In India, four credit information agencies assign credit scores to borrowers. Of these four, TransUnion CIBIL is a preferred bureau. The credit score that TransUnion CIBIL assigns to borrowers is known as the CIBIL score. The CIBIL is calculated based on the credit report and record and is assessed to understand the creditworthiness of a borrower. A clean credit report and a good CIBIL score can increase your chances of being approved for a loan at favourable terms.
However, if you apply for a Home Loan with a low CIBIL score, your application may get rejected. To avoid this, know how to improve your credit score.
What is a CIBIL Defaulter’s List?
TransUnion CIBIL also maintains a list of all loan defaulters known as the CIBIL Defaulters List which is compiled by the Reserve Bank of India that compiles this list. In 1997, the Reserve Bank of India made 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.
The loan defaulters are of two types: wilful and non-wilful. Non-wilful defaulters are individuals or entities unable to repay their debts due to genuine financial difficulties. In contrast, wilful defaulters are those who have the financial capacity to repay but deliberately choose not to. 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.
How Long Does CIBIL Retain Records of Defaulters?
If your name has appeared on the CIBIL defaulter’s list, it will be retained for up to 7 years. Further, since CIBIL or any other credit bureau does not maintain its own defaulter’s list, it cannot remove the name from the list.
The only way to have your name removed from the loan defaulters list is to pay off the loan and improve your CIBIL score after a loan default. Since a loan default can reduce your CIBIL score, it will take some time to improve it. 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.
How Can I Avoid Being on the CIBIL Defaulter’s List?
Maintaining a healthy credit profile is essential to avoid being perceived as a defaulter by CIBIL. Here are some ways in which you can stay off the defaulter list:
- Make Timely Repayments: Ensure all your due, including EMIs and credit card bills, are paid on time. Setting up payment reminders or automating payments is recommended to ensure timely repayments and avoid missing due dates.
- Limit Multiple Credit Applications: Avoid applying for multiple loans or credit cards simultaneously, as it can indicate financial strain to lenders. Instead, apply for loans only when necessary after thorough consideration.
- Monitor Your Credit Report Regularly: Review your credit report regularly to identify and rectify inaccuracies or discrepancies that could negatively impact your credit score.
How Does CIBIL Defaulter Status Impact Loan Approvals?
When a lender marks you as a defaulter, it gets registered in your credit report and affects your credit score negatively. It can be difficult to avail of a loan at competitive terms with a low credit score. To ensure easy access to loans, it is essential to maintain a good credit score by paying EMIs on time on time and reviewing your credit report regularly.
Conclusion
TransUnion CIBIL retains defaulter records for up to 7 years which can impact your loan approvals. To avoid being on the defaulter’s list, ensure timely repayments, limit multiple loan or credit card applications, and monitor your credit report regularly. Improving your credit score after default requires clearing outstanding dues and maintaining financial discipline.
Frequently Asked Questions
CIBIL retains the records of defaulters for 7 years.
Defaulter records cannot be directly removed from your CIBIL report. The only way to do so is by repaying the balance loan amount or outstanding credit card dues. Once paid, your credit report will be updated accordingly.
Defaulter records do not affect your CIBIL score permanently. You can improve your credit score over time by making timely repayments, reducing credit utilisation, and maintaining a healthy credit mix.
