One of the most detrimental events that might result in a low credit score and problems securing a loan when needed is a negative or incorrect item on your credit report. Delay payments, several entries on overdue payments, and unresolved loan accounts with the banks could all be examples of these entries. Creditors may record unfavourable remarks on your credit report in such circumstances, which may remain on your record for a long time and make you appear riskier to future lenders. As a result, we've compiled a list of methods to assist you to delete unfavourable or incorrect items from your credit report.
Negotiate with the bank: Due to unforeseen circumstances, you may be unable to make payments on your outstanding loan or credit card for longer than 180 days. Banks will reflect this as a 'written off' on your credit report in such circumstances. Not only will this effect your credit score, but it will also have an impact on your loan or credit card applications.
By paying the outstanding balance, you can have the 'written off' designation removed from your credit report. You might write to the creditor and offer to pay a settlement sum if you are unable to make the entire payment. This is less than the total amount you owe. Wait for a written agreement from the bank before making the payment.
Note: Settlement will still reduce your credit score and reflect on your credit report, but it’s better than your report’s written off status.
Dispute incorrect information: It's possible that your credit report contains inaccuracies. Your personal information, such as your PAN number, name, and address, may be incorrect, or your current balance may not be accurate. In such cases, you can file a dispute with the bank or credit bureau and provide supporting evidence.
Ask for a goodwill deletion: You can request a goodwill erasure from your existing lender. You ask the creditor to delete a late payment record from your credit report in a goodwill letter. You can explain why the payment was delayed and ask the creditor to remove the negative entry from the report. Although there is no certainty that your request will be accepted, it is worth a shot.
Pay off your debt: If you can't get a negative mark removed from your credit report, paying in full is the best choice. Wait for your payment to appear on your credit report once you've made it. This will demonstrate to future lenders that you are financially responsible, increasing your chances of obtaining a loan or credit card.
Spend as per your credit limit: Keep track of how much you spend on credit cards if you use them frequently for payments. Make sure you don't go beyond 30-40% of your credit limit, as this demonstrates a lack of discipline and raises questions about your financial capability. As a result, it has a negative impact on your credit score. While a high amount of credit spending does not appear on your credit report as a negative item, it is a factor that lowers or effects your credit score. As a result, you must avoid using your credit card excessively.
Take loans one at a time: Applying for many loans at the same time demonstrates that you are in dire need of cash. Lenders perceive you as credit-hungry if you submit multiple applications in a short period of time, which lowers your credit score. This is why applying through fintech lenders is a good idea if you want to find the finest loan and credit cards from numerous banks without jeopardising your credit score. To minimise this risk, be very cautious and strong with your loan agents about avoiding submitting your applications to several banks.
Check for Days Past Due (DPD): Days Past Due, or DPD, is a measure of a borrower's financial behaviour. It shows how many days a loan account's payment has been late. A DPD is generated for each loan and sent to the credit bureau by the bank or financial institution that makes the loan to the applicant. If anything other than '000' and 'XXX' appears in the DPD section, it signifies you've missed payments on your loan or credit card account. If you miss an EMI payment for a month, you'll have to wait 36 months for it to be removed from your DPD records. In the DPD report, there is no way to edit values. As a result, you should always pay off EMIs on time without defaulting, as one minor mistake can cost you a lot of money in the long run. Most lenders will not give money to clients who have had DPDs in the previous six months, even if their credit score is higher than the bank's minimum requirement. If your loan application is denied due to DPDs reported in the previous six months, make timely payments for the next six to eight months to minimise the negative impact on your credit score.
Keep a check on bank's delayed updates: A DPD may occur as a result of a late check deposit by a bank employee, rather than a delay in your payment. In this scenario, make a record of the date you submitted your cheque to the bank as proof that you want to remove any negative entries from your credit report. Managing and maintaining a healthy credit score is a never-ending process that involves constant monitoring and aggressive corrective action when necessary. Never be afraid to report any incorrect entries or to work with bank staff to get erroneous or negative credit entries removed or reduced.