An old colleague called me up after reading one of my articles. We spent some time reminiscing about the old times and the people we had worked with before he came to the real reason he had called me. I knew he had lost his job in 2009 and his divorce had also put a lot of pressure on his finances. Although as a finance professional he understood the value of a good credit standing but circumstances had forced him to start defaulting on his car loan and credit cards after his entire savings were wiped out to pre-pay the home loan (his ex-wife got the flat) and to meet his day to day expenses during his unemployed days. He wanted to make a fresh start as he had just managed to get a job offer but his defaults were now beginning to affect his life. He was aware that he would need to repair his credit standing but was not aware of how to go about it. That rang a bell. I have been asked similar questions by a lot of people who either through circumstances (like my friend) or because of lack of financial discipline had defaulted on their financial obligations but were now wanting to make amends but did not know how to.

First a crash course on what happens when you default on your financial obligations. Today every lender is required to share data about the repayment history of their borrowers with at least one credit Information Company (generically known as CIBIL – since Credit Information Company of India Ltd Or CIBIL is the largest and the oldest of the 4 licensed credit information companies). It is a popular misperception that lenders share repayment data only about customers who default on loans. They are required to share data about the repayment of all their borrowers. So anybody who has taken in a loan (and that includes me as well) and is currently servicing it will find “his or her name in CIBIL”. But for most of us this is extremely useful. If I were in the market for a new loan now the banks will be happy to lend to me at good rates simply because they will discover that my existing loan repayments have been bang on time and the level of indebtedness is very reasonable. The issue of course arises if my credit information report shows defaults (current or past).

This credit report has special significance in today’s life (obviously after our school’s report card) as it determines the credit worthiness of any individual. The need for credit is important aspect of modern day life, which one can hardly do without. The day is not far when matrimonial alliances will be based on the credit reports of bride and the groom…so till death do us apart will probably be replaced by …till finances do us apart.

So if you have defaulted on your payments for any reason, your Credit information report will immediately disclose this status to any prospective lender. With a bad credit report it is highly unlikely that you can get any loan or credit card from any bank.

But all is not lost…you can slowly and gradually build your credit history all over again.

Now that you have been reported a defaulter, and you are burdened with debt, then what should you do? The help comes in the form of specialized credit counseling agencies who can assist you in such a situation. The well-known ones are ICICI initiated venture Disha Trust (www.dishafc.org) or Bank of India initiated Abhay Credit Counselling (www. abhaycreditcounselling.com) which assists you in negotiating with your existing lenders and re-structuring your debt, which can be curative and preventive both.

“The customized advise given by Disha Trust is absolutely free irrespective of the bank the customer has a defaulted with and not just ICICI bank,” shared Ms. Nutan Lugani - Counselor of Dish Trust. She adds, “ We hold extensive counseling sessions with the customers then work out an action plan and accordingly make recommendation to the banks. It is not mandatory for the bank to consider them but it is a win win situation for both, the bank and the customers. With restructuring or rescheduling of loans, banks recover their money without incurring costs of litigation etc. and customer gradually comes out of debt.”

So all is not lost. If you are considering obtaining a loan in future with low interest rates, you must have a healthy credit score. “Worrying too much about your bad credit history is not going to help, but doing the right things will certainly help, “ adds Ms. Lugani.

First start with paying off the re-structured debts and start the process of rebuilding your credit history. But remember, rebuilding your credit history is a slow process. It is a misperception that if you could somehow find the money and pay off all the debt now it will give you a clean slate. What the report will show is that you had defaulted in the past but that you cleared everything off at a particular point of time. That coupled with some other steps should help you in slowly rebuilding your credit history. Ms. Lugani says, “ Customers should not be obsessed about CIBIL credit report. They should first think about the loan, which they have to repay, and the need of the hour is how to come out of it, CIBIL report is secondary. Once you regularly start paying your debts in time then with the passage of time your credit history will improve.”

Remember CIBIL keeps your records for 7 years but displays the month-by-month repayment record only for the last 36 months. What it means is that if you start maintaining a clean history after re-structuring or paying off your loans than your credit history will start looking good after 3 years. Of course CIBIL also computes a Credit score (the process is internal to CIBIL) for each individual, which probably is based on the entire 7 years data. However, currently only a few banks use the Credit score so it is your visible data for 3 years that has more relevance.

In the meantime you can also start adopting measures, which enable you to rebuild credit history like taking secured credit cards, which are given against the security of your Fixed Deposits. Your credit limit will probably be raised in future if you have shown good financial behavior. These credit cards may not be your dream cards, but they are often the best option you have since you are unlikely to be eligible for their regular credit cards.

You can also opt for secured personal loans where an asset is required as collateral. It normally involves bigger sums of money, moreover secured personal loans are preferred by the lenders due to the fact that they are secured against your assets such as jewelry, securities such as shares/mutual fund units, bonds, NSC, KVP, Life Insurance policies with high surrender value, etc. All these loans (with the sole exception of Loan against property which is unlikely to be available for somebody who has defaulted in the past) are available irrespective of your credit record.

Ms. Lugani concurs, “Such customers should look at liquidating the existing liabilities by taking loan against some kind of security, whether it is of stocks and shares or gold, or consider borrowing from some rich relative who can give them at a much lower rate. But word of caution here is that check your expenses, do not increase your credit exposure and repay the present loan to salvage the situation immediately.”

You should pay more than the minimum payments each month if you cannot afford to pay off the credit card fully. Loan, whether big or small needs to be serviced and repaid regularly and on time. Service these loans religiously and the new disciplined you will also reflect in your repayment history in CIBIL records. In fact after three years the remanents of your bad history will no longer be visible.

So remember – slow and steady wins the race.

Next week I intend to cover how to get mistakes in your credit report corrected. I invite readers to share their experiences on this issue.

And No, this question is not asked in the political context with our Northeastern borders racked by chronic insurgency and of course the unrest in J & K.

It is not even in the context of a common single market where many foreign direct investors will testify that this is not just a rhetorical question. In fact the early investors in the India story discovered the maze of local taxes, levies and regulations divided India into many small markets (of which some were more profitably serviceable from manufacturing locations located outside India rather than from a location within India). Anyway much water has flown down the Ganges since those early days and the impending implementation of the Goods and Services Tax would perhaps be the culmination of a series of steps that have already been initiated in recent years to forge a common India market.

The question is in the relatively mundane context of Home loans. Recently I spoke to a friend of mine who wanted to a buy a flat in Kolkata while he was working in Mumbai. He wanted to use my expertise on home loan to suggest solutions for a problem that he was facing in getting a loan. He approached a bank in Kolkata who said they would have given him the loan as both the property and his income papers were in order, but they asked him to visit their branch in Mumbai to get a loan as he was working in Mumbai. When we came back to Mumbai after finalizing the property in Kolkata, he approached the branch of the same bank only to be informed to visit a branch in Kolkata as the property is in Kolkata and they need to value the property before giving the loan. This friend of mine had already paid Rs. 51,000 for booking amount and if he was unable to book the flat, the developer would return back only 50% of the booking amount (after negotiations as the developer was not ready to return a penny out of it). Tensed with all these issues, he called up asking me – Is India really one Nation? The property was ready to move in with all title documents and his loan eligibility was coming around to more than Rs. 20 lakhs (he needed only Rs. 14 lakhs).

I decided to do some research on the same as the number of people moving to other cities for work has been increasing significantly and this may be a common problem faced by quite a few of them who either have plans of relocating or to buy a property for their parents in their “home” city. We have also seen an increase in the number of similar queries we receive on Apnapaisa.com.

We did a round of mystery shopping as well as spoke to the major home loan players. Here is what we found. When we spoke to the players officially each of the players said that such loans are no problems as they have a single common system across the country. However the situation on the ground was a little different. From among the lenders we spoke to as mystery shoppers only HDFC and ICICI followed up on our initial call (we had dangled the bait of Rs. 70 lac home loan). Even the official we spoke to in a SBI branch assured us that they would be able to do the transaction subject to their normal credit and operational checks. The other two private sector banks and the one foreign bank that we spoke to (or visited) as mystery customers either told us that they could not do such a deal or did not respond back after taking down the initial details.

We already knew a few DSA’s (who are our clients as advertisers on our site) and we thought of getting this answered from them also. We spoke to a large DSA based out of Mumbai who serviced many banks. His feedback corroborated our own findings on mystery shopping.

Another DSA we spoke to in Mumbai (who did not work with either HDFC or ICICI) said he would be able to get the transaction done provided the project in Kolkatta was pre-approved by any of the banks he worked for.

I also did a bit of informal talking with the private sector banks that had turned down (or did not show much interest in) our mystery shopper. What came out was that none of them had an effective loan origination system across the country and unless the loan amount was big enough the amount of effort required to co-ordinate with another city was just not justified. Each office is driven by its own KRAs and as legal checking work done for another office was not counted as part of their KRAs this clearly did not enjoy any priority.

What it boiled down to was that a loan that was clearly falling within their credit and legal norms of the bank was being given up simply because of the mismatch of KRAs between the two branch offices. Of course for a determined customer this would still be possible but it might take a lot more time than usual.

The only saving grace to come out of this story was that at least for a few lenders India was a “single” country.

Amen.

Disclosure: Most of the banks mentioned in the article are advertisers on Apnapaisa.

I had an urgent phone call from my son Akshay about his credit card payment that was due in a couple of days. More about that later. But first let me give some background.

Akshay had the good fortune (or is it misfortune) of growing up with me and the lesson drummed in his head always was that credit cards are a great convenience tool as long as you do not overspend and take care to pay 100% of your dues before the due date. In fact during his college days in Pune (I am based in Mumbai) he had an add-on card (see box for what are add-on cards) issued against my own credit card. The understanding with him always was that this credit card was to be used only for emergencies or for making expenses with my prior approval. However in practise some expenses did creep in on the add-on card (to be fair only on a few occasions), which I paid off as it was billed on my main credit card. What worried me were not the actual expenses as the fact that Akshay was beginning to fall for the allure of the so-called “painless” nature of making payments by credit cards. Being a personal finance expert it became a challenge for me to provide Akshay the experience on the whole cycle from incurring expenses on the credit card to actually paying it off. Given his profile he was not eligible for his own credit card.

It was not until he had completed his studies and had started working in Auroville (near pondicherry) that I hit on the solution. I got him a credit card from Kotak Bank secured against a fixed deposit made with them. Since the credit limit on such cards is around 80-90% of the fixed deposit amount, it is fully secure and Kotak (and other banks that issue such cards like Axis, ICICI, HSBC) is therefore able to issue it to all those who seek such cards. I made the fixed deposit on Akshay’s behalf but the card was in his name. I also made him aware of the charges and interest that he will have to pay if he delays payment even by a single day. Obviously he would have to pay for these charges from the modest stipend he was earning. I also told him about the Credit Bureau (in fact showed him my own CIBIL report) and the impact any delays in making such minor payments would have on the major education loan that he wanted to take after 1-2 years for overseas study.

What are add-on cards?

Card Issuers normally provide a facility to provide additional cards (called add-on) cards to the relatives of the credit card holder. These are issued only at the request of the main cardholder and the liability incurred on these add-on cards is that of the main cardholder. The overall credit limit remains the same and is applied on the main card and all the add-on cards put together. Normally a facility is also provided to the main card holder to restrict the credit limit on a specific add-on card so that he can control which relative is able to use how much of his credit limit. Since the payment of expenses incurred on an add-on card has to made by the main cardholder the add-on card holder does not experience the full cycle of credit card from incurring the expenses to paying off the credit card bill.

Which brings me to the reason for the phone call that Akshay had made to me. Clearly my lessons had worked. The first credit card bill was due in a few days and his card-issuing bank did not have a branch at Auroville. His stipend and the savings that he had from his summer internships were all in another bank and he was worried about how the money was going to be transferred to Kotak in time for the payment. Ultimately we worked out a solution where he withdrew cash from his salary account and deposited it in his Kotak Bank account at Chennai (yes – he actually travelled about 160 kms to Chennai specifically to deposit the cash) and then transferred the money electronically from his Kotak Bank account to his Credit card account with them. Although I could easily have found a solution by depositing the money in his credit card account in Mumbai, I let him sweat it out, as I wanted him to internalise the lesson, which he is unlikely to forget in a hurry.

And what did Akshay think was the moral of the story. In his own words “Credit Cards are like Swiss knives – extremely useful nay indispensable in an emergency – but they need to be handled with care or they can cause serious injuries”.

What a great analogy Akshay.

What do you think? I would welcome your comments as also any of your own stories on how you taught your children the value of using financial tools responsibly.

“ My father aged 69 years was retired and staying with me. He had a credit card since the last 15 years. He expired last year in October and since January this year I have been harassed by phone calls from the bank claiming that there is an outstanding of Rs. 32,000 on his card. Now they want me to pay this outstanding. Is it legal for the bank to demand the dues of the father from his son? What should I do? - Rajesh Batra, Gurgaon*.

As soon as I saw this query on our Ask the expert section of Apnapaisa, the memory of late Bollywood actor Kanhaiyalal (who played money lender Sukhi Lala in Mother India) flashed in mind…Circa 1959.

Here was the new age Sukhi Lala (Circa 2009) who is passing the debt baton from one generation to another…till now I thought that times had changed. The tradition of passing the debt from one generation to another was long dead say since independence.

I always felt that Sukhi Lala - the villainous moneylender in old Hindi films – notably Mother India – extracting money from sons for loans taken by their father was more a caricature than the truth. But here was Rajesh with exactly the same dilemma in 2009.

To rescue people like Rajesh, I consulted a few legal expert friends who gave me the low-down on this:

1) First they corrected me about the “Mother India” analogy. In Mother India the father (played by “Jaani” Raj Kumar) had mortgaged his farmland for taking the loan. Hence the repayment was forced from the heroine (the incomparable Nargis) and her two sons because they were emotionally attached to that land and wanted it to be released from the moneylender’s clutches. If they had refused to pay, the moneylender could have proceeded to take possession of the property and sell it to recover his dues along with interest (at a draconian rate). In the case of Rajesh’s father, it was an unsecured loan, hence clearly this was not applicable.

2) Second the bank only had the ability to proceed against the estate of the deceased. So Rajesh would be liable for the credit card debt only if he had inherited something from his father and that too, up to the value of what he had inherited.

Acting in accordance, I wrote to Rajesh to check if he had inherited anything from his father. He mentioned that he only inherited some personal stuff (such as a ancient copy of Ramayan that his father had nurtured his entire adult life) with almost nil economic value. We told him to write to the bank giving all these details and if they still persisted to file a complaint with both the RBI as well as the police for undue harassment. My lawyer friend also advised him that he would have a good case for damages against the bank if they persisted in trying to recover the money even after they had been advised about the facts in this case.

Rajesh accepted the advice and wrote to the bank. Post that the recovery calls from the bank stopped.

However the story had an unexpected ending. Rajesh checked with me whether his fathers name would show up as a defaulter in the Credit Bureau’s records. I informed him that I was not sure of how the bureau dealt with records of people known to be deceased but it was most likely that his father’s record will show up as a default for the next 7 years. This was not acceptable to Rajesh as he said that his dead father had led a blameless life and had never defaulted in his entire life. Rajesh said that he would settle up with the bank to ensure that his dead father’s name was not sullied anywhere. Last I heard he was in the process of settling the bank’s dues to get the name of his father cleared.

For me this was an extra ordinary ending as it highlighted not just Rajesh’s love for the memory of his dead father but also the efficacy of the newly established credit bureau to bring down the overall outstandings in the retail lending scenario.

Hail the spirit & concern of people like Rajesh!

* Name changed to protect the identity.

A momentous moment in India’s retail lending history has just been ushered in very quietly. A few days ago Credit Information Bureau of India Limited (CIBIL), which is currently the only fully operational credit bureau in India, quietly introduced a manual system to provide consumers with their own credit history on a test basis. In a written communication from CIBIL to Apnapaisa it has been clarified by CIBIL that “CIBIL has started offering Consumer disclosures through an interim solution. This interim solution is a testing phase and we will be able to operationalize the full-fledged Consumer Relations System basis our learning from this phase. In this interim phase CIBIL will be manually handling consumer requests for a copy of their credit information report.  CIBIL is also developing the infrastructure, systems and processes for an automated solution that would be needed to enable an individual direct access to their Credit Reports from CIBIL on-line.  The full-fledged Consumer Relations System will have world-class features that will allow consumers to access their report on-line and banks to respond to errors via an on-line maintenance tool. The automated phase is expected to be ready by the beginning of next fiscal year “.

So why is this such an important event that I am calling it a momentous occasion for the Indian retail lending history. For those of you who have just tuned in, CIBIL is one among 4 credit bureaus that have been licensed by the RBI under the Credit Information Companies Regulations Act, 2005 (CICRA). CIBIL though is the only one that already been operational for around a decade now and has the credit repayment history of around 13.7 crore loans or credit cards.

Almost all of the major lenders provide details of the credit facilities given by them to their customers as well as the amounts that have fallen due and the repayment made by the customers on a periodical basis (monthly or quarterly). CIBIL collates and aggregates this information. Thus when a customer (say Mr. Desai) approaches any bank (say Bank of Bharat) for a credit facility CIBIL is in a position to go through its own records and provide details of the existing credit facilities enjoyed by Mr. Desai to Bank of Bharat as well as his repayment history on such facilities. This enables Bank of Bharat to take a more informed decision on Mr. Desai’s credit application since it now has access to credible third party information on Mr. Desai’s existing obligations as well as his repayment history. It also benefits Mr. Desai if he has maintained a spotless repayment history since he is able to get the credit facility quickly and cheaper based on such good record. If his earlier repayment history is not so good, off course, he will find it difficult (and more expensive) to get the credit facility.

Up to now Mr. Desai could not access his own credit report. There was a rather convoluted way for Mr. Desai to get a copy of his own credit report but with this step he can get a copy of his own report by paying Rs. 142/- to CIBIL. This will help him in finding out if there are any errors in the report. A large number of consumers today feel helpless about erroneous repayment history being reported by the banks to CIBIL showing the consumer in default even where the so called “outstanding payment” is in dispute. These kinds of errors are the highest in the case of credit cards.

Since now he can have access to his own report the consumer can point out any errors in the report to CIBIL who are, under the CICR Act, required to notify the concerned bank. The erroneous entry will have to be deleted by CIBIL unless the concerned bank reverts to CIBIL within 30 days of the consumer filing his error report with CIBIL. If the consumer is not satisfied with the action of the bank in this regard he can always file a grievance before the banking ombudsman. Thus by having access to their own credit report the good consumers can ensure that they do not fall victim to erroneous reporting by the banks. At the same time consumers who delay payment for any reason will have to pay the price for such delays. Good consumers who pay their instalments will stop subsidising the consumers who delay payments. At a future point of time CIBIL may even share their proprietary credit score with the consumers for an additional fee. This score predicts customer’s likelihood of becoming a defaulter in more than 91 days within the next year. Higher the score less are the chances that the consumer will default. Any score above 700 is considered good. Having access to this score will assist the consumer in getting a rough idea of how banks view his credit standing and he can then take action either improve his credit score or if his score is already very good take care to maintain it at a high level.

So if you want to get a copy of your own credit report download the form available on the apnapaisa website at this link and fill it in and along with the required documents (mentioned in the form) and the payment of Rs. 142/- send it off to CIBIL address mentioned in the form.

This historic step needs to be welcomed with all fervour by consumers who will now no longer be helpless in knowing what banks are reporting about them to CIBIL.

I have already sent in my application to get a copy of my credit report.  I have taken great personal care to keep my credit standing immaculate but am awaiting with bated breath what my credit standing looks like as reported by the banks.

Watch this space for my comments on my own credit report.

Just participated on a hour long TV show on a popular hindi business channel devoted entirely to CIBIL. The panel of experts included a retired PSU bank chief and a well known politician cum consumer activist from Mumbai. The anchor and the political panelist panned CIBIL for accepting any data that the banks/NBFCs provided to them (CIBIL) and branding consumers as  ”defaulters” on the basis of such wrong data. Suggestions were made on how CIBIL should seek confirmation from the customer before accepting any such data from the lenders. The retired PSU head also correctly suggested that CIBIL is only a reporting institution and that lenders can ignore the CIBIL report if they are satisfied with the consumers explanation of any default reported by CIBIL.   What he perhaps missed is that in retail lending the consumer does not get a chance to explain his side of the story.

I was almost ignored when i tried to get in a word that CIBIL keeps records of all your payments to lenders - whether on time or not -  as reported by lenders . I also pointed out that this ensures that for 90% of the consumers their good repayment track record (now provided by an independent reporting agency like CIBIL) ensures that they get fresh loans at a good rate and speed. This is how Credit bureaus work anywhere else in the world. Off course the banks there are under a legal obligation (Fair Credit Reporting Act in the US)  to report correct and accurate information. Obviously in a country where courts can award millions in punitive damages the banks do carry out their obligations seriously. The only role that a credit bureau plays is in making the credit reports available to the consumers themselves and allowing them to raise a dispute on any item. The disputed entries are referred to the concerned lender and the entry is deleted if the lender does not respond within a fixed time frame. Similiar provisions exist in Indian laws governing Credit Information companies such as CIBIL though such laws have just come in effect and will take time before they are implented on the ground.

Even on www.apnapaisa.com we receive about  10-20 queries daily purely on CIBIL related matters. The blogosphere is also full of how this new animal called “CIBIL” is affecting their financial lives without giving them a chance to provide their side of the story.

Thus CIBIL is fast acquiring a perception of a BIG brother hand in glove with the banks that is out to make the helpless consumer pay up monies that are not due from him.

Clearly therefore there is very little understanding of the role that a credit information company like CIBIL plays in the market. So what has led to this wrong perception in the market.

First off course is the operational inefficiency of the banks (see my blog on  can we trust our lenders http://blog.apnapaisa.com/2008/06/26/can-we-trust-our-lenders/) . Bank’s machinery to deal with consumer grievances is only now acquiring some shape and form under the threat of the banking ombudsman. This leads to many disputes in loan/credit cards and in quite a few cases the consumer is clearly right. Thus when the data provided by the banks itself is suspect any reporter of such data also comes in the circle of suspicion automatically. This has more to do with the banks then CIBIL itelf.

However the perception gets magnified when CIBIL does not take active steps to dispel the wrong perception. CIBIL identifies only the lenders as it’s clients (after all they pay the bills) and perhaps see the obligation  to supply the consumers own credit report to him as a  drain on its profitability. The fact that this report would have to be supplied has been known for the last 30 months and yet they did not put into place any mechanism to deal with it as soon as the license was issued. Even now (almost 2 months + after the license has been issued) CIBIL is yet to officially give a date by which this facility will finally be available to consumers. Niether is there any word on the interim measures to provide credit reports to at least those consumers who are immediately  affected by any alleged wrong reporting by the banks.

CIBIL (and the other 3 credit information companies that have also been provided a license) will need to factor in the consumers as a significant stakeholder in the whole credit reporting process if they have to change the perception about themselves as “only collection aides” for the bankers.

Clearly a robust credit reporting structure benefits the consumers immensely but a consumer education drive is needed so that it does not acquire a bad name.

Any views or comments are welcome.

Today, its is seen that every other person uses credit card for their daily usage eg: shopping for grocery, for petrol or for things which he knows he would be able to pay by next month . This comes in very handy when you can divide you expenses month wise. You know that you can always pay the minimum on your credit card bill and pay the rest by next month , the only problem is you will have to pay interest on your reducing balance eg HDFC charges 3.25% per month and 39 %  annually. So, you can imagine how expensive it is when you try to divide your o/s credit card bill.

People may still be OK with the credit card charges when they have to bare it for only 2 or 3 months.

But, have you ever wondered what would happen if you default on few payments? How much impact can this have on your future or you may ask does it even have any impact? You can imagine similar situation, when you borrow money from your friend and family and forget to repay, they tend to loose faith in you and will not give you a single penny until you can prove you have improved or someone who can assure others you will be able to pay their money.

In the above example, we have used friends and family but who is the big brother who watches in the banking world? Who keeps a tab on our credit history? If you ask a common man he would say the respective bank keeps a track. or he may simply say “don’t know”.

The Big Brother or the big boss who watches all our credit history and repayment history is none other than Credit Information Bureau (India) Limited, also known as CIBIL. It is a repository of information that contains history of all the borrowers as it generates credit report of all borrowers. The report keeps a tab of our repayment history, settlement , defaults, contact details and the important point over here is that this information is shared between all banks. So, if you forget to pay and if the trend continues then be very sure you are in trouble, big time.

Anyone who borrows money from the bank gets automatically listed under CIBIL and all the defaulters gets punished in a very badly. They are blacklisted for next 7 years. When I heard it for the first time, I said, “Are they nuts?”. But, what can you do, rules are rules. It seems a bit unfair that you have to wait 7 years before you can borrow money from any bank. This may affect your dreams when you want to buy a house or car or go for your vacation.

One may ask , can I clear my name under CIBIL? Yes, but the fresh loan that you may get may not be at the current market rate but much higher. To get fresh loan the person must follow the steps below:

1) Clear old dues.

2) Create a fresh history through fully secured debts.

3) Inform the bank to rectify the status.

4)To get faster resolution send a mail to CIBIL with the credit report.

The database gets update every 45-60 days that way the person will get a fresh loan but at a very costly price.

One must always try to pay of their credit dues on time to avoid complications or the mistake may prove every painful.

I had an outstanding due to my credit card provider. After repayment i got a zero balance statement from the bank. Can you please suggest me what to do next to get my name removed from CIBIL/SATYAM’s defaulters list?

Do not be surprised if your loan application is rejected even after you have paid off your much due credit card outstanding balance. The bank might have called you and given you an option where you could just pay a specified sum, in return for a settlement letter. Once you do that and get the settlement letter, it doesn’t for a moment mean that the slate has been wiped clean. You apply for a personal loan or a home loan and the lender will simply let you know that it isn’t interested in lending to you because your name comes up in the Defaulters list on the Satyam or CIBIL list.

When you go in for a settlement, banks can and will legally report you as a defaulter - to the extent of the dues foregone by them - at the credit bureau. All details concerning your default stay at the credit bureau for 7 years. You must understand that you CANNOT remove your name from this defaulters’ list. It will be removed from the list only after seven years, provided you do not default on any subsequent loans (if you manage to get it, that is). What you COULD do is to try applying for a secured credit card - a card that is offered against your term deposits at the bank. This type of card is available at many banks. Build a good credit record with it. This will not remove your name from CIBIL defaulter list but it will improve your credibility in your credit report. This would also increase your chances of getting credit facility from various banks at decent terms in future.

A fraud transaction was made on the internet through my HDFC Bank credit card. I got my card blocked immediately. My card showed a debit balance for 1 year. A replacement card was issued by HDFC Bank to me, after reversal of the transaction amount and charges. However, I am not able to get new card from other credit card companies because of my name in defaulter list (CIBIL/ Stayam’s Defaulter list). How can I get a new card and remove my name from defaulter list?