When a student applies for an education loan, the focus is naturally on the student's academic performance, university and course. But another important part of the application is the co-applicant's financial profile. For many education loans, a parent or guardian is included as a co-applicant, and lenders closely evaluate their financial position.
What Is a CIBIL Score?
A CIBIL Score is a three-digit number ranging from 300 to 900 that represents an individual's credit history. In general, a stronger credit history supports a stronger credit profile. The score is influenced by factors such as repayment history, credit utilisation, length of credit history and recent credit enquiries.
Why Does the Co-Applicant's Credit Score Matter?
A student who has just completed school or college may have no previous loan, no credit card, no regular income and very limited credit history. A parent or guardian acting as co-applicant has an established financial history. Because the co-applicant shares repayment responsibility, lenders examine income, existing liabilities, credit history and repayment capacity.
What Happens If the Co-Applicant Has a Low CIBIL Score?
A low credit score does not automatically mean that an education loan will be rejected. Lenders consider the complete application, including academic profile, course, university, co-applicant income, loan amount, collateral and overall repayment capacity.
What Can Hurt a Co-Applicant's Credit Score?
- Missed EMI Payments: Delayed or missed payments on existing loans negatively affect credit history.
- High Credit-Card Utilisation: Regularly using a very high proportion of the available credit limit.
- Multiple Recent Credit Applications: Applying for several loans or credit facilities within a short period.
- Defaults on Joint or Guaranteed Loans: Repayment behaviour on facilities where a person is a joint borrower or guarantor.
How Can You Prepare Before Applying?
- Check both the student's and co-applicant's credit report for errors.
- Clear genuine outstanding dues before submitting the application.
- Avoid submitting simultaneous loan applications to multiple banks without understanding criteria.
- Keep existing EMIs under control to maintain high repayment capacity.