In India, four credit information agencies assign credit scores to borrowers. Of these four, TransUnion CIBIL is popular. The credit score that TransUnion CIBIL assigns to borrowers is known as the CIBIL score. Based on a borrower’s credit record or credit report, CIBIL assigns them a CIBIL score, and this CIBIL score is assessed to understand the creditworthiness of a borrower. If a borrower has a clean credit report and a good CIBIL score, loan approval can come easy and with beneficial loan terms and conditions, such as competitive interest rates.
However, if you apply for a Home Loan with a low CIBIL score, your application may get rejected. To avoid this, know how to fix your bad credit score.
TransUnion CIBIL also maintains a list of all loan defaulters known as the CIBIL Defaulters List. However, it is not TransUnion CIBIL but the Reserve Bank of India that compiles this list. In 1997, the Reserve Bank of India issued a notice making it mandatory for all financial institutions, banks and NBFCs to share with it a list of all loan defaulters who have an outstanding of Rs.25 Lakh or above. It must be shared with readers that loan defaulters are of two types: wilful and non-wilful defaulters. Non-wilful defaulters are those who are drowning in debt and therefore, cannot honour their loan obligation. Wilful defaulters, on the other hand, are those who have the money but are still not honouring their repayment commitment. The RBI maintains a list of all wilful and non-wilful defaulters and this list is made available to the public each year. People can download this list from the Reserve Bank of India’s official website. The CIBIL Defaulters list is nothing but the list of people who are on the RBI’s defaulters list.
For How Many Years Does TransUnion CIBIL Keep Record of Defaulters?
If your name has entered the CIBIL defaulter’s list, it will stay there for the next 7 years. Further, since TransUnion CIBIL does not make its own defaulter’s list, it cannot delete people’s name off that list either. TransUnion CIBIL cannot remove your name from this list. The only way for a borrower to get their name removed from the loan defaulters list is to pay off the loan. If your name is on the defaulter’s list, the best thing you can do is take measures to improve it. Remember that it will take time for you to improve your CIBIL score after a loan default since a loan default has a negative impact on your credit report and reduces your CIBIL score. Here are a few tips that will help you improve your credit score after a loan default, especially if you are planning to apply for a Home Loan.
If you want to improve your CIBIL credit score after a loan default, the first thing you must do is get into the habit of paying loan EMIs and credit card bills on time. Your credit history is the most important factor that affects your CIBIL score. So, to improve your CIBIL records, focus on creating a clean repayment history. Make it a point to clear all your credit card bills and EMIs on time. Set up reminders so that you do not miss any EMIs or credit card payments. Even if you do miss an EMI, make it a point to clear it as soon as possible.
Your credit utilization ratio, which is the ratio of credit used to credit available, is another key factor that affects your CIBIL score. A low credit utilization ratio is the mark of responsible behaviour. It is ideal for candidates to maintain a credit utilization ratio of below 30%. It is good to not exhaust the limit on your credit cards and not keep clearing only the minimum amount due if you want to maintain a good credit utilization ratio.
Hard enquiries are enquiries that lenders make to enquire about a borrower’s repayment capacity and creditworthiness. Too many hard enquiries reduce the credit score, which in turn, reduces the ability to avail of credit in the future. If you have defaulted on a loan, your CIBIL score will be low. And applying for a new loan in this case will only lead to a new hard enquiry and may be a Home Loan rejection, which in turn, will further lower your CIBIL score and your ability to avail of a loan in future.
Lastly, a borrower’s name may get added to the defaulter’s list by mistake. Borrowers whose CIBIL score has suddenly dropped without any loan default or hard enquiries must report it to the credit bureau. Doing so would require you to create an account with CIBIL and then raise a dispute by filling out their online dispute form.
