There are many who are victims of a bad credit score. People don’t pay the amount on time, attract late charges and interest on the payments. They update those non-payment details in CIBIL which tracks your loan repayment history, screwing up your CIBIL credit score. This inturn might lead to banks/loan providers rejecting your loan application. Sometimes the reasons for rejection are so outrageous, even when a person earning so much
What is CIBIL?
Credit Information Bureau (India) Limited or CIBIL is a Credit Information Company (CIC) which collects and maintains records of an individual’s re-payments of loans and credit cards. This information is submitted to CIBIL by banks and other lenders, on a monthly basis to create Credit Information Reports (CIR) and credit scores called CIBIL TransUnion Score which are provided to lenders in order to help evaluate and approve loan applications.
What is CIBIL role in the Loan Approval Process?
CIBIL’s credit score helps loan providers quickly determine, who they would like to evaluate further to provide credit. It ranges from 300 to 900. Typically loan providers prefer credit scores which are greater than 750. Banks charge you higher interest rate if your CIBIL score is lower or there are adverse comments on your repayment in the Credit Information Report. Some banks even reject loans for this reason alone
The Negotiating Power is with you
CIBIL is only a score, not a binding law which determines your fate. It all depends on how you can negotiate with the banks or lenders or what your other options are. Despite your bad lending score, you can bargain for a better interest rate if you can convince them or make them compete among themselves to give you a loan. However, people are afraid to bargain and take the credit officer judgment as final. The other thing you can do is rectify credit score.
Here is how you do it:
- If you had applied for loan, ask your loan officer what was your credit score and if there were any adverse comments
- If he cites any such comments, go here, purchase your score and credit report
- Check the comments, any adverse one and mark them by whom they were made
- Connect with the customer care department of the company, call-centre guys don’t really help. Even if those guys are the only way raise a ticket and ask for it. Use this for further communication
- Pay your entire dues (Yeah, you must eat that frog!) get your balance to zero and ask them to update details and remove negative comments in the CIBIL report
- After that, if any friend/your relationship manager have access to your CIBIL Score, check if these were rectified
- You can also raise dispute with certain comments made directly to CIBIL using this link . Even if the credit card company or bank doesn’t respond, you can deal with CIBIL directly
- Once those comments are changed, your score might improve, however confirmation with the CIBIL would be better
- And finally don’t close your credit card in frustration/revenge against one company. Swallow your pride, maintain two credit cards and pay diligently
- Set auto pay on your credit card dues for full amount in your bank account so that you don’t miss them
- It is essential you have some repayment history for your score to improve. If you close your credit card accounts, you are not giving them any information to update. So maintain two credit cards at different billing periods. Check out the article on how to use credit card and its benefits
- After a period, say a year or two, because of due payment and removal of non factual negative comments, the credit score will improve. You can re-check your CIBIL score to verify it as well
This is a long process, your credit score don’t change overnight. Avoid getting into pitfalls of arguing with banks/credit card companies or take emotional decisions, deal with them to ensure, they don’t screw up your score. There are some service providers who say they would help clean your credit report over night. It doesn’t happen and you're better off staying away from such claims.
Essentially, even if credit score is not so good, if you can make banks/loan providers compete with you, you could negotiate a lower interest rate. In a year or two after consistent repayment, your credit score will improve
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Disclaimer: This article is for educational purposes only and is not an investment advice/financial advice and should not be construed as such. Decisions taken are solely at your own risk. Read disclosures page for more details.