Friday, 8 January 2016

What is a CIBIL Defaulter List?

Every time you apply for a fresh line of credit – be it a loan or credit card – the lender you approach calls for a copy of your credit report, and goes through it at length. The data contained therein helps a lender evaluate whether lending to the said customer would be risky or otherwise, i.e. what is the possibility of a loan going bad, or the customer defaulting on loan repayment.
Not only in the financial world but globally, even in sectors such as telecom there is increasing usage of the credit report. Landlords too for example choose to check the credit score (which is an integral part of the report) before renting out their property, as do prospective employers as part of the hiring process.
Hence, it is evident that to remain financially fit, having a good credit report is essential.

Tell me more about the credit score.
A credit score is a three-digit representation of your creditworthiness, typically ranging between 300 and 900. Naturally, the higher the score, better are the chances of loan or credit card approval, and at the best interest rates and other terms. This is because a ‘good’ score indicates to a lender that the customer is likely to pay off outstanding dues in time and in full.
What then is a CIBIL score?
Now that we have established what a credit score is, let’s read on to know all about the CIBIL score. There are currently four credit information companies, or credit bureaus in India, namely CIBIL, Equifax, Experian and CRIF High Mark. Of these, CIBIL is the oldest, and hence very often the term ‘CIBIL score’ is used to denote a credit score.
While the score across each of the bureaus may differ slightly, know that the measurement parameters are more or less equal, and that if you wish, you can avail of your credit report from any or all of these bureaus.
What happens in case of a loan default?
Every financial institution categorises a loan as a default only after nonpayment of dues for a certain period. With each passing day of default, a lender is liable to take increasing action to recover the money owed to them. The borrower is also categorised into a loan defaulter list, which ensures that the concerned lender not only does not lend to this particular customer again, but also focusses on follow-up for payment. Lenders often employ the services of a collection agency to help recover outstanding amounts from defaulters.
When it comes to a credit bureau like CIBIL, remember that these bureaus do not maintain a loan defaulter list of their own. In fact, bureaus merely report the data that is shared with them by their members, i.e. banks and financial institutions. Hence, bureaus are not authorised to maintain such a list, and neither can they change any data in the credit report of their own violation.
If you find yourself on a loan defaulter list with a lender, the first thing to do would be to get in touch with the concerned lender and have an open discussion about your finances in relation to your ability to repay the loan. It is likely that the lender is willing to modify the terms of the loan and put together a new repayment plan that makes it easier for you to make payments going forward. If there is no other alternative, consider agreeing to a ‘settlement’ that is mutually acceptable to both parties. Once your loan dispute is resolved to satisfaction, your name will be struck off the lending institution’s loan defaulter list.
Be aware though, that in the interim your CIBIL score may have been impacted negatively, and this needs rectification for your credit history to recover. To initiate the process, you need to raise a CIBIL ‘dispute’.
How do I raise a CIBIL dispute?
The first step in the process is to call for a copy of your credit report. Once you have the report, go through it in detail and identify the areas that need to be rectified, for example, the loan settlement that has been made. Remember, you would need to provide proof to CIBIL, that the payment has indeed been made. Once your dispute has been acknowledged by CIBIL, it can take up to 30 days to complete the process, depending upon the time that the concerned lender takes to respond to CIBIL.
The process is online and hassle-free in today’s digitised world, and the lender’s decision of whether to accept or reject the dispute will be conveyed to CIBIL. Following this, the necessary changes will be made by the bureau, on receipt of accurate information from the lender.
Why is a clean track record important?
With the increasing usage of credit reports across industries and sectors, having a clean bill of financial health is probably as important as being physically fit these days. Remember, a credit score may just be the make or break factor when a lender evaluates you for a loan, so ensuring good credit health becomes very significant.
It is never too late to begin, so call for a copy of your credit report today!

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