Top 7 Best Alternatives for Bad Credit Score – Low Credit Score Solutions
Reviewed by: Fibe Research Team
- Updated on: 2 Jul 2026
This article covers 7 practical alternatives for bad credit score situations in India, including NBFC loans, fintech lenders, secured loans, P2P lending and credit builder products. 3 real borrower examples illustrate how each option works in practice. Read time: approximately 6 minutes.
Getting a loan when your CIBIL score is below 650 feels frustrating. Banks decline applications, often without explanation. But a low score does not lock you out of credit entirely. There are financial options for poor credit score that are regulated and accessible.
This guide covers 7 practical alternatives for bad credit score in India, who each one suits and what to watch out for.
Table of Contents
- What is a Bad Credit Score in India?
- Alternative 1: NBFC Loans
- Alternative 2: Fintech Lenders with Alternate Scoring
- Alternative 3: Secured Loans
- Alternative 4: Peer-to-Peer Lending
- Alternative 5: Credit Builder Loans
- Alternative 6: Apply with a Co-Applicant or Guarantor
- Alternative 7: Borrow from Your Existing Lender
- How Long Does It Take to Improve a Bad Credit Score?
- How to Choose the Right Alternative?
What is a Bad Credit Score in India?
The CIBIL score runs from 300 to 900. Below 650 is subprime. Between 651 and 730 is near-prime. Most banks want 750 or above for an unsecured personal loan. Scores drop due to missed EMIs, credit utilisation above 30%, multiple loan applications in a short period, or past defaults.
QUICK STAT
Approximately 119 million Indians had checked their CIBIL score at least once as of March 2024, a 51% year-on-year increase driven by Gen Z and millennials.
Source: TransUnion CIBIL Empowering Financial Freedom Report, August 2024
Under new guidelines effective January 2025, lenders must update credit data to bureaus every 15 days, so responsible repayment now reflects faster in your score.
| CIBIL Score Range | Category | What Lenders Typically Say |
|---|---|---|
| 300 to 649 | Poor / Subprime | Banks decline; NBFCs and secured loans accessible |
| 650 to 699 | Fair / Near-Prime | Some NBFCs approve with conditions; fintech lenders viable |
| 700 to 749 | Good | NBFCs and digital lenders approve; many banks still cautious |
| 750 to 900 | Excellent / Prime | Full access at competitive rates |
Alternative 1: NBFC Loans
Non-Banking Financial Companies are regulated by the Reserve Bank of India and are the most accessible lenders for borrowers with poor credit. They look beyond CIBIL at income, employer type, employment tenure and recent repayment behaviour. Kavya, 27, a teacher from Chennai, had a CIBIL score of 610 after two late credit card payments. Her bank declined her. She approached an NBFC, submitted 3 months of payslips, and was approved for ₹60,000 at 22% per annum over 12 months. Repaying on time improved her score by 55 points. This is a clear example of how to get loan with bad CIBIL score through a regulated lender.
DID YOU KNOW?
NBFC personal loans for subprime borrowers typically range from ₹10,000 to ₹5 lakhs at 18% to 36% per annum. Higher than bank rates, but far more accessible when traditional doors are closed.
Alternative 2: Fintech Lenders with Alternate Scoring
Fintech platforms assess creditworthiness using income patterns, UPI transaction history and employment type. This makes them among the best loans for low credit score India options, particularly for young salaried applicants with a thin credit file. Loan amounts go up to ₹5 lakhs with approvals in minutes. Always confirm the lending entity is an RBI registered NBFC before sharing personal data.
Alternative 3: Secured Loans
If you hold a fixed deposit, gold or a life insurance policy, you can borrow against these without CIBIL being a major obstacle. Collateral reduces lender risk, improving approval odds and lowering your interest rate.
- Loan against FD: banks lend up to 90% of the FD value at 1% to 2% above the FD rate. Your deposit keeps earning throughout.
- Gold loan: walk in with gold jewellery, walk out with funds the same day. No credit score check required at most lenders.
- Loan against insurance policy: policies held for several years carry a surrender value that can be pledged at low rates.
Rahul, 34, from Hyderabad had a CIBIL score of 590 after a loan default. He needed ₹1.5 lakhs for home repairs. He pledged gold jewellery and received ₹1.2 lakhs the same afternoon with no credit check. Secured loans are one of the most underused financial options for poor credit score in India.
PRO TIP
A loan against FD is often the cheapest borrowing option regardless of your credit score. Your deposit keeps earning interest, which partially offsets the borrowing cost. If you have an FD, check this option first.
Alternative 4: Peer-to-Peer Lending
P2P platforms connect borrowers directly with individual lenders. In India, they are licensed by the Reserve Bank of India as NBFC-P2P entities and are more flexible than banks for scores below 700. Loan amounts range from ₹10,000 to ₹5 lakhs. Confirm active registration and read the Key Fact Statement before committing.
Alternative 5: Credit Builder Loans
Designed for borrowers with no credit history (NH or -1 score) or scores below 600. The lender holds the loan in escrow; you make monthly repayments; the principal is released at the end. Every payment is reported to credit bureaus. Preeti, 24, from Bengaluru had an NH score and no borrowing history. She took a ₹15,000 credit builder loan over 12 months, paid every instalment on time and finished with a CIBIL score of 712. For anyone starting from zero, this is the right first step.
DID YOU KNOW?
Credit builder loans are typically ₹5,000 to ₹50,000 over 6 to 24 months. The real value is not the money. It is the repayment track record you build, which opens the door to larger loans on better terms later.
Alternative 6: Apply with a Co-Applicant or Guarantor
A co-applicant applies alongside you; a guarantor agrees to repay if you cannot. If the other person holds a score of 750 and above with stable income, their profile compensates for your lower one. Can a guarantor help me get a loan with a bad credit score? Yes. A strong guarantor improves approval odds and may get you better rates. Both parties must understand that the co-applicant or guarantor carries full legal liability for the loan.
WATCH OUT
If you miss payments, your co-applicant or guarantor’s credit score is affected. If you default, they are responsible for the outstanding amount. Discuss this openly before signing.
Alternative 7: Borrow from Your Existing Lender
Your existing bank or NBFC has data on your salary inflow, account balance and repayment history. Many extend pre-approved loans or overdraft limits to existing customers even when their CIBIL score would not qualify them as a new applicant. Ask your relationship manager what is available before applying elsewhere.
How Long Does It Take to Improve a Bad Credit Score?
With on-time repayments and credit utilisation below 30%, most borrowers see improvement in 6 to 12 months. Reaching 750 and above typically takes 18 to 24 months. Understanding how to get loan with bad CIBIL score helps short term, but rebuilding your score is the longer-term goal.
How to Choose the Right Alternative?
| Your Situation | Best Alternative |
|---|---|
| Own gold, FD or insurance policy | Secured loan — lowest cost, highest approval odds |
| Salaried, steady income, score 600 to 700 | NBFC or fintech with alternate scoring |
| Score below 600 or no credit history | Credit builder loan first |
| Family member with score 750+ | Joint application with co-applicant or guarantor |
| Long relationship with existing lender | Pre-approved offer or overdraft |
| Need funds urgently, limited assets | NBFC or regulated fintech with fast disbursal |
What to Avoid
Applying to multiple lenders at once triggers multiple hard enquiries, each lowering your score. Use soft eligibility checkers on fintech apps before submitting any formal application. Always verify NBFC registration. Avoid loans where the EMI is a stretch.
PRO TIP
Every on-time repayment through any of these 7 routes is reported to credit bureaus. Consistent behaviour across 12 months typically delivers a 40 to 80 point score improvement.
Conclusion
Need a personal loan even with a low CIBIL score? Fibe uses an alternate credit scoring model that looks beyond your score, assessing income, repayment patterns and financial behaviour. Get up to ₹10 lakhs with quick approval, flexible tenures and zero foreclosure charges. Apply on the Fibe app or website in minutes.
FAQs On Alternatives for Bad Credit Score
1. Can I get a loan with a CIBIL score below 600?
Yes. Loans for low credit score India borrowers are available through NBFCs, fintech platforms with alternate scoring and secured options like gold loans and loans against FD. The key is choosing lenders who evaluate income and repayment capacity alongside your score.
2. Can a guarantor help me get a loan with a bad credit score?
Yes. A guarantor with a score of 750 and above shifts the lender’s risk assessment significantly, improving your approval odds and potentially getting you a better rate. Be aware that the guarantor carries full legal liability for the loan.
3. How long does it take to improve a bad credit score?
With consistent on-time repayments and credit utilisation below 30%, most borrowers see meaningful improvement in 6 to 12 months. Reaching a score of 750 and above typically takes 18 to 24 months of disciplined behaviour.
4. What is considered a bad credit score in India?
A CIBIL score below 650 is generally considered poor or subprime. Scores between 650 and 700 are fair. Most banks prefer 750 or above for unsecured personal loans.
5. Do NBFCs check CIBIL score?
Most do, but they weigh it alongside income and employment stability rather than using it as a hard cutoff. They are significantly more flexible than traditional banks for subprime and near-prime applicants.
6. Will repaying a secured loan improve my CIBIL score?
Yes. Every on-time repayment is reported to credit bureaus and adds to your payment history, which accounts for roughly 35% of your CIBIL score.
7. What is a credit builder loan and who should use it?
A structured product where loan funds are held in escrow until repayments are complete. Ideal for borrowers with no credit history (NH) or scores below 600 who need to establish a repayment track record.
8. Is peer-to-peer lending regulated in India?
Yes. P2P platforms are licensed by the Reserve Bank of India [RBI — flag for review] as NBFC-P2P entities. Always verify registration and read the Key Fact Statement before borrowing.
9. Should I apply to multiple lenders after a bank rejection?
No. Multiple applications trigger multiple hard enquiries, each lowering your score. Use soft eligibility checkers on fintech apps first to gauge your chances without affecting your report.
10. Can I rebuild my credit score while using these alternatives?
Yes. Consistent on-time repayments through any of these routes typically improve your score by 40 to 80 points over 12 months, depending on your starting profile.
