Credit History – How I am Responsible for My Low CIBIL Score

CIBIL Report is the bible of a credit history of an individual. Through my blog, i have published large no of posts on CIBIL Score. I try to cover all the practical aspects of Credit History. On the web, you may find large no of posts on theoretical aspects that does not have much relevance in my opinion. In my post, How financial institutions Kill CIBIL Score? i shared how financial institutions could kill your score. Not many borrowers are aware that sometimes they are also indirectly responsible for low CIBIL Score. I hope you have heard the word Self Destruction. It is self-inflicted acts that are destructive in nature. Some of the recent cases i.e. CIBIL Report handled by me disturbed me. It was shocking that my clients are to be blamed for their poor credit history or low CIBIL Score. Without understanding the nitty gritty of CIBIL Report, my clients were on a spree to destroy their credit history.

There is a famous saying that “Ask in the case of confusion“. It does not mean that you ask anyone and everyone. What it means is that ask right person. In fact, on the official website of cibil.com you may find a lot of literature to understand your CIBIL report. It will help you to understand what went wrong with your credit history. In this post, we will discuss few self-inflicted factors responsible for the poor credit history of the borrower.

Credit History – How I am Responsible for My Low CIBIL Score

1. Loan/Credit Rejection: The one of the most common mistake by a borrower. Whenever a loan or credit facility is rejected by the bank, the person applies to some other bank. On rejection by the 2nd bank, some people keep applying with 3rd, 4th bank and so on. Not many people are aware that rejection of loan/credit facility is taken negatively in the CIBIL report. It impacts CIBIL Score negatively as the banks report the same to CIBIL. In many cases, bank passes incomplete information that CIBIL score is low. When i checked the details of my clients, i found CIBIL score of -1, NA or NH. It implies that there is NO Credit History. It is not low CIBIL Score. It can become low if the borrower keeps applying for loan/credit even after rejection. In such cases to build the credit score, the first step is to opt for secured credit card.

I always suggest the clients not to apply for fresh loan or credit facility till they know the exact reason for previous rejection. You cannot trust bank employees, and it is advisable to pull out your CIBIL report and check the possible grounds for rejection. The front end staff don’t know anything about the rejection and just to save time simple reason is low CIBIL score. You can also submit the written application with the bank and ask for reason in writing. In the case of PSU banks, the best tool to get the right answer is RTI application.

Once you receive written reply from a financial institution or you found out on your own. The next step is to correct the issue responsible for poor credit history. Only after fixing the problem, you can apply again for the loan/credit facility.

2. Third Party Home Loan Agencies: It’s a flourishing business, and they guarantee loan approval to borrowers. These agencies mainly operate in Home Loan segment. These agencies make tall and false claims that they know credit manager of the bank. Typically people with low CIBIL score are trapped by these agencies. They are commission agents who get a commission from banks and charge a borrower also.

Whether you trust me or not, they don’t have any role in Home Loan approval. If banks start approving the home loan based on these agencies, then banks will shut their operations shortly. Banks have separate risk assessment team. They have accountability for all the home loans approved by risk assessment team. If someone claim that he/she, know credit manager and get a home loan approved then he is cheating the borrower. The role of these agencies is as good as that of a DSA.

Now rather than doing any good these agencies can kill your CIBIL Score. Let’s check how. Assuming you had poor credit history and trapped by these agencies. Even if you have good CIBIL score then also it is not advisable to avail loan from these agencies. The reason being, these agencies tie up with 4-5 banks/HFC’s. Now they will simultaneously apply for your Home Loan with all the 4-5 banks/HFC’s. If you have poor credit history, then all the bank’s or HFC’s will reject your Home Loan. All banks will report the same to CIBIL, and your CIBIL Score will tumble further.

On the other hand, if your score is good then all banks may approve but will impact CIBIL score negatively as all banks will dip into your report. Assuming yours is a borderline case. Out of 5 home loan provider, 3 approved and 2 rejected then trust me it will be your last loan during a lifetime. In the event of home loan approval, these agencies take all the credit for approval with NIL Contribution in the entire process. Their only contribution is to FILL the application form of the borrower.

It is advisable for a borrower to approach directly the bank or HFC. You can discuss your case with loan manager. These loan managers are available in select branches of banks or special branches set up by banks for loan purpose.

Words of Wisdom: As i always suggest to readers of this blog that before applying for any credit/loan facility, it is advisable to pull out your CIBIL Report. If you are confident that all is well then only apply. If you know that you have poor credit history, then please don’t be trapped by marketing calls. The objective of a Tele-caller is to generate X no of leads in a day. They are being paid for a lead generation. Even if you tell them that you have poor credit history, they will assure your approval. Trust me it’s a trap, and you will further degrade your CIBIL score.

Last but not the least, as an individual i am responsible for my credit history whether good or bad. I cannot blame banks or financial institutions for the same. Another day one of my clients told me that he is being cheated by the bank. Bank passed wrong info that by doing settlement my client’s, CIBIL Score will not be impacted. My client accepted bank’s offer without checking the nitty gritty of the settlement process. I believe that no one can cheat or trap us till we allow others to cheat us. Therefore, deal with all financial matters that impact CIBIL score carefully and responsibly. You should do thorough research before taking next step.

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