Maintaining a healthy credit score is crucial for securing loans and maintaining overall financial stability. Non-payment and defaulting on the EMI and credit card bill payments for an extended period of time can lead to default. This typically indicates an unstable financial situation and the inability to repay the borrowed amount.
While TransUnion CIBIL does not maintain a formal defaulter list, lenders can identify defaulters through credit reports showing low scores or overdue payments. It indicates that you are a high-risk borrower, making it difficult for you to secure any new form of credit in the future.
If you have defaulted on a loan and suspect that it is reflected on your CIBIL report, it’s essential to verify and take corrective actions promptly. Here’s a step-by-step explanation on how to check and remove the defaulter status from your CIBIL report.
You are deemed a defaulter if you have missed your EMIs and are unable to repay your loans. Financial institutions report such incidents to TransUnion CIBIL, which negatively impacts your CIBIL score.
Here’s a detailed view on how this can affect your finances:
Your credit score is one of the primary factors lenders consider when evaluating loan or credit card applications. A low score or defaulter status indicates poor financial responsibility. This can lead to outright rejection of credit applications.
A low CIBIL score signals high risk to lenders. As a result, lenders may approve loans but charge higher interest rates to compensate for the increased risk. This can make borrowing significantly more expensive. Additionally, options may be restricted to non-banking financial companies (NBFCs) or private lenders, whose terms may be less favourable than banks.
Being labelled a defaulter impacts your overall financial credibility. This can extend beyond lenders and affect other areas of life. For example, employers, especially in finance-related roles, often check credit scores as part of their hiring process. Additionally, renting properties or establishing business partnerships can become challenging if your credit history raises concerns.
Defaults not only affect your present but also disrupt future financial goals. A poor credit score reduces access to funds for emergencies, investments, or major expenses. It can hinder your ability to build a financial safety net or plan for long-term objectives. Maintaining a good credit history is essential for achieving financial stability and growth.
To determine if your name appears in the defaulter list, follow these steps:
Visit the official CIBIL website
Create or log in to your account
Opt for your ‘Free Annual Credit Report’ or purchase the report by paying the required fee
Under the ‘CIBIL Summary’ section of your report, you can find the details related to account defaults and overdues
Alternatively, you can check with your lender if they have flagged any of your credit accounts as defaulted.
Removing your name from the CIBIL defaulters list requires effort and financial discipline. Here’s how you can achieve it:
The first step is to clear any pending payments on your loans or credit cards. Contact your lender to confirm the exact outstanding amount, including any late fees or penalties. Once paid, request a ‘No Objection Certificate’ (NOC) as proof of repayment.
If repaying the entire outstanding amount is difficult, discuss settlement options with your lender. Many lenders offer payment plans or partial settlements. Keep in mind, however, that settled accounts may still negatively impact your credit score unless fully paid.
Sometimes, defaulted status can result from errors in reporting. If you believe the information is incorrect, log in to the CIBIL website and raise a complaint. Provide supporting documents to validate your claim. TransUnion CIBIL will coordinate with the lender to rectify errors, typically within 30 days.
After clearing dues or resolving disputes, check your credit report to ensure the updates reflect correctly. Monitoring helps you track improvements in your credit score and ensures the defaulted status is removed.
Once your default status is cleared, focus on rebuilding your credit score. Here are some tips:
1.Timely Payments
Paying your EMIs and credit card bills on time is one of the most effective ways to maintain a healthy credit score. Late payments can attract penalties and get reported to credit bureaus, damaging your credit profile. Setting reminders or automating payments ensures you never miss a due date.
2.Avoid Over-borrowing
Limit the number of active loans or credit cards you use to keep your financial obligations manageable. Over-borrowing increases your debt-to-income ratio, making it harder to repay on time. This can lead to defaults and a poor credit score.
3.Maintain a Low Credit Utilisation Ratio
Keep your credit card usage below 30% of your available credit limit to show lenders that you use credit responsibly. High utilisation suggests financial strain, which can negatively impact your credit score. Regularly paying off balances in full helps maintain a low ratio.
4.Avoid Frequent Credit Applications
Applying for multiple loans or credit cards in a short period leads to several ‘hard inquiries’ on your credit report. Each inquiry lowers your score slightly and may signal to lenders that you are overly dependent on credit. Apply only when absolutely necessary to protect your creditworthiness.
Once all steps are completed, request an updated CIBIL report to confirm the removal of the defaulted status. This ensures your financial profile is in good standing when reviewed by future lenders.
RBI plays a pivotal role in regulating and overseeing the credit ecosystem in the country. It ensures that credit bureaus like CIBIL and lenders operate within a fair and transparent framework. Here’s how the RBI contributes to the credit reporting process and :
The RBI licences and monitors credit bureaus such as TransUnion CIBIL, CRIF High Mark, Equifax, and Experian. This is done to ensure the bureaus’ compliance with data accuracy and privacy standards. It mandates these bureaus to collect and maintain detailed credit information for all borrowers.
The RBI has established guidelines for how banks and financial institutions should report defaults. It ensures that borrowers are informed before being classified as defaulters and that accurate information is submitted to credit bureaus.
The RBI has mandated a grievance redressal mechanism for consumers to dispute inaccuracies in credit reports. It monitors the dispute resolution process to ensure that errors are rectified promptly and fairly.
The RBI provides a structured framework for loan recovery, ensuring lenders follow ethical practices. It prohibits unfair recovery methods and protects borrowers’ rights during the recovery process.
The RBI actively promotes financial literacy to help individuals understand the importance of maintaining a healthy credit score. Through its initiatives, the RBI encourages responsible borrowing and timely repayments.
By regulating interest rates and setting policies for lending, the RBI ensures credit availability to a broader population. It aims to create a balanced system where frequent defaulters face consequences, but genuine borrowers have access to credit opportunities.
For unresolved grievances with credit bureaus or lenders, the RBI provides an escalation channel. Borrowers can approach the RBI’s Banking Ombudsman for fair resolution of disputes related to credit reporting or lending practices.
The RBI’s role ensures a fair and transparent credit system, safeguarding the interests of both lenders and borrowers. It aims to maintain financial stability while fostering trust in the lending ecosystem.
Being on the CIBIL defaulter list can limit your financial opportunities. However, with timely repayment, proactive monitoring, and disciplined financial habits, you can remove the default status from your report and rebuild your CIBIL score. Understanding the role of TransUnion CIBIL and RBI in credit reporting can empower you to maintain a healthy financial profile.
To clear the default status from your report, repay all outstanding dues and obtain an NOC from your lender.
It is challenging for a defaulter to secure a loan. However, you may be able to borrow the required amount by pledging collateral. You may also be offered the loan at a higher interest rate, etc.