At present, neither any of the banking or credit rating institutions nor CIBIL issues a list for the CIBIL defaulter. In any case, if you seek a loan and your application is rejected by a banking institution, the plausible reason for the same may be your low credit scores which maybe because of a bad payment record. So, one should only try to maintain the credit score by making timely repayments and building a good credit history.
Loan Process for CIBIL Defaulter
You can get a loan application approved despite bad CIBIL scores. This can work as an alternative to help you get personal loan irrespective of your CIBIL score.
- Salary: It will help you get your loan application approved, no matter whatever your CIBIL score is, if your salary is good.
- Spouse’s CIBIL Score: If your CIBIL score is poor and your spouse has got a good score, then you can get your loan application approved.
- Credit Bodies for Low CIBIL Score Holders: Some bodies cater with loans to individuals who have bad CIBIL scores. They ask for higher interest rates on the repayment.
- Peer to Peer Lending: This type of practice is finding foothold in India gradually. It involves high interest rates and a small loan amount though.
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 to impress lenders for your new personal loan
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. Your Spouse CIBIL and Credit Score can boost your personal loan chances significantly
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 in lieu of unsecured personal 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. Raise Income
If you had previously not paid the EMIs on time, your credit score must have gone low. But if you find a job where you get high income and discuss this with the bank, then they will grant you a personal loan.
6. 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.
7. 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.
8. 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.
9. 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.
Action by Banks on Loan Applications around your CIBIL, Experian, CRIF Highmark or Equifax Reports
When you file an application for a loan, the respective bank will attain a copy of your credit report from either of four credit bureaus namely Experian, CIBIL, Highmark or Equifax. This is done in order to evaluate the loan application. In case you have a low credit score or a record of delayed repayments, credit institutions will hesitate in lending you the money. They will likely disapprove your loan application considering the delayed or defaulted payment record. Banks consider the same in case of a credit card application.
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 to raise your Credit Score?
Bad Credit Score can be improved/ rebuild even without Credit Cards. Primarily you need to repair your credit history before you see your Credit Score improvement.
The following factors are to be considered in case to improve your Credit Score:-
1. Make all overdue
It is extremely important to pay your bills on time. This affects 35% of your score Pay on time, all of the time. Your credit scores can be significantly impacted with just one late payment reported to your credit file.
2. Pay down balances
If you currently have credit cards and are using more than 30% of your limit then you want to follow this portion of this guide. Pay down high balances that put you over the 30% rule. Stay under 30% and maintain a low balance as mentioned previously. This factor alone is the second biggest impact to your score at a whopping 30% of your score.
3. Pay all EMIs regularly
Use auto-pay to pay the minimum every month and your scores should continue to improve with healthy, responsible activity.
4. Monitor your credit score
It is available FREE once a year from Credit Bureaus likes CIBIL, Experian, CRIF etc. Complete a thorough review of your credit report. You are legally allowed a free copy of your report from each bureau once a year. Look for inaccuracies in balances, payment history, and questionable collections.
5. Consolidate Your Debt
If you have trouble keeping track of multiple accounts, consolidating could be a good option. You can consolidate multiple debts into a single installment payment. In this case, you’ll be free of multiple payments to keep track of. Plus, you’ll be working towards a higher credit score.