What a CIBIL Score -1 Means & How It Impacts Your Loan Approval

Whether you get approved for a loan or a credit card depends heavily on your credit score. With a little bit of research, you might be aware of the credit score range 300 to 900 and an applicant with a score of 750 or more is considered a low-risk borrower in the lender’s eyes.

But what happens when your score isn’t in this range at all? What a CIBIL score -1 means, or even a CIBIL score of 0? And how do these scores impact your credit applications?

This blog breaks it all down in the simplest way so you know exactly where you stand and how to move forward.

Quick Synopsis 

• CIBIL 0 meaning no activity (under 6 months); CIBIL Score -1 meaning NH or no history (no loans/cards in the last 2 years).
• Lenders may ask for additional documents, add a co-borrower, or charge higher interest; approvals are harder.
• Fix it by building credit with secured credit cards and making timely repayments.

CIBIL Score of 0 and -1: What is the Difference Between These?

CIBIL Score 0 means 'No Activity' or 'NA'. It's mentioned when a person's credit report shows less than 6 months of credit history. In simpler terms, the individual has started his credit journey recently. That is why there is not enough data available to calculate his credit score. 

On the contrary, a CIBIL score -1 means you do not have a credit history whatsoever. Credit bureaus mention that when they do not find any previous borrowing history. Neither a credit card nor a loan in your name in the last 2 years, on which your creditworthiness can be evaluated. 

Features of CIBIL Score -1

As you know, a CIBIL score -1 means that you have no credit history. This lack of past borrowing creates a few unique characteristics that you should be aware of before applying for any loan or credit product.

Challenges During Credit Approval

Since lenders don't get insight into your creditworthiness, they consider other factors, which delay the process, require more effort, and create more hassle not only for the lenders but also for you.

Additional Document Requirement

In such cases, loan providers and credit card issuers may ask you to submit alternative documents to assess your financial strength and repayment ability. These can include employment contracts, property ownership papers, investment documents, and similar documents.

Building Credit Score

To overcome this phase, you need to make a conscious and strategic effort to build a strong credit history. One such strategy is to apply for a secured credit card.

How to Get a Loan with a CIBIL Score of 0 or -1?

Now it is clear to you that a CIBIL score of 0 and -1 simply means either you have started your credit journey recently or do not have any past credit history. So, it is difficult for lenders to evaluate your creditworthiness, which can lead to loan approval rejection. 

However, there are a few tips that can help you:

• Communicate with your preferred lender, explain your need to apply for a loan and show your salary slips or ITR file as income proof. It will help you in the process of convincing your lender.  
• Suppose your chosen lender does not approve your loan application even after reviewing your income proof. Then, consider adding a financial co-borrower to your application to make the process smoother. 

Keep in mind that your co-borrower must have an excellent CIBIL score and a stable and secure income source.

Impact of the Minus 1 CIBIL Score

Besides facing difficulty in obtaining credit, you may have to face other consequences of having no credit history:

• Limited Options: Some financial products and services require a necessary credit history check, such as personal loans, credit cards, mortgages, and rental contracts of a specific type. With a minus-1 credit score, your options will be very limited.
• Higher Interest Rates: Assume you get approval for a credit card or loan with no repayment history. Lenders will charge a higher interest rate than someone with a good credit history. As they cannot evaluate repayment capacity, they try to compensate for the risk involved by charging a high rate of interest.

How Banks Evaluate Your Repayment Capability If You Do Not Have a Credit Score?

If your credit score is -1 or 0, the banks analyse your repayment capability by considering the following:

Savings Account Balance

To check your ability to repay the loan on time, banks consider your savings account balance when you have a -1 or 0 credit score. If you have a track record of maintaining adequate funds in your savings account, lenders get an idea about your financial health, which is reasonably stable.

Employment 

Banks not only check your salary slips or ITR file to know how much you earn. But they also ask for information about your employment. Whether you work full-time, in a private firm, or in a public-sector company and the position you hold, all this information helps lenders evaluate your repayment capacity.

Record of Cheque Bounce

When an applicant does not have a credit score, lenders consider checking the track record of cheque bounce of that applicant. Having this record is a red flag to the lenders as it indicates a failed payment and suggests that it could happen again in the future. 

Final Words 

CIBIL score -1 means NH or 'No History', which means the borrower has no credit history. But, it does not mean you are financially irresponsible or not creditworthy. It is not the same as having bad credit. You can get a Loan or card despite having this score by following the tips.