Impact of cibil score on the financial management of borrowers: evidence frompalakkad district

Background: Credit scores such as the CIBIL score play a crucial role in determining borrowers’ access to credit and their overall financial behaviour. However, awareness and understanding of credit scoring mechanisms remain uneven among borrowers, particularly in semi-urban and rural regions. This raises important concerns regarding financial literacy, credit awareness, and the challenges faced by individuals with low credit scores. Objectives: The study aims to assess the level of financial literacy among borrowers, examine their awareness regarding the methodology of CIBIL score calculation, and identify the challenges faced by individuals with low credit scores in managing their finances. Methods: The study adopted a descriptive and analytical research design. Primary data were collected through a structured questionnaire from 120 respondents selected using a convenience sampling method, including salaried individuals, self-employed persons, and business owners in Palakkad district. Statistical tools such as Two-way ANOVA and MANOVA were used to analyse variations in financial literacy, awareness, and challenges across demographic variables. Results: The findings reveal that educational qualification significantly influences financial literacy and awareness, while age does not show a significant impact on certain variables. However, both age and education significantly affect financial management practices. Awareness of the CIBIL score was found to be moderate, with occupation and age influencing monitoring behaviour. Borrowers with low CIBIL scores face significant challenges in accessing credit and loan approvals, along with financial and personal constraints. The type of loan availed also significantly affects the nature of these challenges. Conclusion: The study highlights the critical role of CIBIL scores in shaping borrowers’ financial behaviour and access to credit. It emphasizes the need for targeted financial literacy programs, transparent credit information systems, and inclusive lending practices to enhance financial inclusion and financial stability.