RBI Issues New Guidelines: Frequent Loan Applications Can Harm Your CIBIL Score

The Reserve Bank of India (RBI) has introduced new rules regarding CIBIL score updates and how frequent credit checks and loan applications can impact your credit rating.

New RBI Update on CIBIL Score

Your CIBIL score is a crucial three-digit number that reflects your credit history, financial behavior, and repayment capacity. It is a key determinant for banks when approving loans.
According to the latest RBI guidelines, the CIBIL score will now be updated twice a month — on the 15th and at the end of each month.
Banks can also choose alternate dates, but the updates must occur at least twice within a month.

This move aims to offer borrowers more up-to-date credit information, improving transparency and faster loan decisions.

Impact of Frequent CIBIL Score Checks

There are two types of CIBIL score checks:

• Soft Inquiry: When individuals check their own credit score, it is termed a soft inquiry.

• Hard Inquiry: When banks or financial institutions check your credit score, it is a hard inquiry.

Soft inquiries do not significantly impact your CIBIL score, but hard inquiries can lower your score slightly because they indicate active credit-seeking behavior.

Thus, frequent loan or credit card applications can adversely affect your credit standing over time.

CIBIL Score Range and Its Importance

A CIBIL score ranges from 300 to 900:

• A score of 750 or above is considered excellent and increases your chances of loan approval.

• Falling below this threshold can make borrowing difficult.

The most common reasons for a drop in CIBIL score include:

• Delayed loan repayments

• Frequent applications for credit

• High credit utilization

Maintaining a strong CIBIL score requires timely repayment of loans and credit card bills, avoiding unnecessary credit applications, and regular monitoring of your credit profile.

How to Check Your CIBIL Score Safely

• Use the official CIBIL website or any RBI-approved institutions.

• Ensure that you maintain healthy financial behavior and stay informed about your latest credit reports.

The RBI’s new regulations aim to ensure that consumers have access to their most updated financial information, helping them make informed borrowing decisions.