Understanding CIBIL Score Requirements for Education Loans

04 Sep 2023

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Unlocking the doors to higher education can be a transformative journey, but for many students, the path is often paved with financial hurdles. As dreams intertwine with reality, the need for a helping hand arises through education loans.

However, amidst the maze of paperwork and eligibility criteria, one crucial factor stands tall: the CIBIL score for education loans.

For students eager to embark on the educational expedition, this blog invites them to join the journey of unravelling the secrets behind loan approvals, creditworthiness, and the vital role played by their education loan CIBIL score in shaping their academic destiny.

So, let's understand the realm of education loan for students and the all-important CIBIL score that holds power to shape educational dreams.

Why is CIBIL Score Important for an Education Loan?

Education loans are crucial for deciding whether to study abroad or in one's home country, providing vital financial support throughout the academic journey. The CIBIL score for education loans plays a significant role in determining loan approval and is an essential factor.

Credit histories of co-applicant/s is crucial for education loans, with scores typically ranging from 300 to 900. A minimum CIBIL score of above 700 increases the likelihood of securing an education loan for higher studies. Those with scores below 700 may encounter approval challenges.

A higher CIBIL score greatly enhances loans for students' prospects.

Also Read - A Complete Guide on Education Loan

What is the Minimum CIBIL Score required for an Education Loan?

When applying for a loan, above 700 is typically necessary as a minimum CIBIL score of co-applicant/s for an education loan.

Does Education Loan Affect CIBIL Score?

Yes, the CIBIL score for an education loan is important for the individual applicant and their co-applicants. When taking an education loan, the immediate effect on both parties CIBIL scores is insignificant.

However, as the repayment period commences, the scores can improve or decrease based on the timely or non-repayment of EMIs.

How Credit Score Impacts Student Loan

Education loans impact an individual's CIBIL score for education loan. Student loans are repaid through instalments, contributing to the credit history.

Recommended CIBIL score ranges are as follows:

  • 300–700: Poor CIBIL score, reducing approval chances. Financial documents require careful review.
  • 701-750: Eligible, but lenders are cautious about meeting the minimum CIBIL score for education loan
  • Seven hundred fifty and above No difficulties in obtaining an education loan. Lenders assess financial reliability based on this score.

How to Improve a Low CIBIL Score for an Education Loan

Obtaining an education loan with a low CIBIL score may present challenges, but there are ways to enhance one's prospects:

  • Credit limit overuse: Avoid maxing out the credit limit. Keep the credit utilization between 30% to 50% to maintain a good credit score.
  • Timely payment management: Make timely payments on all credit and loan obligations. Set up reminders to avoid missing or delaying payments.
  • Handling loan rejections: If a loan application gets denied, don't apply for another loan immediately. Each denial lowers the credit score further.

Does a Parent's CIBIL Score Affect a Student's Education Loan?

Yes, parents' credit score for student loans matters. Banks consider the credit score of the parent(s) when evaluating education loan applications. As a student, not having a credit history is understandable and not necessarily a disadvantage due to the young age.

They value individuals who have practised good personal credit habits, such as timely repayment of EMIs (Equated Monthly Installments).

How to Get an Education Loan with a Low CIBIL Score?

When considering an education loan with a low CIBIL score, keep these pointers in mind:

  • Timely Payment of Current Bills: Ensure timely payment of existing bills to demonstrate responsible financial behaviour.
  • Request a Secured Student Loan: Opt for a secured loan by pledging collateral, reducing the impact of the credit score on loan approval.
  • Display Proof of Income: Provide evidence of a solid income to showcase the ability to repay the loan, despite a low credit score.
  • Rectify Credit Report Errors: Regularly check for and correct any inaccuracies in the credit report to prevent negative impacts on loan applications.

Also Read - Education Loan Application Process - Step by Step Guide

FAQs on CIBIL Score for Education Loan

Can a person apply for an education loan even with no credit score?

YES, for students normally lenders do not consider CIBIL score for funding. However, CIBIL scores for Co-applicant/s i.e parents are considered for an education loan.

Does delaying repaying an education loan affect a person's credit score?

Like other loan products, late payments or defaulting on a student loan or an education loan will lower one's credit score.

How to check the CIBIL score for an education loan?

To check aCIBIL score for an education loan, register on the official website of CIBIL. This allows one to access their credit score easily.

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