Guide for steps to be taken if wrong loans get reported in CIBIL report

A CIBIL Report is made after collating and collecting a lot of data. This data may pertain to loans, credit cards, payment details, individual’s personal details and employment details. Any credit rating agency be it CIBIL or some other agency just collects the data that is provided to them by various lenders and presents it in the prescribed format and uses the given data to compute the credit score. However sometimes due to error in data provided by some lender, manual fault etc there can be some errors in the CIBIL Report.  A credit check from time to time not only ensures that the person can assess his credit health but also helps one in spotting such errors.

Types of Errors in a CIBIL Report:

As we said there is a lot of information and data provided in a credit report thus there can be various types of errors. While some errors may impact CIBIL score calculation others may not. However it is important to mention that regardless of the impact of the error on the scoring it is imperative that they are rectified at the earliest.

The errors can pertain to wrong reporting of the name, address, date of birth, PAN, Aadhar and other such details. One’s employment details like name of the current or past organization of length of service etc may also be reported wrongly. These errors do not impact the credit score directly.

Then there are errors which can cause trouble as they impact the credit score calculation. These are reporting of a loan that does not belong to you, showing a payment default which did not happen, a larger than actual overdue amount, inaccurate account status (defaulted/settled), wrong loan closure details. These errors can cause your credit score to be low and require immediate attention and correction. Reporting of a loan that does not belong to you lowers your borrowing capacity and any default that may occur on that loan will be reflected in your credit report.  There can be multiple reasons for these errors like the problem may occur at the time of entry or some confusion about an address or PAN details etc.

How to Get the Wrong Loan Removed from the Report?

The first reaction of anyone on seeing a loan that does not belong to them on their CIR would be confusion and panic. However rest assured it is not such a serious issue and can be resolved. The key is to keep checking your report from time to time so that you are aware of the mistakes if any. Problems arise when a person checks their report just before they want to apply for a loan then there might be no time to get the mistake rectified. Worse still they may realize that there is a problem after a loan has been rejected due to a low cibil score. So here are the steps that need to be taken when you spot an error in the report:

  • The first step in obviously to get your CIR and go through the entire report thoroughly so that you know what it contains. Just looking at your CIBIL rating online will not help as one may not be aware of the contents of the report or about the loan listed in it.
  • The next step is to inform CIBIL about the error and register a complaint. This can be done online too. There is dispute resolution option on the CIBIL website, one can fill the complaint form, the 9 digit number from your CIBIL report is mandatory for filling this form.
  • The error may have happened at the level of the credit agency or the lender. Depending on where the error originated the next step would be taken. If the error is at the level of the agency then it can be rectified faster.
  • However if the loan has been erroneously reported by the bank then since CIBIL being just an aggregator will not be able to make any changes on their end and will get in touch with the concerned lender.
  • One can expect a resolution within 30 days of filing the complaint. If one is not satisfied with the resolution then the complainant can approach CIBIL again and if still the matter is not resolved then one can approach the banking ombudsman.

Do follow basic credit health rules and keep checking your credit report from time to time to stay credit healthy. If there is an error, don’t worry there is way to resolve it.

 

What goes into calculation of CIBIL score?

The most valuable asset that keeps your financial life sorted is your CIBIL score. This tool predicts your future financial behaviour. Whenever you apply for any loan, say a personal loan, the lenders check your score to determine the level of risk they are exposing themselves to by granting you loan. While a high score is a sign of good credit management a low score indicates that you are a risky borrower. Hence a low score may lock you out from the ability to borrow funds.

The credit bureaus use a mathematical algorithm to churn the information in your credit report and arrive at a three digit credit score. Let us solve the mystery of how this magical number is calculated. Only when you know the factors that go into the credit score calculation, will you be able to work on them so as to achieve and maintain a high credit score.

Here is a breakdown of five factors that constitute your credit score.

Payment history- This factor has the largest influence on the credit score (35%) as it portrays your future behaviour in terms of loan repayment. It reviews how well you have met your past obligations of credit cards and other loan accounts. It analyses whether you made your payments on time, how often you missed the payments, whether your recent bills are past the due date etc. It also looks at the public record items like delinquency, collections, liens, judgements or bankruptcy. If you have a clean track record of regular on time payments then you will score high on this factor. However if you have had problems in repayments, your score will be weak. The best way to gain credibility in the eyes of the lenders is to always pay back the bills and installments on time.

Amount owed- The credit scoring models give 30% weightage to the amount of available credit that you are using on the revolving accounts. The ratio of the amount that you owe to the total credit limit that is extended to you on all cards determines your credit utilization rate. This rate shows your overall dependence on credit. If you do not carry your balances to the next month you will have a high score. On the other hand high balances and maxed out credit cards will lower the credit score. As a general rule it is best to keep the utilization rate below 30% if you are trying to improve your score.

Length of the credit history – This factor accounts for 15% of the credit score and considers the age of your credit accounts. Creditors like to see whether you are able to successfully manage credit over a period of time. If you have open accounts since a long time and manage them responsibly, it gives the creditors sufficient proof of your dependable behaviour and therefore increases your credit score. If you have just recently opened an account and do not have sufficient credit history to show your track record then you may have a lower score. Because the length of the credit history affects your score, it is advised that you should not close your old credit cards as it shortens the average age of your accounts and hurts your score.

Credit mix-The type of accounts that show up on the CIBIL report, make up 10% of your credit score. If you have both revolving credit as well as instalment loans on your credit profile, you have a variety to show that you can manage different types of debt. Hence a good credit mix contributes to your creditworthiness and raises your credit score. On the contrary, having only one type of account like a credit card, can lower your score.

Recent credit activity- This factor considers your pursuit of new credit, including recently opened accounts and hard enquiries. It makes up 10% of your score. A number of newly opened trade lines or hard pulls on the credit report communicates to the lender that you are either desperate for credit or unable to qualify for credit. It signals financial trouble and lowers your score.

Knowing about the factors that constitute your score is the first step in your journey towards building your credit score. It will now become much easier to work upon your credit related actions to improve your score.

5 Ways to Build Your Credit Score from Scratch

It can be a terrifying experience to find out that your loan application was rejected due to the absence of a credit score. However, there is no reason to be alarmed as there are many people who don’t have a credit score for many reasons. If your credit history is blank, then you can build a good one in many simple ways.

The following are 5 good ways to build your credit score from scratch:

  1. Joint Account Holder

The easiest way to build a credit score to become a joint account holder with a person who already has a credit history. However, you must choose your partner carefully.

You would want someone who you trust, and who trusts you too.  This is because your credit history will be based on the kind of credit history they have as well. So, if they have a good CIBIL rating and a good history of timely payments, then your credit score will also increase. Similarly, if they tend to delay EMI payments, etc. then your will have low CIBIL score.

If you want a home loan on an urgent basis but don’t have a good credit score, or have no score at all, then becoming a joint holder is one of the best options for you. This is because the lenders generally don’t consider passing a loan “risky” then there is a joint account holder involved who has a promising credit history.

  1. Becoming Authorized User

It is not always possible to convince someone to become a joint-account holder with you. In that case, they might at least make you an authorized user.

While being an authorized user you don’t share any financial responsibility with the account holder and server only as a signer you can still get credit building advantages. The only problem with this method, however, that you may not see the results, at least for a long time. So, if you want to build credit score fast then becoming a joint account holder is a better option.

  1. Getting a Credit Card

Getting a credit card and using it wisely is another excellent and simple way to build your credit score. Since most banks love to push credit card usage anyway, it won’t be hard for you to get one for yourself. However, the real work begins when you get to spending. Here are a few things to keep in mind when you use your credit card:

  • Credit Utilization: No matter what the limit on your credit card is you must spend it wisely. Ideally, you shouldn’t spend more than 30% of the credit limit. Thus, if the credit limit is Rs. 1 lakh then you should cap your monthly expenses with the credit card to a maximum of Rs. 30,000.
  • Timely Payments: Believe it or not, timely payments are extremely important to build a healthy credit score. If a potential lender performs a credit check and finds a history of delayed payments, then it is easily possible that they will reject your loan application. Similarly, if they see a history of payments done on time then they will feel confidence in your creditworthiness and it will be easier for them to sanction a loan.
  1. Personal Loans

Personal loans are tricky to get especially when you don’t have a credit score. However, you still have a good chance to get a small personal loan. In fact, if you could manage a personal loan along with a credit card then you can get the desired results faster as a mix of different credit forms (loans and credit cards) can give an impetus to the credit score.

  1. Monitoring Your Credit Report

You can easily find your CIBIL rating online. Most of the credit bureaus of India allow the users to download their credit report for a nominal fee. If checking your credit report you find that there are some errors or discrepancies, then you can have them corrected and see an improvement in your score.

Credit building is a long-term process. Unless you already have a credit score it can be difficult to build one, and not to mention the time and effort it demands. That being said, if you can find someone who has some experience in this area then you can succeed in the endeavor easily and faster.