24-May-2017 written by : FSI-Team
Indians are increasingly getting exposed to credit and are also getting to know about the importance credit holds in the process of meeting their financial objectives. Also, as per the second survey carried out by Credit Sudhaar on awareness of credit score, the number of people being aware on the credit bureaus, credit score and credit report has increased multifold over last two years. The general perception is that the CIBIL rating, as people call it, if is over 750; leads to assured approval of loan application. But this may not be true and people with over 750 credit score may also get rejected. Let us find out the reasons.
Rakesh Choudhary is working with a MNC as a supervisor and stays well within the means. On front of credit he only holds two credit cards that he has been using for last 3 years and had been diligent in repayment. He has also been saving for purchasing a property. However, when he applied SBI home loan, the application got rejected. On inquiring about the reason, he got to know that while his score was over 750 there was one personal loan, which he had never applied for sure, reflected with regular delayed payments. Any derogatory status on the credit report is bound to lead to rejection from the lender.
In a situation when this loan did not pertain to Rakesh, why should his application get rejected? What could have been the reasons for a delinquent loan reflecting in his CIBIL report? What should he be doing to come out of this situation and get an approval on his home loan application?
For any lender, the credit report holds a high importance in the process of underwriting. Any negative flag like settlement, write off, post write off settlement, suite filed etc will lead to negative outcome and loan rejection. The lender is bound to deem that the data provided on the credit report is correct and hence the decision.
There could have been three reasons on why this derogatory flag reflected on the report.
Errors are pretty common in bureau data. Owing to large number of lenders of varied scale and segment focus, the reporting at times becomes flawed. It is important that one keeps checking the credit report on a regular basis. With RBI mandating a free credit report to be provided by every bureau, it becomes easier for the people. All that one needs to do is raise a dispute with the credit bureau and the lender to have this resolved.
The banks and NBFCs at times ask for guarantor with the loan application. A guarantor's responsibility is to ensure that the loan is repaid in time. In the event of default, the guarantor becomes liable to pay to the lender. In case of non-payment, the account gets reported with negative status and can lead to impairing the availability of loans to the guarantor as well. So before signing on as a guarantor, one needs to be very sure not only on the repayment capacity of the borrower, but also on the intentions. One should only become a guarantor where the borrower is known very well and can be influenced for repayment of the loan.
The cybercrime is growing at an exponential pace. The fraudsters can get access to one's identity and use it for financial gains. One can not only get defrauded by a loan getting disbursed, even the regular bank accounts can get accessed and money withdrawn. In such a situation, the victim may have a highly difficult time in sorting out such issue. Getting yourself enrolled with "Credit Monitoring" and investing into "Identity Theft Insurance" will help in such a situation.
Since credit is an integral part of our lives and we need it for meeting various requirements, we cannot afford to neglect the status on our bureau reports. It is highly recommended that one should frequently keep checking the report and takes corrective action in case any issue is spotted. Akin to our health, where we get tests done on a regular basis, we should also undertake these checks to maintain our financial health.