How Does Gold Loan Affect Your Credit Score?

Learn how gold loan affects credit score and how to manage it wisely to maintain a healthy credit profile. Make informed decisions for better financial health. 
Gold Loan
2 min read
28 June 2025

Understanding the significance and credit impact of gold loans in India

In India, gold holds great significance, whether it is for weddings, festivals, or other occasions. Almost every Indian household possesses gold jewellery, which represents luck and prosperity. However, the value of gold extends beyond its cultural significance.

Gold serves as a tangible asset and can be utilised as collateral for obtaining a loan during times of financial uncertainty. Gold loans involve pledging your gold possessions temporarily to a lender in exchange for a sum of money based on the gold's value.

Unlike unsecured loans, such as personal loans or credit cards, your CIBIL Score, or credit score does not play a significant role in getting approval for a gold loan. As a result, you can easily avail of a loan with just the required gold loan documents. However, it's important to note that taking a gold loan can have an impact on your CIBIL Score and credit report, which keep track of your credit and loan history.

Here are a few different ways in which a gold loan can impact your credit score.

Gold loan application

When you apply for gold loan, lenders may perform either a soft or hard inquiry on your credit profile. A soft inquiry does not affect your credit score and is usually done for pre-approval checks. However, a hard inquiry involves a formal request for your credit report from credit bureaus and is recorded in your report. This type of check can slightly impact your credit score for gold loan, especially if you have a limited credit history. Though gold loans are secured by your jewellery and generally do not require a high CIBIL score, repeated hard inquiries can still affect your overall creditworthiness. Bajaj Finance offers a simple and transparent application process for gold loans with minimal documentation and quick disbursal.

Repayment on time

Paying your gold loan EMIs on time is crucial for establishing a strong track record of regular payments, which directly affects your CIBIL Score for gold loans. By consistently making timely repayments, you enhance your chances of securing future loans with better interest rates and faster approval processes.

Loan default

Failure to repay your gold loan as per the loan agreement puts you in a default status. It is important to note that a delay in making loan payments is reported to all credit bureaus in India, resulting in a drop in your credit score as this information is added to your credit report.

What is a Credit Score?

A credit score is a three-digit number that reflects your creditworthiness. It tells lenders how reliable you are when it comes to repaying borrowed money. This score is calculated based on your credit history, which includes information about loans, credit cards, and bills you've paid in the past. The higher your credit score, the more trustworthy you appear to lenders, making it easier to get approved for loans and credit cards. A good credit score can also mean lower interest rates, saving you money in the long run. So, it's essential to manage your finances responsibly to maintain a healthy credit score and secure better financial opportunities.

How to achieve a higher CIBIL Score with a gold loan

Here are a few ways to boost your credit score:

  • Timely repayments: Make sure to repay your gold loan on time, as any delays or defaults can negatively impact your CIBIL Score. Set reminders or automate payments to ensure timely repayments.

  • Responsible borrowing: Borrow only the amount you truly need and can comfortably repay. Taking on excessive debt can strain your finances and increase the risk of repayment difficulties.

  • Regular credit monitoring: Monitor your credit report regularly to stay aware of any errors that could affect your CIBIL Score. Promptly address any issues with the credit bureaus.

  • Clear existing debts: Prioritise clearing existing debts before taking on new loans. This demonstrates responsible financial behaviour and improves your creditworthiness.

  • Communication with lender: If you anticipate any difficulties in repaying the loan, communicate with your lender. They may be able to offer alternative gold loan repayment options or solutions to avoid defaults.

Bajaj Finance provides gold loans with several benefits, including low gold loan interest rates, multiple repayment options, and quick loan disbursal. You can apply for a gold loan online with Bajaj Finance or visit your nearest branch.

Frequently asked questions

Why is your CIBIL Score important when applying for a gold loan?

You typically do not need a CIBIL Score to secure a gold loan since it is a secured loan backed by physical gold jewellery. Lenders are more interested in the quality and value of your gold rather than your credit history. This makes gold loans accessible, even if you do not have a strong credit score.

Does taking a gold loan affect my credit score?

Yes, taking a gold loan can affect your credit score. If the lender reports it to credit bureaus, your loan and repayment history get recorded. Timely payments may help improve your score, while delays or defaults can hurt it.

How does a gold loan impact my credit report?

A gold loan shows up on your credit report if the lender reports it. Your repayment behaviour—on-time or delayed—affects your overall credit profile. It helps build a positive report if managed responsibly.

Can timely repayment of a gold loan improve my credit score?

Yes, paying your gold loan on time can improve your credit score. It shows lenders that you are reliable with repayments, which adds to your creditworthiness over time.

Will defaulting on a gold loan lower my credit score?

Yes, defaulting on your gold loan can lower your credit score. Missed or delayed payments are reported to credit bureaus, which negatively impact your credit profile.

Is a gold loan considered a secured loan for credit score calculation?

Yes, a gold loan is a secured loan as it is backed by your gold jewellery. It is treated like other secured loans in credit score calculations, with repayment behaviour playing a key role.

Disclaimer

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