"Nothing's good about a bad credit score", said a dejected Vineet. He had an abysmal score of 545. He was hoping to get a car loan of 10 lakhs but no bank was willing to touch him even with a 10 foot barge pole. He needed a loan so bad that he was wondering if he should contact one of those "infamous loan sharks". He was driven to the brink this time.
Car was not as important, as much as his reputation. It had become an issue of pride. How would he justify to the world why he couldn't buy a car in spite of the income he bragged about. His story began a few years earlier.
A juvenile and naïve Vineet couldn't handle the success when he escalated the corporate ladder faster than his peers. From a mere trader with a brokerage house to soon become a Portfolio Manager within a year was better than a dream come true for him. He knew he was the envy of so many people and he took pride in it.
His mantra in life was clear, "work hard, party harder". He adopted some very expensive habits and used multiple credit cards to pay for them. Soon bills began piling at home. Although stressed for payments yet couldn’t curb his extravagant habits. All this began affecting his work and he was given a month’s notice to leave his work.
Vineet panicked and took a huge personal loan immediately to settle scores with all card companies. At the same time his rowdy and condescending behaviour towards his subordinates and colleagues at work had earned him notoriety. Unfortunately, it took him nine months and two cities to be employed again.
As expected, due to absence of income he couldn't repay his personal loan. Not even one instalment. He went knocking his so called friends’ doors but they just turned their backs on him in his hour of need. This, obviously, led to a deplorable score.
You must have heard of the old adage, "the bigger they come, the harder they fall".
A young and inexperienced Vineet didn't know there are no loans for bad credit score. Unfortunately, CIBIL holds no records of what were the circumstances when you couldn't repay your debtors. Today, after five years, his past had caught up with him and was there to haunt his future. Now what?
Vineet needed a car loan but he couldn't get it because of his poor score. This was bad enough. Knowing his past, no one was willing to co-borrow with him. Then someone told him about a NBFC that might lend to him albeit at an exorbitant rate. He was worried because that EMI was insanely high. All this because of a bad CIBIL score.
"Having a bad credit score is nothing short of living a nightmare", pointed Vineet. A poor score not only spoils your chances of qualifying for a credit facility but it also impacts the rate at which you can borrow.
With a low CIBIL score you portray a risky credit profile. Lending institutions are wary of taking such inflated risks. Certain NBFCs may extend loans to subprime borrowers but they charge a premium over regular interest rates to cover the extra threat of default.
Your credit score is a reflection of your attitude as a borrower. A bad credit score translates into bad credit behaviour. Step in the shoes of your lender for a minute. Would you choose to work with someone who, apparently, has a record of evading with other lender's money? This will help you decode the mindset of a credit institution.
Once you understand what a lender is looking for in a borrower or what a bank considers as a favourable credit profile then you can work in that direction. Always strive to improve credit score so that you can better your chances of accessing credit in future.
One can never say when they would or wouldn't need to take help of a credit product. Having a bad score can impair you from taking loans even if you have a good source of income. With a good score you can get loans easily, at competitive rates and possibly even without collateral.
Vineet learned his lesson the hard way. Hope others learn theirs through his story.