How to improve an ailing credit score

Negative remarks and flags can affect a borrower’s profile. Here are the danger signs to be wary of 

Reserve Bank of India (RBI) committee recently submitted in a report that in due course, every individual should receive a free copy of her credit report from credit bureaus. It is noteworthy that awareness about credit reports and scores in India is low. “The Cibil consumer bureau has over 330 million credit records of over 180 million individuals,” said Harshala Chandorkar, senior vice-president-consumer relations, Credit Information Bureau (India) Ltd, also known as Cibil.

Low awareness, however, does not make having a healthy credit score any less important. Take the case of this 29-year-old Bangalore-based information technology (IT) professional who requested anonymity. Back in 2007, when even fewer people knew about credit scores and only one out of the present four credit bureaus was in operation, he took an add-on credit card for his father who was going abroad for a trip. His father made some purchases abroad using the card. But soon after returning to India, his business hit a low and he was unable to repay the outstanding amount. Between 2007 and 2010, the accrued dues inflated to Rs.43,000. In 2010, they received a call from the credit card issuing company that they could settle the account by paying Rs.28,000. This was good news for them and they paid up. “The lender, however, did not tell me about the side effects,” said the IT professional. In 2012, when he applied for a personal loan for his wedding, his request was declined as there was a “settlement” flag in his report.

He approached the credit card issuer again and after many calls and emails, the lender agreed to remove the flag provided an additional Rs.43,000 was paid. The lender accounted for the interest unpaid between 2010 and 2012. Though the flag has been removed after the fresh payment was made (i.e. a total payment of Rs.71,000), in the number of “days past dues” column of his credit report, the months for which he did not pay are still mentioned. “This is a problem with some banks as they view it as a threat,” he said.

Everyone needs to keep an eye on their credit score, irrespective of which category you fall in—have defaulted and have a bad score; have never defaulted but have an average score; or have a good score and want to maintain it. Avoid letting negative remarks creep into your credit score.

 

 MUNTAZIR ALAM

PGDM 2ND 

SOURCE-- MINT LIVE NEWS