Why banks don't want to recruit candidates with poor credit score

Representational Image. Photo: iStock/ cnythzl

A recent notification of the Institute of Banking Personnel Selection (IBPS) for appointment of clerical staff says that the candidates should have a good credit history. According to IBPS, applicants should have a minimum credit score of 650 out of 900 to be eligible for the job.

As per the notification, applicants should submit their credit score when they are selected for the banking job before the joining date. Those who could not update their credit score have to produce a no-objection certificate (NOC) from their bank. The offer letter of candidates who fail to follow these instructions will be cancelled.

In other words, banks don’t want people who are poor at managing their own financial affairs properly as staff.

While checking of the credit score of applicants for bank jobs was being carried out for some years now, it is only now that IBPS has introduced a strict condition for appointment.

Appointments in all banks, except State Bank of India, are conducted by the IBPS.

What is CIBIL?

Credit Information Bureau of India Limited or CIBIL provides financial report on the loans we avail from banks and other financial institutions. Our repayment history too is shown in the report.

Scores are given to each person based on repayment pattern, capacity for repayment and current financial status, among other parameters.

The maximum CIBIL score is 900. While a score above 750 is termed ‘excellent’, any score in the range of 650-750 is considered ‘good.’

Will study loans land you in trouble

In the case of students, their CIBIL score could be adversely affected if an education loan was availed. Students should ensure that their repayments are on schedule. If there is delay in securing a job to start repaying the loan, discuss with your bank to extend the term of the loan. You can also seek the help of parents to repay the amount.

While defaulting on repayment of one or two installments may not bring down the CIBIL score below 650, continuous defaults and delayed non-payment would affect the score. One-time settlement of the loan also would reduce the CIBIL score.

Availing loans from several banks is another factor affecting the score.

Many students have a misconception that repayments could wait till they complete their studies. However, it should be noted that this is moratorium period and not interest-free period. It would be better to earn small amounts of money to start repayment during the course itself.

“Avail a loan only for urgent needs and repay the amount without default. If you encounter any difficulties in repayment, approach the bank to reschedule the loan. Also seek a grace period,” says banking expert S Adikesavan.

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