24-Jan-2017 written by : FSI-Team
Dhaval was a complete teetotaller but the only thing he couldn't resist was trading in the share market. Sadly, he suffered great losses in trading during the crash of 2008 and 2009. Though he never meant to but due to shortage of cash he had to default on payments. At first he stopped paying his personal loan because there was nothing to lose. Then he stopped paying his car loan and finally his credit card bills.
When he started getting calls from collections, he made arrangements to settle those outstanding debts. He negotiated for a lower amount and then forgot about them completely. As time passed things changed and with them Dhaval changed. He now never invested carelessly and always sought guidance from experts before investing.
Almost eight years had passed and life had given Dhaval a second chance. He was now preparing to start afresh with his latest ecommerce website. He met quite a few bankers and spoke to them extensively about his project requirements. He made a proposal and submitted to banks for a project loan. He was sure to get an instant personal loan because the proposal he prepared showed foolproof growth. He was super hopeful that with this new loan his business would thrust into future with ease.
Alas, a shock was in store for him. His loan was not processed due to poor remarks in CIBIL report. Up until then Dhaval hadn't given it a thought at all. He didn't think his past, that he believed was buried, would now be dug up by banks.
Dhaval never thought about the implications that his credit past will have on his future credit aspirations. One can never ignore the significance of holding a high credit score. Dhaval argued that his CIBIL score is not a fair reflection of his intentions as a borrower. He had every intention to repay all his creditors but he failed in doing so only because of the sudden losses that he had to bear.
Well, business is a business and the business of lending is no exception. Misfortune can befall upon anyone at any time and it can leave you cash strapped. But lenders do not really care for that. At times depending upon your relationship with the lender, they might revise your tenure and reduce your EMI so that your burden is lessened. They may even give you a couple of months of levy but not more than that. After all they are all bound by policies and regulations.
Cash crunch can really crush your dreams. They say money makes the world go round. With no money your world simply stops. Dhaval was now a new leaf but unfortunately his CIBIL score did not capture this. With a poor score and "settled" remarks on his CIBIL report it was very difficult for him to explain to lenders that he meant to repay all debts borrowed.
Credit reports record defaults but they nowhere mention why the customer had to default. Because of this invariably all customers with unfavourable remarks are assumed to hold malicious intent. Some events in life are beyond one's control like job loss, medical emergency, loss due to natural disaster etc. These are some examples of how people are struck with poor luck and at times it leaves them cash dry. This can disable them from paying off their creditors. Inability to pay debts on time leads to a drop in credit score which has repercussions in future.
If you are someone like Dhaval no matter how tempting it would seem to settle the loan but don't ever choose that option. It blemishes your credit history and potential lenders begin doubting your intentions. Always keep in mind that though it is possible to enhance credit score but the procedure will call for you to be patient and it may not be 100% effective. It is better to save your score today than undertake course correction later.
Even if some lenders would believe your story and even if they agree to lend to you, they would probably do it at a higher rate of interest. This again would be a blow to your credit goals because a higher rate of interest means a higher EMI. A higher EMI could be beyond your affordability and therefore once again you might have to give up on taking finance.
Whenever you are struggling to make ends meet, repaying debts take a back seat. If you don't want your misfortune to hamper your credit score then don't completely ignore your creditors. Win over their confidence and pay to them as soon as you have cash. Show your bankers that you are a responsible borrower and that you will not let a cash-down situation come in way of earning a fair score.