You have applied to your bank for a Credit Card, and you find that they have declined the application. You follow up with the bank and find out that you have a poor credit score. You do not remember having defaulted on any payment before. There is no reason for you to have a low score. What should you do now to rectify the situation? Read on to learn how to deal with such problems.
What happens when you have a poor credit score?
A low credit score affects your capacity to avail loans from banks. Banks offer different types of Personal Loans and Credit Cards. When you Apply for a Personal Loan Online, the banks check with the credit bureaus and obtain your credit report. The credit report displays your entire credit history. The banks approve or decline your loan application depending on your credit score. The weaker your credit score, the lower are your chances of getting loans from the banks.
The reasons for a poor credit score
- Defaults in repayment of your loan instalments and Credit Card payments
- Frequently applying for loans and Credit Cards
- Having a high proportion of loans outstanding as compared to the approved limits
- The imbalance between the secured and unsecured loan
- Chequered credit history
Can there be errors on your credit report?
Yes, errors can creep into your credit report. Banks and financial institutions have to report the credit details of their customers to the credit bureaus every month. These details include the fresh loans approved, repayments received in loan accounts, delayed instalments, and so on. Hence, your credit rating changes every month.
There can be errors like double reporting of accounts, non-reporting of closed accounts and so on. There can also be instances of mistaken identities. These errors can bring down your credit rating considerably.
How do you solve the problem?
- Apply to the bureaus for a copy of your credit report. The credit bureaus provide one credit report free every year. You can also obtain a copy by paying a nominal fee. You can also access the websites of loan service providers like MyMoneyMantra and check out your credit scores.
- Check your credit report for errors. There can be errors in your name, address, employer’s name, and identity details like PAN and so on. These are the reasons for mistaken identity. Your report can contain details of loans that you might never have taken.
- Rectifying such errors is easy. You should get in touch with the credit bureau and provide the exact details of your identity along with photocopies of supporting documents. The credit bureaus take up the matter with the concerned banks and rectify the errors.
- There are other errors as well such as misreporting of your accounts. You might have closed your account, but the report might show the loan as outstanding. The banks might have reported the same account multiple times. It can happen in cases like overdraft accounts where the banks renew the credit limits periodically.
- Under such circumstances, you should approach your bank with a copy of the detailed credit report. Request them to inform the credit bureau about the closure of the accounts and rectify the same at their end. Alternatively, you can submit the details to the credit bureaus. They will take up the matter with the concerned bank.
How do you solve an actual problem?
We have seen how to solve the errors in the credit report. However, not all entries in the report would be erroneous. There can be genuine entries as well. You might not be aware of the same. It might have been an old Credit Card or Personal Loan default. Banks usually sell their assets to Asset Reconstruction Companies (ARC) if they find it unable to recover the loans. However, such written off or sold accounts remain in the credit reports forever.
You should contact the ARC or the parent bank and arrange to close the loan. Subsequently, you should approach the credit bureau and submit the documents supporting the closure of the loan. The credit bureaus remove such entries thereby improving your credit score.
Points to note
- You should obtain your credit report annually and check it for errors. If you find any, proceed to rectify the mistakes.
- It is better to check up your credit score free before applying for a Personal Loan or a Credit Card. These soft inquiries do not hamper your credit score. However, the banks make hard checks on your credit history while processing your loan application. Such checks can affect your credit score.
Your objective should be to maintain a good credit score. It improves your chances of getting loans and credit cards.
To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 60+ Banks and NBFCs. We have served 2 million+ happy customers since 1989.
Talk to our Loan Specialists toll-free at 1800 103 4004 to know more about our products and offers.