Denied a Loan Despite 800+ Credit Score? The Hidden Truth Revealed

A credit score of over 800 is considered extremely well in India. It is often associated with easy approvals and lucrative interest rates. However, several borrowers with strong credit scores are facing loan rejections, which leaves them perpelxed.

That is why it is important to understand the basic reasons, expert insights along with several crucial factors beyond the three digit number that influence the decisions of financial institutions.

High credit score, still facing loan rejection?

A high credit score i.e., a score of 750 or more signals strong creditworthiness. Still, it is not a guarantee that your submitted loan application will definitely be approved.

Financial institutions carefully look over key aspects that truly financial health such as income stability, existing debt, credit behaviour etc. If your income is irregular or you have frequently changed your jobs then this is looked at very seriously by the banks and might even result in the rejection of your loan application.

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Main Reasons For Loan Rejection Regardless Of A High Credit Score

Unstable income: Banks prefer borrowers with a steady income source. Even often ignored, minor gaps in employment or fluctuating earnings can trigger worries about repayment capacity, leading to rejection of loan applications.

High debt-to-income ratio: Now if a very large or significant portion of your monthly income goes toward servicing existing debts then you have a high debt to income ratio. Then banks can easily perceive you as over debt dependent. This can result in rejection, regardless of your credit score.

Multiple recent credit applications: Applying for several loans, other credit lines or credit cards within a very short span sends a strong red flag to lenders. This may make them view you as credit-hungry or financially stressed.

Negative remarks or discrepancies in credit report: Any late payments, past defaults, errors in credit report, improper or pending settlements, or discrepancies in your personal information can undermine your application, even if your credit score is high.

Guarantor or co-applicant issues: If you have acted as a guarantor for a defaulted loan or previously applied with a co-applicant who has poor credit. Then this can be a clear ground for your personal loan application to be rejected.