What Does a Zero or Negative Credit Score Mean?

In today’s world, both individual consumers as well as businesses rely greatly on credit. Several factors determine the ease of availability of credit and the most important of these factors is the credit score. An individual’s credit score is a numerical representation of their creditworthiness and repayment capacity. Several different credit bureaus collect data on a borrower’s attitude towards credit and its repayment. The most trusted of these credit information bureaus is TransUnion CIBIL. Almost all lenders rely on TransUnion CIBIL’s credit reports while deciding on loan applications. The credit score assigned by TransUnion CIBIL is known as the CIBIL score.   

An excellent credit score not only leads to quick approval but also makes one eligible for beneficial loan terms and conditions, such as a low-interest rate, long repayment tenor and high loan sanction. But, what is an excellent credit score or what is the minimum CIBIL score for loans? What does CIBIL score 0 mean? Is it possible to have a zero credit score or a negative credit score? This article answers these questions.  

Here’s What Your CIBIL Score Says About You

An individual’s credit score is a marker that allows credit issuers to check a borrower’s creditworthiness and ability to repay a loan on time. In simpler words, a borrower’s credit score apprises the credit issuer of the risk involved in lending credit to the borrower. If you have a very good credit score, you will get approved for a loan quickly, you will get offers from almost all lenders and you will also get the best loan terms and conditions. Before we proceed further, let us tell you a little bit about the CIBIL score range for loans.  

If your credit score is 750 or above, yours is an excellent credit score and availing of a Home Loan will be quite easy for you. A very good credit score falls within the range of 750 and 800. Anything between 625 and 750 is a moderate credit score. Credit scores below 625 are considered low credit score. If your credit score falls within the fair or poor categories, availing of credit won’t be easy for you. If you have a good credit score, your credit issuer will extend the best loan terms and deals only if you attach a co-borrower or guarantor. If you have a very good credit score, you will enjoy quick approval and disbursal and if your credit score is excellent, lenders will line up to offer you credit should you need it. 

Also Read: How to Increase Your CIBIL Score Above 800  

However, is there a thing like zero credit score? What does credit score 0 mean? What is a negative credit score? Read on to know the answer.   

What does CIBIL Score 0 Means? 

Credit information bureaus decide a borrower’s credit rating based on their credit history. However, when your credit history is still young or in other words, you have only recently availed of credit CIBIL for the first time, you will have a zero credit score. A zero credit score simply means that your credit history is not available for the credit information bureau to give you a credit rating based on it.  

So, should you be worried if you have a zero credit score? Not really. 0 is not a bad credit score – it simply means that it will take some time for your credit history to build up.  

What Does CIBIL Score Minus 1 Mean?  

If your credit history is less than six months old, credit information bureaus will give you a negative credit score. A credit score of negative (-1) simply means that you do not have a credit history and that you have not taken any credit to date. Therefore, the credit information bureau does not have enough information to decide if you are a reliable borrower or not. Now, the question is: is it possible to avail yourself of a loan if you have a zero credit score or if your credit score is negative (-1)? Let’s find out the answer.  

Is it Possible to Avail of a Loan if You Have a Zero or Negative Credit Score?

While it will be difficult for you to avail of a loan if you have a zero or negative credit score, know that it isn’t entirely impossible to get approved for a loan with a negative or zero credit score. Here are a few tips that will help you get approved for a loan even if your credit score is 0 or (-1).  

To start with, if you have a zero credit score, be patient and focus on repaying your loan on time. This will help you build a good credit history. On the other hand, if your credit score is negative (-1), apply for a small loan and repay it on time to build a good credit history.  

If you have a zero credit score and you want to avail of a loan, you should try availing a secured loan. A secured loan is a type of loan that involves collateral. Under this type of loan offer, a borrower pledges an asset as security. This asset could be a residential or commercial property or jewellery. Since secured loans involve security, the risk involved for the lender goes down in the case of such loans. So, if your credit score is zero or negative, apply for a secured loan and not an unsecured one to improve your chances of loan approval. Further, repay the loan on time to build your credit history and increase your chances of loan approval in the future.  

Lastly, try borrowing money from a lender with whom you already have some history or a lender who is willing to judge your application based on factors other than credit score, such as your income, employment history, job stability, etc.  

Conclusion

Many borrowers assume that a zero or negative credit rating is a bad thing; it is not. It simply means that credit information bureaus do not have enough information about you to assign you a credit score. If you see a 0 or -1 on your credit report, do not get disappointed. Instead, use the tips mentioned in this article to build your credit history and credit rating. Alternatively, if you need a loan urgently, opt for a secured loan over an unsecured one to receive quick approval.  

 Read Also: Steps to Check CIBIL Score by PAN Number