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Do you know the reason a loan was denied to you by a lender or the lending bank? While there may be a number of reasons behind this, what immediately comes to someone’s mind is you have a credit score that is very poor and in the worst case, your name also finds its place in the CIBIL Defaulter list.
So, why is your name on the credit defaulter list in the first place? Missed EMI payments, failure to pay credit card bills on time, inability to settle different types of loans, etc. are some of the reasons that have a huge impact on a person’s Credit Score, which eventually results in the person’s name listed on the defaulters’ list.
Now, your name has appeared in the dreaded CIBIL defaulter list and you don’t exactly know why? Let’s understand a few terms like Credit Score and CIBIL, before learning how your name appeared in the defaulter list and ways to remove the same from the list:
A score that lenders carefully analyze before sanctioning a loan to you as it directly suggests how likely you’re to repay what has been lend to you. The credit score of an individual is typically arrived at by credit bureaus based on the report they receive from various financial institutions. The report clearly mentions about your credit history, details about your credit card payments, loans, etc.
Needless to say, you stand a great chance of being accepted for a loan or a high-value credit card if you have a healthy credit score.
We have many credit bureaus like Equifax, High Mark, Experian and CIBIL. Credit Information Bureau India Limited, also known as CIBIL, is authorized by the Reserve Bank of India as a credit information company.
CIBIL Score Range
The range of CIBIL score is from 300 to 900 and a CIBIL score that is anywhere near to 300 makes you a defaulter while a score of 900 or close to 900 ensures high eligibility to obtain a loan or a credit card.
While there is no separate range of CIBIL score to be eligible for a credit card, personal loan, home loan, car loan, etc., a score of 750 or above is usually considered to be a good one.
The criterion for every financial institution is different and you might get a loan or a card with a score below 750 but the lower you go, the tougher it gets.
How did your name get onto the CIBIL Defaulters’ list?
Much to your surprise and agony, you’ve seen your name in the CIBIL report. Below are few of the reasons why this may have happened:
- Failure to repay a loan: Not being able to repay a loan means your lending bank categorises you as a defaulter in your credit report, which eventually results in you finding your name in the defaulters’ list of CIBIL.
- Purely by mistake: So, you paid your loan dues and credit card bills regularly but still find your name in the defaulter’s list? You may not be at fault but this may happen due to recording and reporting incorrect details related to your name, age, PAN card number or a loan you never applied for! To avoid such unpleasant situations, you must get into the habit of checking your CIBIL score regularly.
- Loan / Credit Card Payments not recorded properly: At times, banks and other financial institutions may miss recording your timely payment of loans and credit card bills, resulting in your name being incorrectly added to the list.
How to remove your name from the CIBIL Defaulter list?
Should you be in a situation where you see your name in the CIBIL Defaulter list, whether it was your fault or not, here’s what you can do:
- If you have defaulted on your loan payment, the first thing you must do is get rid of all your financial obligations and settle the pending EMIs as soon as possible. CIBIL typically prepares a monthly report and you may have to patiently wait at least for a month after settling your dues so as to not see your name in the updated defaulters’ list report. While nobody can erase your name from the defaulters’ list, at least the default that you have made will appear as settled.
- If CIBIL authorities have done a mistake at their end and entered your name in their defaulters’ list report, you may bring this case to their notice. Be prepared to support your claim with genuine documents and CIBIL authorities will rectify the mistake after careful analysis.
- If you feel your name appeared on the defaulters’ list because of a mistake was done by the bank that sanctioned you a loan or gave you a credit card, you may want to visit the nearest branch of your bank at the earliest and let them know about the error they have made. The bank or the financial institution will give you a proof of all the payments that you have done, which you can later forward to the authorities at CIBIL. CIBIL will work together with your bank and after proper verification, the defaulters’ list will be updated after having removed your name from it.
- Reach out to the Banking Ombudsman: Banking Ombudsman is a judicial authority that is governed by the Government of India. It came into existence to help resolve the complaints raised by customers of banking institutions and issues regarding services that these financial institutions offer.
If you feel that a financial institution isn’t paying heed to the proofs that you have regarding regular payments, or isn’t helping you in gathering substantial proofs, or perhaps the bank isn’t handling your case as efficiently as you desire, you may lodge a complaint against them with one of the twenty Banking Ombudsman offices in India.
How to make sure your name never gets listed in the CIBIL Defaulter list?
Life is uncertain and you never know when you may have to urgently take a loan to meet your immediate financial requirements. Therefore, it only makes sense to be very careful and not let your name appear in the CIBIL Defaulters’ list in the first place.
Not only will it ensure hassle-free loans and credit cards when you need them in future, but will also save you from all the running around that you would have to do to get your name on that dreaded list.
Keep the below points in mind and rest assured that your name will never be documented in the defaulters’ list:
- Make prompt payments: This is the simplest thing to do but difficult to follow. Pay all your bills on time and let all worries be far away from you.
- Regular check on your credit report: Your credit score must be checked regularly as many a times your name might appear in the defaulter list for no wrongdoing of yours. Resolving issues then and there is better than knowing about them only when you apply for a loan.
- Make your payments automatic: Most of us live extremely busy lives and it is only natural for us to completely forget about credit card payments amidst our daily grind. The smartest thing you can do is automating your payments by working with your bank. And if traditional calendar reminders aren’t your thing, you may even turn to various mobile applications and online tools that will keep a track of your payments for you.
- Use a credit card whether you need it or not: You may not really need a credit card to make all your payments but get into the habit of using one, even if it is occasionally. This helps in building a credit history and facilitates easy sanctioning of loans should you require them in future.
- Ensure you have a diverse credit history: If you want to increase your chances of getting a loan at a good rate, this is perhaps the best rule to follow. Your financial portfolio ideally must contain a mix of home load, personal loan, car loan and a handful of credit cards.
- Avoid being the guarantor of someone else’s loan: This is perhaps the trickiest of the lot and something that could put you into a lot of unnecessary trouble. If you really must stand as a guarantor for someone’s loan, sure go ahead. But perform due diligence at your end and make sure you don’t fall into the trap. If the person whom you are standing up for fails to repay the loan, be mindful of the fact that it is going to have a direct impact on your credit score.
Work on the points we have mentioned above and make sure your name is on the CIBIL Defaulter list, for good. No lending institution would give a loan or a credit card to a person whose name is on the CIBIL defaulter list and to someone who doesn’t have a healthy credit score!
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