Is a good CIBIL score required by a student applying for an education loan?

27-Dec-2016 written by : FSI-Team

A higher education loan is often considered as one's ticket to success and a bright future. For a middle-class household that pins its hopes on the career prospects of the son or daughter, an education loan may seem like manna from heaven, where the parents do not have the financial muscle to fund the higher education of children on their own. In the modern age, when credit is omnipresent and youngsters are getting savvier with credit usage, the question that most students are asking before making an application for an education loan is whether it is important for a student to have a good CIBIL score when applying for an education loan. Let's delve deeper into the subject and find some answers.

A fresh start

The long and short of the answer of whether a student must have a good CIBIL score before applying for an education loan is no. Students who are making an application for a line of credit for the very first time, have no pervious credit report if they are young and still dependent on their parents. If the required documents are in place, a student loan for a fresh graduate or even a post graduate applying for a higher education loan, can be approved without much ado, especially if the loan amount is less than र 4 lakhs. In such cases, a working parent may be asked to step in as a joint applicant. However, the case may be different if you have had an existing credit line, such as a credit card as a student and are applying for a loan amount that is above र 5 lakhs. In such cases, it is prudent to ensure that your CIBIL score is above the level of 750 (out of 900) before you make the loan application.

The CIBIL score of the parents'

The CIBIL score of a working parent who may step in as a guarantor when you are applying for an education loan will become vital if the loan amount is over and above र 5lakhs. The prospective lender will want to see the credit history that the parent has had and assess his capability to repay the loan on your behalf if you are not able to meet the terms and conditions of repayment. The CIBIL score of a parent or parents' may however be relevant if the loan amount is high. For a loan amount that is less than र 4 lakhs a guarantor may not be necessary. This is however a decision that the bank will make and each lender has its own set of rules.

Your first chance to build good credit

While having a good CIBIL score may be an absolute necessity for a student applying for an education loan for the very first time, it is the first chance for an individual to build a good CIBIL score. If you are taking an education loan, it is your chance to service it well and get a good head start in building credit history. Do bear in mind that that like any other line of credit such as a home loan, car loan, easy personal loan or a credit card, the details of education loans to get reported at CIBIL. Slackness in repayment or non-payment may thus botch up your credit report even before you have begun and impact your chances of getting credit in future.

Here are some tips to service your education loan to build a good CIBIL score:

  • Be determined to make timely repayments on your loan
  • Put your loan ahead of any expenses you make
  • Save up from your academic years and don't wait till you begin your job to start making repayments on your loan
  • Try working small jobs alongside your academic pursuits to earn the extra bit of money to make repayments on your education loan.
  • As soon as you get your first salary, put a standing instruction in your salary account for the deduction of your education loan EMI
  • However hard you have worked to earn the lucrative job you have landed; do not be in a hurry to lead the high life.
  • Live frugally like you did in your years as a student and spend carefully till you have repaid your education loan in full.
  • Try to prepay your education loan to be debt free and concentrate on saving for your future.

As mentioned above, your CIBIL score may not be as important to get an education loan, but once you have taken it, it can indeed be your stepping stone to get a good score. So just like a batsman in the game of cricket can hit a century in the very first match of his life, so you can have a high credit score high if you make it a point to service your education loan well.



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