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How to Remove a Bad Debt from Your Credit Report?

  Wed, May 24, 2017     written by : CSF-Team
Bad Credit

What would you do when you need a lot of money, an amount that's way out of your affordability range? It's time like these when people turn to banks for a financial support. But do you know your odds of getting a loan is greatly dependant on your CIBIL score?

Having a good CIBIL score is important because not only bad credit personal loans are hard to get, but even when they are available they usually come at a high-interest rate.

What is bad debt? Why should I be concerned?

We have established now that high credit score is important to a comfortable life. However, what's bad debt have to do with it; Let's find out.

Bad Debt

When a person fails to repay their debt, which could be from a personal loan, home loan, etc. then they are deemed as a defaulter. Usually, in this situation, the bank proposes the option of debt consolidation, in which the loanee is allowed to repay only a portion of the actual full debt and close the case.

Although debt consolidation may seem to fix the problem on the surface, it doesn't end here. When the pending debt is "settled" then the bank closes the ledger, but the balance that remains (or the amount that's not settled) is being mentioned in the person's credit report. So, if the actual balance that had to be paid by the person was Rs. 5 lakhs, and they settled the bills at Rs. 2.5 lakhs, then the remaining 2.5 lakhs will be charged off.

The bad debt that's left in the credit report can make getting a loan almost impossible in the future, which is why you must get it removed from your CIBIL report and improve CIBIL score.

How can I Remove a Bad Debt?

The only way you can remove bad debt is by paying the loan balance, i.e. the amount that still remains after you have paid the "settled" amount.

Follow these steps to remove the bad debt:

  • To get started, talk to your bank. Explain your situation and let them know that you are now in a state to repay the pending debt. Without a doubt, they would be happy to assist you.
  • Once you have repaid the pending debt, half of the work is finished. Now you just have to wait to let the transaction reflect in your credit report because that's what really matters. So, it's time to get in touch with your bank again.
  • Only your bank can help you in removing the "written off" statement from your credit report, which works as red flag for the lenders. For obvious reasons, you should expect indifference or reluctance from the bank. After all, a history of defaulting on a loan irrespective of the reasons behind it is enough to put you in a bad position. Still, since you have repaid the debt, even if late, it has to count for something. If you are persistent enough and have a good relationship with the bank lately, then you will be able to convince them after all.
  • As per your request, the bank will update the CIBIL authority regarding your repayment and urge them to remove the bad debt from your report. You can check your report yourself with a few weeks to verify the changes.
  • That's it! Your credit report is healthy now. However, you must not stop here. Since you have had a history of defaulting, it's likely your score is below average and must be improved. However, you can easily increase it by taking several measures such as paying your credit card bills and loan EMIs on time, spending credit in moderation, and checking your report itself from time to time for anomalies.

Conclusion

If you don't want to waste time looking for bad credit personal loans then resolving your debt issues is a must. Many people don't even check their credit report after settling a loan with their bank. However, they face problems when they need another loan in the future, as the history of debt consolidation is mentioned in their reports.

If you have bad debt on your report then you must get it removed by following the steps given above. Only then you can improve your score and make it easier to get loans or credit cards.