In a credit bureau, there is no such thing as a defaulter list or a negative list (Phew! Right) But, your name can be included in the credit bureau as a defaulter. Digital lending platforms (such as Loan Singh), banks and credit card companies report repayment performances of your loans and credit card dues to the credit bureau. Defaults not only reduce your credit bureau score, but also hamper your chances of getting approval for a fresh loan. The biggest reason for personal loan rejections is credit default. There can be times when your name is tagged as a defaulter, by no fault of your own. Let us first understand what is a credit bureau & a credit bureau report, how you become a defaulter in the eyes of the bureau, and ways to remove your name as a defaulter.
There are 4 credit information bureaus licensed by the Reserve Bank of India – CIBIL, Experian, Equifax and Highmark. They maintain your credit information which is sourced from credit institutions. When you approach a bank or a digital lending platform, for a loan, a hard inquiry is raised by the credit institution to the credit bureau. The bureau then compiles a credit bureau report which houses your credit information such as past/current personal loan or credit card, prompt payments towards loan EMIs, credit card statements, etc. You might have cleared a loan; if you have done so by repeatedly defaulting in loan EMIs, then this will reflect in your credit bureau report. The credit bureau report also contains your personal information such as your name, date of birth, residential address, PAN, voter ID number, contact number, types of credit availed, size of loan, credit limit spend and outstanding current balance; along with your credit bureau score.
Credit Bureau Score
The credit bureau report, not only displays your credit history but also compiles a rating/score known as Credit bureau score. The score is a statistical indicator of an assessment done on your credit repayment capacity. The score has a minimum value of 300, and a maximum value of 900. The higher your credit bureau score, the better your chances of getting fresh credit from Loan Singh or any other lender. A good credit bureau score indicates quite many things such as the timeliness of repayment, the quantum of credit you own, the nature of credit, and your overall performance while under debt. The bureau score is also a culmination of the number of times a hard inquiry was made by any lending institution.
Credit institution will not lend you credit, if you have had a history of defaults in your loan repayments. You can either be a major or a minor credit bureau defaulter. Minor defaults would include payments that were delayed, but cleared within a secondary due-date. For defaults, that go beyond an ultimatum tenure (for example – say 90 days from the due-date) are termed as ‘Late Payments’, or ‘Non-payments’; these negatively affect your credit history, and decrease your credit bureau score. It is a no brainer, that late payments indicate a lax approach to your credit responsibilities.
Credit Bureau Score Ranges
Your credit bureau score can fall into the following 5 categories.
Score less than 0 – A credit score of 0, or less, means you have no credit history. In this situation, it is wise to apply for a personal loan from Loan Singh; as banks are likely to reject your loan application, basis lack of credit history.
Score between 350 – 500 – A score between 350 and 500 is poor, indicating either a default in past EMI payments or excess credit utilization on credit cards.
Score between 550 – 650 – A score in this range is acceptable, indicating that you have been regular with your payments, and can be trusted for fresh credit. You have good chances of getting a loan approved.
Score between 650 – 750 – This range indicates that you are doing well with your finances. You should stick to your financial habits to maintain, or improve, your score. Your chances of getting a loan approved are great.
Score between 750 – 900 – This is considered as the best range for a borrower. This clearly indicates that you have ben regular with your EMI or credit card bill payments. You can easily avail a loan.
What to do if you are marked as a defaulter?
A defaulter tag, on the credit bureau report, could take years of effort to erase. It not only prevents you from getting fresh credit, but also disrupts your reputation. A good repayment history can be halted by a single default. Defaults also welcome penalties and hiked interest rates. So, be smart and disciplined to always pay your EMIs on time. The only way to avoid any credit rejections in the future is by improving your credit bureau score; there is no other way. Never allow a ‘Written-off’ or ‘Settled’ status to remain on your credit bureau report. The more ‘Closed’ status’ the better for your credit bureau score.
Every individual has the right to access his/her credit bureau report. You can request for your credit bureau report from the bureau website. You can check the report to understand the instances when you under performed in your credit responsibilities. There are 2 ways through which your name could appear as a credit bureau defaulter.
Credit related default
This simply happens when you do not pay your loan or credit card EMIs, on time. In this case, you need to clear all the pending EMI payments, at the earliest. Credit bureaus, generally publish a monthly report to ensure that you clear the pending dues, & prevent your name from getting re-tagged as a ‘Defaulter’
Check if Your Name, gender, PAN and address could have been entered in a wrong format. If so, then contact the credit bureau to get it rectified. Provide valid documents as proof. In case, the issue is due to human error at the credit institution, report the same to the institution, & attach a copy of the report. Once rectified by the institution, get an acknowledgement of the same, and send it to the bureau for updating. The error could also be due to identity theft or fraud; where someone has used your details to avail a loan, and defaulted.