The high demand and the changing nature of education have made multi-year degrees more expensive. Education loans come to the rescue for those who want to avoid shelling out the entire cost of education out of pocket.
When you apply for an education loan, the lender uses your CIBIL or credit score to determine your creditworthiness. A high CIBIL score ensures the lender that you’re not a credit risk.
But what if, as a student, you don’t have a credit score? Is CIBIL score required for an education loan in that case? How much CIBIL score required for education loan? Does education loan affect CIBIL score? Read on to find out.
Minimum CIBIL Score Required for an Education Loan
The minimum credit score required by different lenders varies however, typically the minimum education loan CIBIL score required is 750.
If you’re a student without any credit history, then you can apply for an education loan with a working parent as a joint applicant or a guarantor. In such a case, the lender will consider your parents’ credit report to determine their repayment capacity on your behalf. In this case, the following documents are required:
- Identity Proof, such as an Aadhar card, passport, or other government-issued ID for both the student and the co-applicant.
- Academic records, including mark sheets and passing certificates from school.
- Admission letter from the institute you’re planning to attend with fee structure.
- Income tax returns, salary statements and other financial documents of the co-applicant.
Additional Read: CIBIL Score for Education Loan
Importance of CIBIL Score for Education Loan
Education loans allow students to study in their desired country and institution, providing support for tuition, lodging, books, and more. CIBIL scores are central to determining whether an education loan is approved. With a higher credit score, you can access the following education loan benefits:
1. Lower interest rates: A good credit score can help you avail of an education loan at lower interest rates, reducing your repayment burden for education loan CIBIL score.
2. Approval for higher loan amounts: A high credit score also elevates your chances of being approved for a higher education loan amount, reducing your financial burden.
3. Possibility of longer loan tenure: A good credit score can also help you become eligible for longer education loan tenures. A longer loan tenure results in smaller EMIs, reducing your immediate financial burden.
4. Faster approval from the lender: With a good credit score over 750, your education loans can get approved faster by the lender, relieving you of any financial uncertainty.
To improve your CIBIL score for education loan, follow these steps:
- Maintain a good credit utilisation ratio: This refers to the total percentage of credit you have used. It is essential to keep it between 30%-50%.
- Repay all debts: Making timely repayments on loans, bills, and other bowstrings can help improve tour credit score.
- Time your loan applications: Getting rejected for a loan can cause your CIBIL score to drop. Do not immediately apply for another loan right after being rejected.
Additional Read: What is a CIBIL Score? Why is it important while applying for a loan?
How an Education Loan affects your CIBIL Score
Just like any other type of loan, an education loan also affects your credit score depending on your repayment behaviour. It is also reflected in your credit history. If you’re regular with your EMI payments and have a clean borrowing history, it will positively reflect in your credit report.
The positive effects of an education loan on your CIBIL score include the following:
1. Better Credit Score: If you pay your education loan on time, your credit score improves. This means paying your EMIs on time after the moratorium period without missing.
2. Better Credit Mix: Credit mix means having different types of credits or loans, both secured and unsecured, such as home loans, car loans, education loans, etc. A diverse credit mix boosts your credit score.
3. Building a Long Credit History: Education is usually a long-duration loan. Paying off this loan in earnest builds a long and strong credit history, boosting your credit score.
In contrast, repeated delays in EMI repayments can unfavourably affect your credit score. The negative effects of an education loan on your CIBIL score. You can perform a CIBIL score check online to keep track.
Additional Read: Top 5 Myths About Cibil Score
Conclusion
A good CIBIL score for education loan above 750 provides many benefits when applying for an education loan. If you’re a student, the bank considers the credit score of your parents or guardian. Timely repayment of an education loan affects your credit score positively.
Want to apply for a loan for your higher education but are not sure if you have the perfect credit score? You can perform an online CIBIL score check free with Tata Capital. Visit our website to check your credit score and get started with your loan process.
You can also apply for a quick education loan with us at competitive interest rates. To know more, contact us today! For more information, head to the Tata Capital website or download the app today!
FAQs
You can get an education loan even without a credit score. For this, you will have to apply for a co-applicant with a good CIBIL score.
Most financial institutions require a CIBIL score of 700 or more for education loans and others. However, some institutions offer loans for lower credit scores.
Education loans do affect your CIBIL score. They are a form of credit, so if proper repayment management improves CIBIL scores.
To check your CIBIL score, you can register on CIBIL’s official website. You can also check it using Tata Capital’s credit score checker.
The minimum credit score for an education loan is usually 685. However, some financial institutions may offer loans at lower scores.
In general, financial institutions prefer CIBIL scores of 685 and above. However, some may offer education loans to those with lower credit scores as well.
Many banks provide education loans with low CIBIL scores upon furnishing additional documents demonstrating financial stability. These documents ensure the lender regarding your creditworthiness.
Yes, depending upon the lender, you can take advantage of a 40 Lakh education loan without collateral.
Yes, a bank can reject an education loan for various reasons, including a low credit score.
Yes, you are eligible for an education loan with 50% marks from some lenders. However, in most cases you must have an admission letter from the university you’re planning on attending.
A CIBIL score of 900 is considered perfect. However, a score of 750 and above is usually considered excellent by most lenders.
06 May 2025
5 mins read
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