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How can CIBIL affect your higher education loan eligibility?

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October 08, 2018
The cost of education is rising and this trend is expected to rise further with each passing year. Merely relying on savings or income sources is not enough while financing your kid's education and invariably, at one point or the other, you will have to apply for an education loan. However, there are certain things that must be understood before taking out an education loan or any loan for that matter. The first and foremost is your eligibility for a loan - whether the lending institution considers you eligible for the loan credit or not. This is directly implied by your CIBIL score.

Nowadays, every lender checks CIBIL score of all applicants for education loan application. It's quiet logical that a financial institution wants to know the past repayment record to predict the future behavior.

CIBIL score i.e. the 3 digit score (ranging from 300 to 900) of your credit history is a direct and crucial indicator of your loan eligibility and can directly lead to a loan application being accepted or rejected. The CIBIL score plays a crucial role in the time taken for loan approval. A high CIBIL score expedites the loan application process. Since a high score helps in winning the trust of your potential lenders, they take minimum time in processing your application. Faster processing of your application ensures quick disbursal of funds into your account, which you can use to address your needs.

A common mistake that people make is that they assume that paying off the debts on time is enough for maintaining a good credit i.e. CIBIL score. However, this is just one of the factors that goes into deciding a person's CIBIL score. There are other factors as well, such as the applicant's repayment history, credit balance i.e. the amount you owe to the lender accounts, the amount of time for which you have used credit (this is an important factor as well and it makes up 15 percent of the score), new credit that you have applied or taken and credit mix.

A lender looks at an education loan just like any other line of credit-a loan that needs to be repaid. And just like any other loans and credit cards, education loans are also reported to the bureaus that get reflected in the borrower's credit report and can have a negative or positive impact on your credit score, depending on your repayment behavior. Non-repayment of education loan can and will affect your credit score.

While applying for a higher education loan, it is important that any previous loan (if ever taken) must be either paid off completely or EMIs for it must be being paid off regularly and religiously. Since education loan approval depends on the credit history of the student as well as the parent(s), it must be noted that the CIBIL score of the applying parent must be as high as possible (i.e. as close to 900 as possible).

HDFC Life has introduced a free online feature where you can check your CIBIL score within minutes. For further details and to check your CIBIL score, please click on the mentioned link:

https://creditmart.hdfclife.com/#/.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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