When applying for a loan, the first thing that comes to mind is the CIBIL score. While it is an important metric, however, it’s not the only deciding factor.
Lenders today take a deeper look into your financial health before approving credit. Beyond the three-digit score, here are five hidden factors that play a crucial role in loan approval:
What is CIBIL score?
CIBIL Score is a 3-digit numeric summary of your credit history, rating and report, and ranges from 300 to 900. It is considered that the closer your score is to 900, the better your credit rating is.5 hidden factors that decide your loan approval
1. Debt-to-Income ratioA high CIBIL score alone doesn’t guarantee approval if your debt burden is already heavy. Lenders carefully evaluate your debt-to-income ratio, the percentage of your monthly income that goes toward existing EMIs. For instance, if 50–60 per cent of your salary is already tied up in home or car loans, lenders may see limited repayment capacity, regardless of your credit score.
2. Income stability
Lenders prefer predictable and stable earnings. Salaried employees working with reputed organisations are often viewed more favorably since their income is considered steady. On the other hand, gig workers, freelancers, or those with fluctuating earnings may face tougher scrutiny, even with a strong CIBIL score.
3. Spending behaviour
Your spending patterns reveal a lot about your financial discipline. Frequent use of credit cards, carrying large outstanding balances, or making only minimum payments can raise red flags. Lenders want to see that you not only earn well but also manage your expenses wisely.
4. Financial discipline
Consistency in handling money often overrides a credit score. Even with a lower CIBIL rating, applicants who show responsible financial behaviour, such as paying bills on time, avoiding excessive credit card usage, and maintaining savings, may still secure approval.
5. Existing obligations
Lenders also consider the number and type of loans you already hold. A person with multiple active loans, even if paid on time, might be seen as financially stretched. This could affect their eligibility for fresh credit. On the other hand, someone with fewer obligations and clean repayment records stands a better chance.
