This landmark judgment from the High Court has given much-needed relief to persons with a poor CIBIL score. The decision has made front-page news, as it has not only considered the concerns of those with depressed credit ratings but has also directed the banks to be humane and transparent when dealing with such cases. The judgment opens new doors for the less fortunate to step through the present financial challenges and into a bright future.
What This Decision of the High Court Means for You?
If the worry of a low CIBIL score has been gnawing at you, then this ruling comes in like a breath of fresh air. The High Court has instructed the banks not to reject loan applications solely based on a poor credit rating. Transparency and humanitarian approach have now become the highlights of this ruling, especially in cases of education loans.
For years, the major throttle to loan applicants has been a poor CIBIL score. Banks and financial institutions are prone to rejecting applications based on a score below an acceptable threshold. But this gives a last chance to throw this convention out of the window and level the playing field for the unlucky ones who have to put up with a low score.
Why Is This Decision So Important?
The decision of the High Court is subject to an appeal in the case of a student denied an education loan due to a lower CIBIL score. On that occasion, the student had taken a loan before but had not repaid within the time limit, and the student’s credit profile. Even after receiving an offer letter from a highly reputed company, the bank did not provide him with a new loan, and thus his future was being jeopardized.
The court rightly pointed out that students are the future builders of the nation and should not be denied education loans because of credit history. They reiterated that banks should not rely solely on past performance in determining the ability to repay of the loan.
What Led to This Decision?
The case involved a student who got a job offer but had his education loan denied on account of his low CIBIL score. His arguments before the judges were that refusal of the loan would jeopardize his future; especially since the job would secure income for him to repay the loan.
The banks on the other hand maintained that to allow the loan would run counter to the guidelines of the Indian Banks Association (IBA) and the Reserve Bank of India (RBI). They also invoked the Credit Information Companies Act, 2005, and its relevant regulations which do not support the exceptions made in this case.
The High Court, however, held that education loans are integral to building the future of young people; they should not be denied education loans because of technicalities, such as a poor credit score.
How Can This Decision Affect the Banking System?
The judgment is anticipated to bring changes in the banking industry. It will make the process of loan approval fairer, more inclusive, and more human-centered. It would also mean that the bank would have to balance all its policies with the larger goal of helping people realize their dreams.
What Should You Do If You Have a Poor CIBIL Score?
While this decision is a step forward, there is a need for immediate action toward improving one’s CIBIL score. Some suggestion tips are:
- To pay your EMIs and credit card bills on time.
- Avoid having more than one loan in the same period.
- Check regularly for the errors and discrepancies in the credit report.
- Keeping a healthy credit utilization ratio.
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