March 28 , 2013
Have you been wondering how your name landed in CIBIL's dreaded hall of fame? If you ever borrowed from a bank or other financial institution or had a credit card your name and repayment details enters CIBIL's records. There is nothing to panic about this unless your loan application got rejected for poor score.
Why your name is on CIBIL's list
All banks and lenders update loan and credit card account details of their customers every month which is posted on CIBIL's database. Lenders do this in their own interest. Having a credit information repository helps them to view past credit history of borrowers who approach them for loan or credit card and make better decisions on who to lend to.
If you have missed loan repayment or have delayed it then you would be reported as 'defaulter' in your credit report by CIBIL. But as widely held by many, CIBIL does not maintain a defaulter's list from where you can remove your name. It does however maintain a list called suit-filed loan accounts who are willful defaulters of Rs 25 lakhs and above. The list of such defaulters is provided to it by banks and other lenders.
If your loan application has been rejected for poor CIBIL record you can ask for the report from the bank and go through it to understand which aspect is causing problem. You can purchase it from CIBIL for a small fee.
Understand Credit score and CIR
CIBIL generates a report and score whenever a lender requests for it as you apply for loan with the bank or institution. Your credit score is a 3-digit number between 300 and 900 which reflects your credit worthiness. Higher the score better you have been with your repayments and better the chances of your new loan or credit card approval. The report called CIR is a summary of your credit history based on previous loan and credit card history. It contains details like loan account number, loan balance and whether you have been regular with repayments.
How banks would use your credit score
From the bank's perspective a person with high credit score is financially disciplined and has been regular on his past borrowings. So if such a person were to approach for loan they would gladly extend credit to them. In contrast banks would like to avoid lending to those with low CIBIL score because they are perceived to have high chances of defaulting on repayment. If at all they lend to them they might charge higher rate of interest.
The report does not show name of present lenders. You can get in touch with CIBIL to know which lender has entered your details. Be sure to quote Control Number of the report.
But there have been instances of banks denying lending to customers with no prior credit history. This is indeed ridiculous because that such people have never borrowed before might mean that they have been excellent with their personal finances and have not had to borrow before. If you have encountered this then try talking this sense to the bank or try another lender.
How to remove your name from CIBIL defaulter list
Once there your loan account details will be kept for 7 years unless any change is made by any of your lenders. If indeed you have defaulted on repayment earlier, the only way to set that record cleared is to be regular on repayments following. So if you have ever borrowed or have credit cards, be regular with your repayments and keep balances low. If you have a low score you can work on it and improve your credit score.
But it might be possible that banks are refusing you loan based on the darn score though you have been pretty regular with your EMIs. In this case you can request the prospective lender to let you see your CIBIL credit score. Check if all details are correct, including your loan account details, lest it turn out that it is not yours! If you find that your repayment has not been correctly reflected go to the bank where you have loan account and ask them to set the records right.