Has your loan application been rejected? Find out why

Anuradha Nayaab lives in Bangalore. When she needed some money, she decided to knock on the bank's door for a loan. She decided to mortgage her house worth Rs 30 lakh for a loan of Rs 15 lakh. She applied for a Loan against Property (LAP) with a public sector bank; sadly it got rejected. Not wasting any time, she approached another bank; the loan application got rejected again! It was tough luck.

Surprised with the turn out of things, Anuradha enquired with the banks to reason out. She was told that her name was listed with the Credit Information Bureau (India) Limited, also known as CIBIL.

What is CIBL?

CIBIL is a repository of information that contains credit history of borrowers. It generates credit report of borrower’s repayment history, settlement, defaults, contact details. Lenders have access to it.

How did this happen?

On probing further into the matter, Anuradha found out that she had defaulted payments on her two credit cards. She had taken credit cards from two different banks in the year 2004. Until the end of 2008, she was disciplined in her repayments but when emergencies crept up, credit card payments slipped her priority list.

Consequence— her name was listed with the CIBIL as a defaulter.

Anuradha decided to resolve the matter. She got in touch with the credit card companies. She was told that one of her credit card was deactivated and the amount on second one was written off because she had ignored her payments.

How did her name appear on CIBIL list?

Anyone who has borrowed from a lender will have his/her name with CIBIL. This list includes even those who make their payments on time. "The issue arises when the repayment history against your name shows defaults such as in Anuradha's case. When your name appears as a defaulter, it effectively shuts off your access to future credit except for fully secured loans," says Harsh Roongta, CEO of apnaloan.com.

Since Anuradha ignored her dues, her credit history is spoilt and hence banks are not willing to give her a fresh loan.

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Can she restore her credit history?

"Anuradha's payment history will continue to be available to prospective lenders for seven years even if she clears her dues," says Roongta. Even if she pays back with overdue interest and fees, she will face difficulty in getting fresh credit since most lenders will hesitate in the current environment explains Roongta.

"A full payment does not result in a complete restoration of your credit history. But it atleast shows your goodwill if you settle your dues", says Roongta.

Will she get a fresh loan?

"All is not lost for Anuradha. She may be eligible to raise fresh credit but perhaps at a higher interest rate", says Roongta. But before approaching a lender for a loan, she will have to clear her dues. She can follow the steps given below.

Step one: Pay off the entire credit card dues

Step two: Create a fresh history through fully secured debt such as loan against insurance policy, shares, mutual fund units, bank fixed deposits, jewellery.

Step three: Inform the banks about the change. Ask them to rectify her status as a defaulter

The bank will then send the updated report to CIBIL. Usually, banks send customer’s account information every month to CIBIL. It takes 45-60 days for it to update its database. If Anuradha wants to get her credit report updates on priority, she can send a mail to CIBIL and her credit history will be updated in a week’s time.

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