First-Time Borrowers and CIBIL Score: What You Need to Know
- Pranali Yadav
- Aug 26
- 2 min read
If you’re applying for a loan for the first time, here’s some good news: a CIBIL score is not mandatory for first-time borrowers. This recent guideline ensures that individuals without prior credit history can still access loans. Let’s break down what this means, how CIBIL scores work, and how it impacts your borrowing journey.
What Is a CIBIL Score and Why Does It Matter?
A CIBIL score is a three-digit number that reflects your creditworthiness based on your past repayment behaviour. It acts as the first impression for banks and financial institutions when you apply for a loan.
Higher scores (700+) signal responsible credit management and improve chances of approval.
Lower scores can reduce the likelihood of loan applications being considered.
It’s important to note that while a good score boosts your chances, the final lending decision rests entirely with the bank, not CIBIL.
How Is the CIBIL Score Calculated?
India has multiple licensed credit bureaus—CIBIL (TransUnion), Experian, Equifax, and CRIF High Mark. Among these, TransUnion CIBIL is the most widely used.
Your score is generated based on:
Payment History: Consistency in paying EMIs and credit card bills on time.
Credit Utilization: The percentage of your used credit limit—lower usage is better.
Age of Credit: Longer credit history reflects stability and responsible management.
Credit Enquiries: Multiple loan/credit applications in a short period may negatively impact your score.
New RBI Guidelines: Relief for First-Time Borrowers
On January 6, 2025, the Reserve Bank of India (RBI) directed banks not to reject applications from first-time borrowers solely due to the absence of a credit history.
This means:
First-time applicants for personal, housing, education, or business loans cannot be denied just because they have a “zero” or “no” CIBIL score.
Lenders must assess repayment ability using other factors such as income, employment records, and financial background.
What Banks Will Look At Instead
For applicants with no prior credit score, banks may evaluate:
Salary or income details.
Employment stability and professional background.
Any available repayment records, including delayed payments, restructured loans, or accounts written off.
This broader assessment helps lenders determine repayment capacity fairly, without penalizing those new to credit.
Cost of Accessing Your Credit Report
RBI has capped the fee for an individual’s credit report at ₹100. Additionally, every credit bureau must provide one free full credit report per year, including your score, in digital format.
Final Thoughts
The RBI’s directive is a positive step toward financial inclusion, ensuring that lack of a credit history does not become a barrier for deserving borrowers. Whether you’re planning to fund education, buy a home, or manage personal expenses, your first loan application will now be evaluated more holistically.
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