CIBIL score: I have never taken a loan, can my credit score still be affected?

CIBIL score is a three-digit number that indicates your credit history and a summary of how you made repayments for past loans, if any. Your credit score can still be affected if you haven't taken a loan or used a credit card.

One can still have a low CIBIL score even if they haven't acquired any loan previously.

Many people often feel apprehensive about loans and prefer making cash payments for everything. Some even consider credit cards as equivalent to loans and avoid using them as they fear increased expenses and a negative impact on their credit score. However, with rising costs these days, many people are availing credit facilities like personal loans, and credit cards. Access to credit facilities can also help to improve your credit score.

If you've never taken a loan, your CIBIL score can still be affected. The CIBIL score, also known as credit score, is a three-digit number that summarises the credit history of a person and determines whether they would receive a loan or not.

It’s a common notion that not availing any loan is good for credit history. However, not using any credit facility may not be a wise option for your CIBIL score. Let's explore how your credit score can be impacted even if you've never taken a loan.

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Impact of no credit history on credit score

If you've never taken a loan, you essentially have no credit history. This absence of credit history can create confusion for credit rating agencies. In such cases, your score might end up being zero, which is a poor credit score. A zero CIBIL score is a perplexing situation for banks because they're unsure whether to trust someone who has never taken a loan.

However, having a zero credit score doesn't mean you can't get a loan. In such situations, individuals are assessed based on other criteria. But, it can affect the interest rates or the total loan amount you're offered. If you don't want to take substantial loans, you can make small purchases on Equated Monthly Instalments (EMIs), like mobile phones, washing machines, refrigerators, or other essential items. This way, you won't burden yourself with significant debt, and your credit score will stay healthy.

How your CIBIL Score could be affected even if you have never taken a loan?

• Credit Inquiries: If you haven't availed any loan or credit card yet but are willing to get one and have applied in multiple financial institutions then it could affect your credit score. These lenders conduct a thorough credit enquiry before accepting a loan application. Multiple inquiries within a short period of time could lower your credit score.

• Defaulting Credit Card Payments: Loans are not the only credit facility available and defaulting credit card payments could also lower your CIBIL score. Therefore, it's crucial to ensure that your credit card repayments are made within the specified period to avoid a low CIBIL score.

• Identity Theft: It's a real concern if somebody is using your identity to acquire loans or other credit facilities. In such cases the fraudsters don’t pay the dues and it negatively affects your credit score. So, try reviewing your credit report on a regular basis to avoid such scams.

How can you improve your CIBIL score?

Credit scores typically range from 300 to 900. A credit score of 750 or higher is considered excellent, while a score between 550 and 750 is considered good. Anything below 550 is seen as poor. Your credit score depends on several factors, broadly with 30 per cent depending on whether you repay loans on time, 25 per cent on secured or unsecured loans, 25 per cent on your credit exposure, and 20 per cent on the utilisation of credit.

It’s important to understand that not taking any loan doesn't mean that your credit score won't be affected. Moreover, explore the various factors that can influence your credit score and take the necessary steps to maintain a good CIBIL score

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