you can’t get a personal loan right away, you can use a secured card to build your credit and improve the odds of getting a loan down the line.

You Have Too Much Debt

One thing lenders look at when they’re reviewing loan applications is your debt-to-income ratio. This is how much of your take-home pay is used to cover your debt each month. A personal loan can be a way to consolidate your existing debts and potentially lower your interest rate, but you might not qualify if you owe a lot of money already.

If you’re handing over 40% or 50% of your earnings to service your debts, that can seem like a big red flag to a personal loan lender. You’re more likely to be considered a high-risk borrower and the lender might wonder how you’ll be able to meet the new loan obligation. If you’re already knee-deep in debt, knocking down the balance before you apply for a loan could be a smart move.

So, if you plan to apply for a loan, make sure you go through CIBIL report well and get everything in order to get the best deal!

Derogatory remarks in your report

If there is even a slightest mention of Days Past Dues (DPDs) [ which basically means late payments] or a written off or settled status (which means you have merely closed your card/loan without paying the full amount due), banks will reject your loan right away. Even if you happen to have a score of 780 or 790 or even 800 if such remarks are recorded in your cibil report, you will not be granted a loan.

Wrongly matched credit report data

Sometimes, because of some kind of technical glitch there are chances that your data is matched with another person’s when the bank runs a cibil check.

Credit Hungry

When we are in urgent need of money, we never stop to think the fatal mistakes we make – which result in not getting the much required money at all in the end.

There is a “Default status”

Willful default: The bank thinks that you defaulted on the payments willfully. Simple! No one else will trust you with credit.

Written off Status: This can show “Written off” or “Settled” or be blank. If it shows “Written off”, the bank followed up with you for payments and finally wrote off the debt as unrecoverable. A big negative on your report. No lender with touch you even with a barge pole.

If it shows “Settled” that means you were unable to pay, you negotiated with the bank and paid a part of your dues as a settlement amount. Once again this shows that you cannot be trusted to pay any debt in full. So no lender with give you a loan.


Most lenders cap the age of loan applicants at 60 years. This is because monthly incomes usually dip after retirement, which increases of the risk of default. Some credit products may also cap the age by which the repayment has to be completed. For example, most lenders require the borrowers to complete their home loan and loan against property repayment before they turn 70. Those who fail to meet these requirements may have their loan applications rejected. If you too are approaching your retirement age, improve the chances of loan approval by making your spouse or employed children your co-applicants.

Minimum income eligibility

Most lending products have minimum income criteria for loan applicants. Lenders may also set varying income eligibility criteria depending on your location, i.e. metro, urban, semi-urban and rural areas. As this is often the first filter that lenders apply for processing loan applications, those who fail to meet this criterion are usually rejected outright, even without the consideration of other eligibility factors, such as credit score and EMI affordability. As this criterion may vary across lenders, visit online lending marketplaces to find out the loan options available to you basis your monthly income.


Fixed obligation to income ratio (FOIR) is the proportion of your total income which goes out as EMIs (including the EMI for the new loan application) and other repayment obligations like house rent, insurance premiums, etc. As lenders prefer to lend to those with FOIR of 40-50% or lower, those exceeding it may have their loan application rejected. Hence, those with higher FOIR should prepay their existing loans in whole or part to increase their loan eligibility. Alternatively, opt for lower EMI for the new loan if that contains your FOIR within 40-50%.

Job and employer’s profile

Many lenders also consider your job description and/or your employer’s profile while processing your loan application. Lenders prefer government employees and those working with top corporates and MNCs the most due to their higher job certainty, whereas those working with lesser-known or financially-strained companies are less preferred. Employees with hazardous job profile have lower loan approval chances. Consider loans from NBFCs if banks reject your loan application due to your job or employer’s profile.



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