It is a fact that credit report is the report of one’s financial life. It is the numbers on your credit score which decides your credit worthiness. Each and every lender will check your credit report, as it is one of the primary eligibility criteria, before lending. The numbers which are referred to be your credit score are generated on the basis of your credit history which includes your borrowings and repayments against it. In India, there are three credit rating bodies, and CIBIL is the most important out of these. The CIBIL Score varies from a range of 300 to 900 and a CIBIL above 750 is considered as a good one. To have a good CIBIL score you need to be timely regarding your all your loans repayments.

Understanding how one’s CIBIL Score is calculated/ created is the first step of cleaning your credit history.

Your credit record is governed by three bodies- CIBIL, Equifax, Experian. All the banks throughout the nation send the records of their customers to these bodies. These records contain information regarding your borrowings and repayments against it. These bodies then create one’s credit report according to the information they receive from these lenders. One’s credit score, can get drastically affected even if they miss one or two EMI.

Credit Score and Its Impact On Loans

Credit Score are mostly damaged by-

Delinquency/ Late Payments

Delinquency can be basically explained as the state of being late for a payment on a loans/ borrowings or any liabilities. For an example-If a payment is to be made regarding a home loan which is due on the third of each month and the borrower does not pay until the tenth, in this case the account is said to be in delinquency until the payment is made. A late fee or penalty may or may not be charged against a delinquent payment. This depends on the Banks/lenders policy completely.

Your CIBIL is basically the representation of your repayments and if you miss even one repayment (EMI) it can be reflected on your CIBIL easily.

Collection Account

An account is converted into a collection account when the account is handed over to the third party debt collection agency for the recovery of the loan. This mostly happens when the Loan is already declared as a NPA which a non performing asset. This generally happens when one doesn’t pay towards a loan for a minimum of three or more months continuously. This can decrease your CIBIL drastically and majorly.

Accounts that Reflect in Your Credit Report

Charged-off Account

Having a charged-off account or debt implies that you have not been paying the minimum payment regarding the money you borrowed for a particular time being. Your account is already a delinquent payments and hence, now your account is re-categorized as “charged off” on the company’s profit-and-loss statements. This generally happens when you don’t pay your EMIs for a minimum of 6 months.

How to Clean Up Your Credit Report

How to take Your CIBIL Score from 360 to 800 in 1 Year

If you don’t have a good credit score it is very important to correct it and have a good one so that you can be credit worthy for future.

Review your Credit Report

Reviewing your credit score is the first and the basic step in terms to clean up your credit report. You can get free copies you’re your credit report from all the three authorized bodies such as Equifax, TransUnion and Experian. Doing this at least twice is a year is must. Go through each and every section carefully and check for any inappropriate data like-

  • Inaccurate personal information, which can be your name or PAN.
  • For the Accounts which don’t belong to you.
  • Wrong account details like, amounts owed and the credit limits.
  • It can happen that you closed one of your account and such as closed accounts being listed as open in your report.

If you get any of these thing in your credit report then first talk to your lender and send a letter to the credit bureaus too. If you are right steps will be taken by and your CIBIL will be updated.

Correction in Delinquency

Correction of Delinquency is also possible. Delinquency generally happens when you don’t pay towards your loans. In order to correct this first check for the debts which is due for more than 60-90 days. As this is the time your debt has not been a collection debt or charged off account. So it’s not too late. Try to repay these debts first. In case if you can’t afford the full amount, talk to your lender and try to negotiate. You can also ask for some extra time by which you can repay it. Doing this your credit report will not be affected and if already done this can help you to correct it.

Correct the Charge-offs

Correcting the Charge-offs in the credit report is also possible. Contact your creditor and ask them for settlement, you can do this even on call or by sending them mail. But apart from all these the most effective one is my meeting them. If you get successful in this it is very important to get the proof of settlement in written along with the signatures of lender and borrower.

After all this is done, it is equally important to file a dispute with the credit reporting agency. Provide the proof of payment i.e. the documents and settlement letter. All this can remove your charge-off.

How to Maintain a Good Credit History

Correction in Collection Accounts

These are the most difficult one to correct. These accounts are the one which are handed over to the recovery agencies so that the debt can be recovered.  In this case, these agencies have no interest in any settlement. They want to collect the money. But still here is some hope. Check if the collection agency have reported any wrong data such as wrong date, the wrong amount, or any other information. If you get any you can dispute that as well and have the negative listing deleted from your report.

If the reported debt is from past the reporting limit is more than 7 years then the collection agency cannot list it. You can dispute the information to have it removed from your credit report as well.

Why Fixing Your Credit Score is Important?

There are many reasons which make the fixing of your credit score important. The biggest reason is that credit score affects your credit worthiness which means it is the one which decides your future borrowing capability. It also affects the interest rate you pay on your loans and credit cards. Whether it be a mortgage one or an unsecured one. Not so good credit score of yours can result in higher interest rates for your borrowings.
Good credit score provides you financial freedom where you don’t have to depend on cosigners to help you avail a secure or unsecured loan.

Life is unpredictable and who knows you may need to opt for a loan in the near future ( in case not planned then also) so it becomes important to have a good credit score and be creditworthy all the time. And in terms to have a good credit score it becomes equally important to check for any issues in your credit score and to fix it if there are such issues.

Credit score has lots of importance which you already know to till now, doing the above-mentioned things can help you to clear up your Credit Score in 2019.

(Updated – 03/06/2019)