Many credit users must be having a question about the defaulter list of CIBIL, especially while checking their credit reports. However, it is important to note that there is no such thing as a defaulters list with credit agencies. Credit agencies collect and organise data related to every credit user’s repayment history. This data is often exhaustive and includes aspects such as timely payments, defaulted payments, etc.
How to remove your name from CIBIL defaulter list?
- Examination of Your Credit Report Make a careful examination of your credit history, this will help you understand your mistakes and will also ensure that your details in the report are flawless and correct.
- Clear Off Your Dues The best way to improve your credit report, is to clear off your all outstanding credit. In case you have any financial limitation, you should speak with your lenders in advance and make a way out. Once your bills are cleared, wait for 3 months and again check your credit report.
- Pay in Time A delay in the payment of the loan or credit card instalment has negative impact on your credit history. If you desire an improvement of your credit score or if you want to keep the good score good, you should start paying your monthly instalment before the due date.
- Spend as Per Your Credit Limit Try to spend no more than 30% of your credit limit. This one move will always keep your credit score healthy.
- Take Loans One at a Time If you apply for multiple loans in the same go, you will only show your credit hunger. Applying for short duration loans is not a good idea either. Therefore, you should apply only for one loan at a time. This makes for easy payments and higher possibility of getting the loan approved.
How a Defaulter can get a Personal Loan?
Follow these factors that may help you get a personal loan even if you are a CIBIL defaulter:
1. Good Salary
If you have a good income presently, you are bound to have improved repayment capacity. This should go a long way to gather an approval on your loan application irrespective of your CIBIL score.
2. Spouse CIBIL and Credit Score can boost your chances
If your CIBIL/Credit score is poor and your husband/wife has got a good CIBIL score, then you may ask for their assistance. You can get your loan application approved by making your spouse a joint loan holder.
3. Collateral Loans
You can be allotted loan on collateral such as assets, shares, gold, FDs. There are many other products available as well. Banks don’t generally complete the process of generating CIBIL report for such instruments. Any good credit counselling institutions can tell you about how to manage your new credit for boosting your CIBIL credit score and become eligible for unsecured personal loans in future.
4. Loan Backed by a Guarantor
If you are now financially stable but your credit score isn’t, you may still get approved for a loan if you have a guarantor. This will remove the risk-factor associated with lending you money. You will need to make sure that your guarantor has an excellent credit score. However, note that if you default on this loan too, your guarantor will have to repay the outstanding balance. Also, their credit score will take a hit in case of default on your part. This is why many are apprehensive about being guarantors for loans.
5. Consolidate Debt
Many Fintech lenders offer debt-consolidation loans. If you have multiple credit cards or personal loans, there is a high probability that you’re headed towards a potential default. Prevent this from happening by taking out a personal loan for debt consolidation and direct your repayment towards a single source. Besides helping you ward off a default in the future, it can also help relieve a lot of stress.
6. Peer to Peer Borrowing
Peer-to-peer lending is a form of crowd-funding used to raise loans for people who need to borrow, from people who want to invest. This is quite a good practice abroad. Yet, it is being applied in India slowly. Remember that on such loans, the rate of interest is very high and the amount is smaller.
7. Salary Advance
If you are in a financial crunch, you can always request your employer for a salary advance. You will need to justify your ask with valid reasons for your employer to consider your request. Being in the CIBIL defaulter’s list is going to create barriers. Before you decide to take an additional loan, you should attempt to clear the loan you have defaulted on. You should also find a way to clear your name from the list and improve your credit history, which will then improve your CIBIL score.
8. Withdraw Provident Fund
There is a reason this fund was introduced in the first place to ensure your retirement is secure. However, if you are in a financial crunch and are in desperate need of money, you can consider withdrawing your provident fund. Now, you are only allowed to withdraw this fund partially under certain circumstances.
Let us understand that there is no separate defaulters list with the banks or credit bodies. Rather, credit companies maintain data pertaining to your repayment performance on credit of all sorts. This data is expansive and includes timely payments as well as defaulted payments of the borrower’s. Any individual who has ever been on the credit line gets a report automated in the credit bureau together with information on the repayment timings. When repayments are late or not made at all, it has a negative impact on your credit score.
What would happen if you Default on Paying EMI?
If you delay your EMI payment, it will decrease your credit score, which will have an impact on your credit worthiness. Missed or delayed payments are categorized into minor and major defaults. Those delayed or missed EMI payments, which are less than 90 days old, are considered minor defaults. In case you fail to pay EMI beyond 90 days, then your account is listed under NPA or nonperforming assets and considered as major defaults. Among various factors that affect EMI default are:
1. CIBIL Score
When it comes to determining your eligibility for a home loan, your CIBIL score is one among the several factors considered. It is generated depending on your past credit behaviour recorded on the credit report. Your past credit behaviour includes:
- Your complete repayment history i.e., successful repayment of loans
- Utilization of your credit balance – this shows the total credit available and the percentage of credit used
- Loan repayment tenure and timely repayment
- New loan enquiries – your CIBIL score affects when you make a new loan enquiry
- Your credit mix, which asks for a healthy mix of unsecured and secured loans
The lender or bank reports any non-payment or over-due of an EMI to CIBIL. The impact of EMI default on CIBIL scores leads to either a major or minor drop. If it reduces your credit score significantly, then it affects your loan eligibility.
2. Decreases your borrowing Capacity
When you apply for any home loan the next time, the bank will check your CIBIL score and credit report, and if you have a low score, you fail to meet one of the most required eligibility criteria to have your loan application approved. A CIBIL score effect on home loan may force the bank to decide whether to lend money to you or not. If you have any late EMI payments owing to some exceptions given by your previous lender, your CIBIL score will still get affected. This will decrease your borrowing capacity as you will find it difficult to convince the new bank or lender about the reasons for late payments.
3. Potential Legal Implications
Legal implications like a civil suit are rare in the case of personal loans. A bank opts for it only if it has made multiple attempts and failed to recover the money from the borrower.
You should take the effects of EMI default on CIBIL score such as a reduced score and decreased creditworthiness as a lesson and avoid defaulting on EMIs. If you have delayed any EMI, the report of it is sent to the credit bureau, which has an effect on your credit rating. To improve your credit score, pay your EMIs on time and in full and keep a track of your credit report.