What is CIBIL Score -1 And Its Significance?

CIBIL Score -1 for an individual means that the person has no credit history. The CIBIL Score generally ranges from 300 to 900 (900 being the best score). But sometimes the score may be reflected to be -1. Following reasons can result in CIBIL Score -1:

  • No credit history in the name of applicant (cases where the applicant has never availed credit facilities from any of the lenders i.e., bank/ financial institution).
  • No direct credit exposure in the name of the applicant (cases where the applicant has availed sub-facility and the actual credit facility is in the name of someone else. For example, having an add-on credit card. However, the main credit card is in the name of another person).
  • No active credit for the last 24 months (cases where the applicant has closed the credit facilities 24 months/ 2 years before extraction of CIBIL report).

Hence the possibility of having a -1 CIBIL score arises when the applicant does not enjoy any credit facility on his/ her name for at least 2 years from the date of extraction of the CIBIL report. In such cases, the CIC is unable to analyze the credit history of the applicant due to the unavailability of the previous track record of the applicant in debt repayment.

In some cases, a score of 0 (Zero) is assigned to the applicant, which is also termed as NA (Not Applicable). The score 0 is generally assigned when the track record in debt repayment of borrowers available with the CIC is less than 6 months on the date of extraction of the CIBIL report.

In this post, we will discuss CIBIL Score -1 features, understanding this credit score, the importance of having a credit history, getting a loan on CIBIL Score minus 1, and frequently asked questions.

Features of CIBIL Score -1

Here are the features:

  • Having a CIBIL Score -1 essentially means that the CIC has no information about the previous debt repayment of the applicant due to the unavailability of credit in the name of the applicant for at least the previous 24 months.
  • Due to the unavailability of such information, the lender is unable to decide on the credit application of the borrower since it is difficult to determine the creditworthiness of the applicant.
  • In such a case, the bank/ financial institution may ask for other documents witnessing the financial strength and repayment capacity of the applicant.
  • The proofs include but are not limited to previous ITRs (Income Tax Returns), employment details such as tenure of employment, nature of employment, monthly salary, etc., net-worth certificates, future income details, etc.

Understanding CIBIL Score and CIBIL Score -1

CIBIL scores the applicants on a scale ranging from 300 to 900 where a higher score depicts a better track record of the borrower in debt repayment. A lower score represents that the possibility of default is high in the loan which is taken as a sign of caution by the lender (bank/ financial institution) while making a credit decision.

Under the new scoring system (CIBIL TransUnion) of CIBIL, scores will range between 1 and 5. A score of 1 represents the highest probability for defaulting and 5 shows the lowest likelihood for the same. This system is taken into account for providing scores to new borrowers after considering details such as:

  • The volume of loan requests
  • Type loan whether secured or unsecured
  • Demographic info such as location, age, income, etc.
  • Details of 3 months for any overdue amount to be paid from past loan

Some can fall in the range of 0 to -1 score. Little or no borrowing history or track record may mean that CIBIL can assign you scores 0 or -1, thus also known as 'not applicable' or 'NA'. The score '0' depicts that your credit history of the past 6 months and less is available, while the score '-1' means there is no information on credit history, thus also known as 'no history' or 'NH'.

Most banks and NBFCs do not lend to those with a score of 0 or -1. However, some lenders can grant a loan by looking into relevant income proofs, credit appraisals, etc. Experian like CIBIL has a scoring range, but between 1 and 6 for borrowers who have less than 6 months of credit history.

Get a Loan Despite 0 or -1 as Credit Score

The credit score of the applicant is arrived at by analysing the previous debts of the applicant; most importantly the repayment of previous debts. A better repayment history shall result in a better CIBIL Score. Applicants having delayed repayments may get a lower score. The score of an applicant depends upon the number of loans availed, repayment history, frequency of defaults made by the applicant in repayment, amount of such defaults, and settled/written-off accounts.

Speak with the bank in question and try to convince them you are eligible for getting a loan. Submit income proofs along with a letter from your employer to negotiate your case, and coax the bank into giving you credit by proving your creditworthiness. Once your loan is approved, stick to making payments on time, and repay in full amount when necessary. Do not arrive at a settlement or foreclose the loan with the bank.

Why is Some Credit History Necessary for a Borrower?

CIBIL (CIC- Credit Information Company) score is considered to be the most crucial factor for consideration of a loan by a financial institution/bank. An unsatisfactory CIBIL score may lead to the rejection of a loan. The majority of the loans throughout the globe are rejected due to low credit scores. A better credit score increases the chances of getting a loan sanctioned. It depicts the credit history of the applicant. And this enables the lender (bank/ financial institution) to decide on lending.

Frequently Asked Questions about CIBIL Score -1

Here are the FAQs:

One can simply approach the bank/ financial institution to avail of the loan even if the score in the CIBIL report is -1. Having a credit score of -1 does not mean that the track of borrower in servicing the debt is suspicious but it means that there is no hit (NH- No-Hit) of the applicant as per the CIC (CIBIL) i.e., there is no debt repayment record with the company.

After you approach the bank for a loan, it may seek other documents from you, which may be considered necessary to decide on lending to the applicant. Based on these documents the bank/ financial institution shall be able to know the financial strength of the applicant and the ability of him/her in servicing the debt in the future shall be analyzed.

Before approaching the bank, the applicant should keep other documents such as ITRs, salary slips, statement of accounts, employment details (including a letter from the employer regarding credit-worthiness and identity card), etc., ready to be furnished to the lender so that there are no delays in getting the loan sanctioned.

After availing of the credit facilities, the applicant having a -1 CIBIL Score shall come under the purview of CIBIL and the credit data/debt repayment information of the applicant (about the loan sanctioned) shall be shared with the credit information companies (including CIBIL) by the respective lender. This shall enable the CICs to have a track record of the borrower in debt servicing which shall eventually lead to bettering the credit score of the applicant.

Based on the debt history, the applicant with CIBIL Score -1 shall now have a score ranging from 300 to 900. A better score can be reached by the applicant with the regular and timely payment of EMIs. Any default in repayment of debt is closely monitored by the CICs which results in lowering the CIBIL Score of the borrower.