3 min
21-November-2024
Loan closed but not updated in the credit report
When a loan is closed, it should be reflected in your credit report promptly. However, there are instances when the closure is not updated in the credit report, which can affect your credit score. This issue can arise due to delays in reporting from the lender, incorrect documentation, or mistakes made by the credit bureau. If your loan status is not updated, it can lead to discrepancies in your credit report, causing your credit score to remain lower than it should be. This is why it’s crucial to monitor your credit regularly and take action if you notice any discrepancies in your loan status. Let’s dive into how to resolve this situation.What is a CIBIL report?
A CIBIL (Credit Information Bureau India Limited) report is a detailed record of an individual's credit history, which is compiled by CIBIL, one of India's leading credit bureaus. It includes information about loans, credit cards, and payment histories, which are used to determine your creditworthiness. The CIBIL report plays a significant role when you apply for new loans or credit, as lenders use it to assess your repayment capability. It contains details such as the type of credit accounts, outstanding balances, payment histories, and defaults, if any. Additionally, it includes your CIBIL score, which is a three-digit number that reflects your creditworthiness. A good CIBIL score is crucial for obtaining loans at competitive interest rates, while a poor score may result in loan rejections or higher interest rates.Why accurate loan status matters for your credit score?
- Impact on credit score: Accurate loan status updates ensure that your credit score reflects your true financial behaviour. If a loan is marked as closed but isn’t updated in your credit report, your credit score might drop due to the outdated information.
- Loan approval process: Lenders use the credit report to evaluate your creditworthiness. An outdated loan status can negatively impact your ability to secure new credit or loans, as lenders might see a non-closing loan as active and affecting your debt-to-income ratio.
- Credit utilisation ratio: Your credit utilisation ratio plays a key role in calculating your score. If a closed loan is still reported as active, it could make your credit utilisation seem higher than it is, which negatively affects your credit score.
- Trustworthiness of credit report: Accurate loan statuses build trust between you and lenders. If you consistently maintain up-to-date records, it boosts your reliability in the eyes of future creditors, improving your chances of receiving better loan terms.
Common reasons a closed loan might not update in CIBIL
- Delay in reporting by the lender: Lenders might take longer to update the credit bureaus with information about the closure of a loan. This delay could occur due to internal processing times or system issues.
- Discrepancies in loan closure documentation: Incomplete or incorrect documentation at the time of loan closure can cause discrepancies in updating the loan status. For example, if the lender doesn’t receive the final payment or a required document, they may not update the credit report.
- Errors from the credit bureau: Sometimes, errors made by the credit bureau itself can lead to the loan status not being updated. These issues may include technical glitches or human errors when processing the data.
Step-by-step guide: How to fix an un-updated loan in CIBIL
- Contacting your lender or loan servicer: Reach out to your lender to confirm whether they have updated the loan status with the credit bureau. If they haven’t, ask them to do so promptly. You can also request a loan closure letter for your records.
- Reviewing loan closure documents: Ensure that you have all the necessary documents that prove the loan has been fully paid off. This could include a No Objection Certificate (NOC) or a loan closure statement.
- Reporting discrepancies to CIBIL and other bureaus: If your lender confirms the loan is closed, but your CIBIL report still reflects it as active, file a dispute with CIBIL. Provide them with the necessary documentation to support your claim.
- Following up on the dispute resolution process: CIBIL typically takes 30-45 days to resolve disputes. Follow up with them regularly to ensure the issue is being processed and updated accordingly.
What to expect when disputing loan status with CIBIL?
- The dispute resolution timeline: When you file a dispute, CIBIL will investigate the issue within 30-45 days. During this time, they will contact the lender for clarification and verification.
- How CIBIL investigates loan status errors: CIBIL will cross-check your loan closure documentation and communicate with the lender to verify the information. If discrepancies are found, they will update your report accordingly.
- How the correction is reflected in your credit report: Once the investigation is complete and the loan status is updated, the changes will be reflected in your CIBIL report. You will be notified about the update, and your credit score should improve if the loan was previously negatively affecting it.
