For millions of Indians, a loan or credit card rejection often arrives with a short notification and no explanation. No roadmap, no clarity and little understanding of what went wrong. As digital lending becomes more accessible through apps, BNPL platforms and fintech products, a growing concern is emerging: people are entering the credit ecosystem faster than they are learning how it works.

A new report, “The Hidden Cost of Not Knowing: State of Credit Score Awareness in India,” found that nearly 30% of Indians have faced loan or credit card rejection, with many left unaware of the reason behind the decision. The findings raise an important question for India’s fintech ecosystem: can artificial intelligence help borrowers understand and improve their financial profile before rejection happens?

The challenge appears larger than isolated rejection cases. The report found that 45% of respondents had either never checked their credit score or were unsure whether they had done so, while more than 400 million Indian adults have no formal credit history. For many users, the journey begins with a financial product but little understanding of the system behind it.

MUST READ: Do Indians understand credit scores? Report highlights costly knowledge gaps

Credit score confusion

The report shows that awareness and understanding are not always the same thing. While 75% of respondents claimed they understood credit scores, deeper knowledge gaps persist.

More than 58% incorrectly believed checking their own score reduces it, while 25% associated credit scores directly with salary or income levels.

Such misconceptions may appear minor, but they can translate into significant financial costs. The report highlighted how even a relatively small score difference led one borrower to pay a 1.6% higher interest rate on a home loan, increasing costs by nearly ₹8.6 lakh over 20 years.

As credit products become easier to access, industry executives believe the larger issue is not access itself but interpretation.

Can AI explain what lenders do not?

Anand Agrawal, Co-founder of FixMyScore & Credgenics, described the situation as a “credit paradox,” where India has one of the fastest-growing digital lending ecosystems while many borrowers continue receiving silent rejections.

MUST READ: Petrol, diesel prices up by ₹3: Will your grocery bill and daily essentials cost more now?

"No explanation, no clear roadmap, no guidance. That silence is not just frustrating; it is financially devastating for millions of aspirational Indians who simply don't know what went wrong or how to fix it," Agrawal said.

According to him, traditional lending systems often operate like black boxes. He said AI-enabled credit advisory solutions can shift the process beyond displaying a three-digit score by identifying specific factors behind weak credit profiles and explaining corrective actions.

"AI-powered credit advisory doesn't just give a three-digit score; it assesses the entire financial history and the story behind it," he added.

MUST READ:  Why blockchain and AI are becoming essential for secure digital payments

The problem

Pramod Kathuraia, Founder and CEO of Easiloan, said many consumers still discover credit problems only after applications are denied.

"The majority of Indian people encounter loan and credit card application rejections often without any explanation, leaving them unsure about what went wrong or how to improve their chances next time," Kathuraia said.

MUST READ: You can now check your CIBIL score on BHIM app: Here's how

He noted that AI systems can analyse repayment behaviour, account age, credit utilisation and enquiry patterns to provide personalised recommendations before applications are submitted.

"Traditionally, borrowers discover issues with their credit only after a rejection. AI-enabled platforms can change that," he said.

Vikkas Goyal, Founder of VimanoTech, said transparency remains one of the biggest challenges in India's credit ecosystem.

"AI-driven systems can analyse financial behaviour and identify the specific factors influencing lending decisions," Goyal said, adding that the larger opportunity is helping borrowers understand how to improve rather than simply informing them that they failed.

As India expands financial inclusion, AI may increasingly be viewed not as a tool that predicts rejection, but one that explains it.

MUST READ: Investor query: Will a missed EMI, loan settlement, early prepayment or high card usage hurt my CIBIL score more?

Published on: May 17, 2026 10:05 AM IST