With the increasing number of incidences of credit card fraud in India, banks are now exercising extra caution when approving any credit card or loan application. SBI bank considers the CIBIL score as one of the key criteria when approving any new credit card or determining the maximum credit limit to be sanctioned to the borrower. To be eligible for SBI credit cards, you must have an SBI Credit score of 750 or higher. CIBIL is one of India’s three authorised credit bureaus, along with Equifax and Experian. The credit report and the CIBIL score help the lenders evaluate a potential borrower’s creditworthiness and loan repayment capacity thus, protecting lenders from high-risk borrowers.
Why Checking Credit Score is Important for a Bank?
Your CIBIL score is the primary criteria used to determine your loan eligibility. All banks, including the State Bank of India, consider your credit score as an important factor in loan approval. Your SBI Credit score is an analysis of your credit history, the number of prevailing loans on your account, the frequency of loan and credit card applications, repayment of dues, and various other factors. These parameters allow SBI to assess the likelihood of recovering the loan amount if they offer you a loan. Loan applications with poor or medium CIBIL scores are evaluated based on other factors such as current monthly income, credit utilisation ratio, employment stability, and so on.
In recent years, there have been numerous instances of credit card fraud and the risk of credit card payment default. As a result, lenders are wary of high-risk borrowers. They seek the assistance of credit bureaus such as CIBIL in order to obtain borrower credit information in the form of an online credit score and credit report. This allows banks like SBI to assess potential borrowers’ creditworthiness before approving their credit card applications.
Also, in India, credit cards are treated similarly to unsecured loans, in that they do not require collateral and are issued solely on the basis of a borrower’s credit history. As a result, SBI considers a good CIBIL score to be a key criterion for approving borrowers’ credit card applications because it entails very low risk for the bank. A borrower with a good CIBIL score is expected to demonstrate financial discipline by paying credit card bills on a monthly basis.
Understanding CIBIL Score Ranges
The CIBIL score, which ranges from 300 to 900, is divided into several categories. The lowest possible score is 300, and the highest possible score is 900. Each of these categories is interpreted differently by lenders such as SBI and other non-banking financial institutions that determine your personal loan eligibility.
Here’s what CIBIL scores for SBI personal loans mean:
750 – 900: A CIBIL score of over 750 is interpreted as a good online credit score for any kind of loan by banks like SBI and financial institutions. An applicant with a score in this range is considered risk-averse, which increases his or her chances of qualifying for a loan. The borrower will not only be able to obtain favourable terms and conditions on the personal loan application but he or she will also be able to negotiate a lower interest rate and a larger loan amount.
600-749: CIBIL scores in this range are known as middling scores. SBI considers other parameters such as existing monthly income, employment stability, and the number of prevailing existing loans when evaluating loan eligibility of borrowers with CIBIL scores in this range.
300 – 599: With a low SBI Credit score, your chances of getting an SBI personal loan are slim. With this score, your likelihood of the SBI personal loan application being rejected is high. In some cases, a personal loan may be offered against collateral such as gold schemes, assets, shares, and fixed deposits with this score.
How to Improve Your CIBIL Score
Follow these steps to gradually improve your CIBIL score and make you eligible for an SBI personal loan:
To keep your SBI Credit score from falling, make sure to repay the entire amount due on your credit card every month. Although banks allow credit card holders to pay a minimum amount, it is best to pay the full amount owed. Paying only the minimum amount due means that the remaining balance is carried forward to the following month, attracting a high-interest rate and eventually leading to a debt trap. This not only lowers your online credit score but each default is reflected in your CIBIL report which increases the likelihood of your loan rejection.
It is advised that you set up auto-debit at your preferred bank to pay your monthly loan EMIs and credit card bills. This will allow you to avoid missing payments on the due date. Banks provide you with the option of selecting a date that is convenient for you. The auto-debit process will begin on the date you specify. To avoid an unsuccessful auto-debit, you must ensure that your chosen bank account has the required balance on the pre-determined date. Banks charge a high interest rate on every failed auto-debit. Paying your debts on time is recorded in your report and is thus available to future lenders when they check your online credit score.
Avoid credit-hungry behaviour such as cash withdrawals against credit cards, which is interpreted as financial instability. When lenders access your CIBIL report, this information is visible to them, increasing the possibility of SBI personal loan rejection.
To be eligible for an SBI personal loan, applicants must improve their SBI Credit score through consistent creditworthy behaviour. Rejections will lower your score even further, limiting your SBI loan eligibility. The higher your online credit score, the better your chances of getting an SBI Credit Card approved quickly and easily, with better terms such as a higher credit limit or a lower rate of interest.