CIBIL plays an important role in the financial system. It keeps a record of the loans and credit card accounts of the borrowers and also tracks their repayment behaviour. It collates the information provided to it by all the member banks in the CIBIL report and calculates a CIBIL score. This score is a reflection of how well a person has handled his loan obligations. People who are diligent with their payments have a high CIBIL score.
But if you have missed several EMI payments or failed to pay even the minimum amount on the credit card bill then the bank may label you as a defaulter. Every month the bank sends a loan defaulter list to CIBIL. CIBIL may share this defaulter list with other lenders as well. This may hamper your ability to secure loans in future. Most lenders will turn down your application as lending to defaulters is a risky proposition.
But CIBIL itself does not come out with its own defaulter list as such. It does not blacklist people on its own. It only records the information about defaulters that is sent by the member banks. If your name appears on a bank's loan defaulters list, you are bound to get a very low CIBIL score. You can order your free CIBIL report and see whether any bank has labelled you as a defaulter. Check whether the details mentioned in the report are accurate and up to date. Find out the reason for the appearance of the black mark and work to avoid such a situation in future.
Since the lenders and CIBIL work with a huge amount of data, there is a chance that your name appeared as a defaulter due to some errors and mistakes on their part. Incorrect recording or reporting of EMI payments could lead to such situations. So if you are sure that you have honoured all your commitments on time, check your free CIBIL report and get in touch with CIBIL as well as the bank that labelled you as a defaulter to report the mistakes. Provide relevant documents to support your claim so that the mistakes get verified and corrected as soon as possible. Ask the bank to send updated accurate information to CIBIL so that your CIBIL report reflects the same.
In case you actually defaulted on the loan and the information reported by the bank is accurate then you must try to clear your dues as fast as possible. Make payments for all the pending EMIs and credit cards outstanding balances. Ask them to remove your name from the defaulter’s list. If you do not take any action then the default information sent by the bank will continue to pull down your credit score. Remember even though the bank may remove your name from the loan defaulters list, the fact that you defaulted on your loans in the past will continue to reflect on the CIBIL report. Even a "settled" debt warns the potential lenders that you are not a trustworthy borrower. You will need to work on your credit history so that new positive information overshadows your past mistakes and helps in improving your CIBIL score. The following best practices will help you do so.
Pay bills and EMIs on time- Timely payment of your obligations is the most important aspect that will help you improve your score. Even a single missed or delayed payment will be detrimental for your credit profile. Set reminders or automate payments so that you never forget your due dates. A good payment track record over a period of time will help in building a positive credit score.
Pay your card balances in full- Never use your card for expenses that you cannot afford to pay at the end of the month. Paying only the minimum balance due, may save you from the loan defaulter's list of the bank, but such a pattern may soon lead you into a debt trap. As the interest rate on credit card balances is very high, the debt may soon become unmanageable. This may again lead to non-payment of dues and reflection of your name in the loan defaulter's list.
Check your CIBIL report and score- It is always a good practice to check your report twice a year to ensure that the information reported therein is accurate and up-to date. A regular check helps uncover cases of identity theft or mistakes on the part of the bureau.
There is always a way to recover from loan defaulter list. With a little effort and patience you can work towards rebuilding your credit.