5 Steps to Clear Old Debt from Your Credit Report

It’s nearly impossible to enjoy a perfect financial life in which you don’t miss a single loan EMI or a credit card bill. Most people make a slip at least once in their life. However, the good news is that your bad debt or past financial mistakes are automatically removed from your credit report over time.

If it’s been a long time and your old debt hasn’t been removed from your free CIBIL report, then you can take the following steps:

1. Compare Multiple Credit Reports

There are many credit rating agencies in India but only 4 of them are at the top and referred to by the majority of traditional banks and NBFCs. These are CRIF High Mark, Experian, CIBIL TransUnion, and Equifax. You can compare them to identify the one that’s showing the old debt.

2. Contact the Concerned Credit Agency

Now that you know where the problem lies, you can contact the appropriate crediting bureau directly. Fortunately, all the top credit rating agencies allow the users to raise disputes through their websites in a convenient and simple manner.

3. Contact the Bank

You must also contact the bank which submits your financial details to the credit rating agency. Sometimes, they submit wrong information which results in a poor score or a bad remark on your report. In this case, they may fail to report that your old debt has been cleared.

Taking the case up with your lender can easily resolve the issue if they find out that the fault was on their side.

4. Approach the Upper Management (Optional)

If you have obtained a satisfactory resolution with your bank, then you can skip this step. However, if they haven’t done the needful or are simply unresponsive to your concerns, then you can send an email to the head branch. You can visit the official website of your bank and raise the issue there.

You also have the option to pay a visit to the banking ombudsman which acts as a quasi-judicial authority that was created to provide resolution of the complaints of banking customers.

5. Wait for the Changes

After the mistake has been acknowledged, the changes will be visible over a period of a few weeks. This is because the credit rating agencies update the records periodically. In most cases, you shall be able to see the bad credit fix in your report in a month or so.

Preventive Solution for Old Debt Damage

If you want to protect your credit score from unwarranted damage due to carelessness on your bank’s end, then it’s important that you check your credit report from time to time. This will allow you to check for issues like old debt, wrong repayment information, discrepancies in personal details such as name, address, bank account, etc.

All the credit rating agencies in India are required to offer the customers one free credit report every year. So, there is nothing stopping you from getting your free CIBIL report today! You can simply visit CIBIL’s official website, create an account, answer a few questions for verification, and that’s it! They will send your report to your email address within minutes!

Monitoring your credit report is also beneficial for the following reasons:

Identity Theft and Frauds

Identify thefts and financial frauds are still rampant in India. The main reason behind it is the lack of awareness. Most people realize about these only when it’s too late. However, by monitoring your credit report on a regular basis you can identify anomalies such as unrecognized bank accounts or credit card accounts, unfamiliar loan inquiries, etc.

Healthy Credit Score

By checking your credit report, you can monitor your credit score changes. So, if you notice your score dropping, you can take appropriate measures to bring it back to the normal level again.

Discrepancies

Mistakes in your personal information and credit information can lead to a poor score. However, by identifying these mistakes and getting them corrected, you can easily prevent the damage.

When it comes to credit management, then the majority of problems can be averted or resolved by simply knowing the right plan of action. In that regard, this blog can be of great help. Good luck!

 

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How Does Different Credit Bureaus Work

Before jumping to the main topic, Let’s know that what is the credit bureau? And what mainly does it do. A Credit Bureau is an organization who generates and maintains the credit score and credit report of any individual. These both are nothing but a direct reflection of how credit responsible any individual is. There are various factors which these bureaus determine while generating, updating, and maintaining the score and the report. Various algorithms are working on the credits and the repayments of credits any individual has taken and is repaying. It also majorly depend upon the banks or the NBFCs who update them with anyone’s proceedings of the credits. If in case, a bank or an NBFC fails to do so, it directly affects the score.

Everyone who has dealt atleast once with credit score or credit report knows what do they both mean. A score is a three-digit number between the range of 300-900 which is obtained by calculating various factors and report is the detailed information about the accounts. Where are the credit bureaus and how many of them will know the information? In India, there are 4 credit bureaus viz. TransUnion CIBIL, Equifax, Experian and CRIF HighMark. The first ever bureau was TransUnion CIBIL which was established in 2000 with the association of TransUnion, An America based Credit Bureau. CIBIL stands for Credit Information Bureau India Limited. Over the next few years, other bureaus came and established themselves. In 2010, RBI(Reserve Bank of India) passed a mandate that each and every bank or an NBFC(Non-Banking Financial Company) has to update any information regarding the credits which includes any type of credit card or loan of an individual to the credit bureaus.

Credit score consists of 5 parameters.

• Payment History

• Amount owed

• Length of credit history

• Credit Mix

• New Credit

Check the following table which determines the weightage of each of the above-mentioned parameters in respective credit bureau.

TransUnion CIBIL

Equifax

Experian

CRIF HighMark

In Percentage(%)

Payment History

35

35

35

35

Amount Owed

30

30

30

30

Length of Credit History

15

15

10

10

Credit Mix

10

(Inquiry) 10

15

(Utilisation)15

New Credit

10

(Accounts in Use) 10

10

10

Now, as per the details mentioned above, the 65 percent of any credit score comprises of the payment history as in how responsible the person has been over past years in making the payments of the credits s/he had been taking is considered. The amount owed is how much is the total credit anyone has taken, this includes the credit card limit as well as a loan. And the rest three factors revolve around the total length of credit history i.e. from how long has an individual be taking credits, credit mix i.e. what kind of credits one has. Secured or unsecured and revolving based on fixed credits. New credits are the new type of accounts (not be mistaken by bank accounts) or the credits which one opens. In here, Equifax has a different name as Credit inquiry which is the number of times one has inquired about any kind of loan or a credit card. The loan would be any of the loans like, home loan, education loan, car loan which are basically unsecured types of loan. And the accounts that are in use. Also, CRIF HighMark considers the credit utilization instead of credit mix.

There is no much difference between any of the factors which determine the score. There is hardly 5 percent change. So when the credit score is calculated is more over the same with just 20-25 points change. There can a major difference when a bank would not update any of the bureaus about a transaction. That can happen sometimes, that a particular bank would update the information to 3 bureaus and skips one or there is no tie up with any of the individual bureaus. When anyone checks the detailed report, it can found about which information is missing. Majorly if there is any change, it would be of 50 points maximum and shouldn’t we worry about, as taking the above points into consideration.

But, one should always be responsible for his/her credits and should not take them casually. The weightage may differ in any of the bureaus of the parameter but, an individual’s behavior would make the creditworthiness better or worse. So, one has to be mature enough in taking the credit repayments seriously!

Learn How to Read Critical Information from your Credit Report

All credit bureaus in India are required to provide a free credit report once a year to anyone who asks for it. This means that you can access your credit report free of cost four times a year since there are four credit rating agencies in India. However for these reports to be useful you should be able to understand the relevance of the information contained in them, especially the critical part. So here we take a look at the critical information that a credit report contains what it means and why you need to focus on it.

What is Critical in Your Report?

So let’s say you got your free credit report, now you need to know what is contained in each section and how it impacts your credit score. As we all know credit scores are all about your debt history so all information about all your credit cards and loans.

The credit score definitely is the most important thing in your CIR. A good score is important for you to get loan applications sanctioned and is also an indicator of your credit health. A score above 700 is considered to be good.

The accounts section is the most crucial part of the report and the information contained here impacts the score to a great extent. Information about all open loans, closed loans and credit cards is included in this section. Thus you should first make sure that all the loans and cards that are mentioned in the CIR actually belong to you. Though unlikely some loan or credit card that may not belong to you may be mentioned in your CIR. It could be just an error or sometimes a case of identity theft in either case it is very important that you take immediate action on it.

The next thing you need to understand is the account classification of each loan. Each debt is classified as per their payment status. Thus if you have been paying regularly then your loan would be classified as STD. If a loan is classified as anything other than STD then it means that you have not been paying regularly and it is not good for the score. So make sure that no loan is classified as a non-std asset by mistake. It may happen that the borrower may assume that his EMI’s are being debited on times while it may not be happening due to some error or oversight.

You should also check your repayment history, this will let you know if you have paid all your dues on time in the past 36 months. DPD means day past due; thus DPD of zero for all credit cards and loans is a good sign for the credit score. Anything beyond zero DPD signifies that the payment has been delayed which will lower your credit rating.

Also ensure that all loans that have been repaid by you fully are reported as closed. Even if you have repaid all the dues from your end but the loan reflects as an open loan then you need to get in touch with the lender and get a NOC or complete any other pending formality as required.

When going through the CIR also check details like the total loan amount, unpaid amount, tenure, interest etc. This will ensure that you have all your facts straight and there are no errors on the part of the lender or you have not missed any important detail.

Other Aspects That Require Attention Too:

While what is mentioned above is critical in your report, there are other aspects too that require careful consideration. Some facts that you need to check are:

  • Personal Information section contains details about the DOB, PAN, and driving license and so on. Make sure that all information mentioned is accurate

  • Contact Information section has details about individual’s current address and also past addresses (if any), email address, telephone number, mobile number etc. Again the accuracy of this information is important.

  • Employment Information section has details about the current occupation, work place details, name of the company (for salaried) duration of employment etc.

  • Enquiry Information sections details about all enquiries made by lenders and this also has a bearing on your credit score. So do make sure that the details mentioned here are accurate.

So get your CIR and understand what it means, it will help you stay credit healthy.

How to Plan Your Dream Wedding Without Spending Your Savings?

Life is but a long sequence of good and bad moments. However, some moments are more special and important than the others, one of which is your marriage.

It’s true that you don’t tie the knot every day. Plus, it’s a special occasion because it’s the beginning of a new chapter, or rather a new life. Thus, it’s understandable if you want to organize a lavish and festive wedding, with no concern for the expenses. However, is using your savings for the same a good idea? Let’s find out.

Weddings in India

Indians weddings are known for their grandeur and plush display. However, to make arrangements for these, a massive amount of money is required. This is the reason why many young professionals turn to their savings for help. They liquidate their fixed deposit accounts, bonds, and other long-term investments to fund their weddings. However, this is not recommended by the finance experts for the following reasons:

  • After you get married, many new expenses may need to be taken care of, such as home loan, new furniture, travel, car loan, etc. However, if you have spent all your savings on the wedding, then you won’t be able to clear these expenses.
  • You must always have an emergency fund for financial security. For instance, if for any reason, you lose your job or develop a serious illness, then you should have enough money to handle the situation without needing money from anyone else.

What’s the Solution?

A personal loan is the best solution for funding your dream wedding because of the following factors:

 

Peace of Mind

The biggest and most important reason to get a personal loan is that it gives you the peace of mind when you know your savings safe and untouched. So, you can enjoy planning your wedding without a worry and pay for all expenses easily.

With a personal loan, you also don’t need to go through the inconvenience of selling your mutual funds, bonds, etc. to get the money. Instead, you can give your full attention to the most important event of your life i.e. your marriage.

Fast Disbursal

The approval process for a personal loan isn’t as complicated as a home loan or education loan which require an excellent cibil report and often a loan guarantor too. There are also few formalities and minimum waiting period.

These days, many banks offer special loans which are designed for exclusively for marriages. So, you can also look into them to get the money even more easily and quickly.

Competitive Interest Rates

Thanks to the large number of NBFCs and other financial institutions that have emerged on the surface today, the interest rates and perks offered on the personal loans are extremely competitive. So, if your timing is just right, and your CIBIL report is impressive, then you can easily get an attractive interest rate that will help you repay your loan quickly.

How to get a wedding loan?

To get the best possible loan for your wedding, be sure to do your research and compare the interest rates online. Other than this, you must keep the following things in mind:

  • Wedding Budget: A wedding comprises of various kinds of expenses. However, when you take a loan, then you have to make sure that you have as accurate of a budget as possible. This is to avoid a situation in which your loan is way smaller than your actual expenditure.
  • CIBIL report: One of the most important things you need to do to get a low interest rate is to improve your credit report. This is because all banks decide the interest rate and the terms of the loan on the basis of this important document only.
  • Loan Documents: Make sure that you have the appropriate documents to apply for the loan. These include your ID, proof of income, bank statements, etc.

In Conclusion

Weddings are meant to be thoroughly enjoyed and cherished, there are no two ways to it. However, you can’t let your emotions come in the way of your discretion. So, spend as much money you feel comfortable with, but don’t splurge your savings when a personal loan is a much safer option.

 

Does Credit Score Retires?

Credit rating is a continuous process that begins with the first loan or credit card one takes in their name. Subsequent to that all information related to cards and loans keeps on getting updated in the credit report. The credit score is calculated based on the cumulative information on each loan and card. There are five basic parameters that determine the credit score of an individual. So does credit rating have validity? Does a score retire after a specified time period?

Understanding Credit Scores:

Before we understand whether a credit score retires or not it is important to understand the calculation process for it. Repayment history, credit utilization ratio, loan tenure, credit inquiries and credit mix are the five factors that influence the credit rating.

Repayment records about all loan dues and card dues is reported in the CIR, this is done month on month so as long as a loan is running or a card is active, information on them will keep getting updated. Regardless of the fact whether a loan runs for 15 years or 5 years the record will keep getting updated for that duration. So what happens when the loan is repaid? After that repayment record are not updated but the loan status whether closed or settled is reported in the CIR.

The same applies to the credit utilization ratio too, this information is also continuous as the card would be used on an ongoing basis and this information will also be updated monthly and the score would reflect that too. Hard enquiries (when a prospective lender asks for an applicant’s score) would be reported in the report as and when an enquiry is made. Information about credit mix and loan tenure is also dynamic in nature and would depend on the individual’s treatment and nature of their debt.

So Do Credit Scores Have Validity?

No, credit scores per se do not have any validity and they do not retire. Credit rating calculation is a dynamic process and gets updated as and when there is a change in parameters (that impact the score) whether positive or negative. However the information that is part of the score calculation has a specific validity and will cease to impact the score after a specified time frame. Repayment history for 36 months is included in the report and only repayment records for past 36 month are included in the score calculation. The more recent information has more impact on the rating. Thus if a default or delay is made more than 36 months back its negative impact will not be felt after this time frame.

Hard inquiries for two years are included in the report however when score is calculated only inquiries made in the last year are factored in. So all inquiries made in the past year will have an impact on the rating; older enquiries will have no impact whatsoever on the score calculation. So anyone who wants to improve CIBIL score should avoid making loan applications without a sufficient gap between two loan applications.

Information about “settled” or “written off” loans stays the longest on a report and this account status must be avoided at all costs. Any “settled” or “written off” loan raises red flags for all future lenders as they may feel that you cannot be trusted as a borrower. This information stays on the report for seven years, thus the validity of this information is seven years.

As we discussed before, information related to loan tenure and debt mix is dynamic. If a loan runs for its full tenure then it is considered good for the rating as a deeper credit trail is good for the credit health. Secured loan and unsecured loan mix is also a factor when the rating is calculated, a bigger proportion of unsecured loans is not good for the score. So as and when the loan proportion changes its impact will vary on the score.

Thus credit scores do not retire and have no validity but some information that is used to calculate them may have some validity and may become redundant after a specified time period.