Personal experience but I heard for some people who has significant income or other benefitting factors may not affect this:
Cibil score has various parameters and no way to be sure that 'this causes reduction in score like that.. its all based on assumptions (atleast if I told)'.
You'll mostly get to know about its impact when you apply for loan especially unsecured one with high amount or low interest or less tenure.
Ex: If you're a banker who approves loan to a customer, what would you do below person..?
Lets say Person A has 1L per month salary, and
total available credit limit is 10L (which actually until utilized won't become a debt, but it can be used any time means ready for spend, or withdraw, if we want, any day)
When applied for 10L loan, with 12% interest for 3 years = 33,214 EMI = 33% // which is well within % salary limit to sanction as EMI.
But this % limit banks assuming after including all your spends like other EMIs + loans + Credit Card utilization pattern etc. total must be around this because banks usually assumes 40% for mandatory expenses like rent, utilities.
This person bank statement showing, every month paying 15k for rent, 5-10k general expenses, 20-25k credit card expenses or bills (so around every month spending 40k-50k).
Now,
will you approve the loan limit with requeted tenure?
or hoping person spends with EMI increases tight budget may result more credit usage, so hoping for worst
- reduce the limit and/or increase the tenure..?
or looking it as opportunity
- increase interest rate and/or increase the tenure..?
Again, just a note these all based on experience as customer (I never worked as a banker) and it can vary from person to person. But understood that high credit limit is always sees as leverage because you can use that at any time.
Another example (as per me):
1L salary with 3L combined limit = risk 3x (if anything goes wrong)
1L salary with 10L combined limit = risk 10x
1L salary with 1Cr combined limit = risk 100x
Cibil score may not change or decrease but there is a reason banks ask for statemnt sometimes before issuing loan, so based on above assumptions.
Now, if someone comes and tell that I had loan offer with 8% without any docs on my ICICI card - assume, there are good cases and we're talking about bad ones.
