Credit Report
UNDERSTANDING NEGATIVE TAGS IN YOUR CREDIT REPORT: WHAT THEY ARE AND HOW TO ADDRESS THEM
Your credit report is a detailed record of your financial behavior and it plays a crucial role in determining your creditworthiness. In India, the Credit Information Bureau (India) Limited (CIBIL) is one of the major credit bureaus that compiles and maintains reports. A healthy credit report is essential for securing loans, credit cards, and favorable interest rates. However, negative tags in your report can significantly impact your credit score and your financial prospects. Understanding these negative tags and how to address them is key to maintaining a strong credit profile.
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WHAT ARE NEGATIVE TAGS?
Negative tags, also known as negative marks or negative entries, are indicators on your report that reflect adverse credit behavior. They highlight issues that have negatively affected your creditworthiness. Here’s a closer look at some common negative tags:
Common Factors That Negatively Affect Your Credit Report
1. DEFAULT
A default occurs when you fail to make payments on a loan or credit account as per the agreed terms. When a loan account is classified as a default, it signifies that the borrower has not made payments for a prolonged period, typically more than 180 days. Defaults can have a severe impact on your credit score and remain on your report for up to seven years.
2. DELAYED PAYMENTS
Delayed payments, or late payments, are recorded when you miss a payment on your credit card or loan. Credit reports categorize these late payments into various buckets, such as 30, 60, or 90 days overdue. The more severe and frequent these delays, the more they can damage your credit score. Late payments typically remain on your report for up to seven years.
3. OVERDUE ACCOUNTS
Overdue accounts refer to accounts that have missed payments and have become seriously overdue. These are often reported as collections or written off. An overdue account is a red flag to lenders and can significantly impact your credit score.
4. BANKRUPTCY
Bankruptcy is a legal status of a person who cannot repay the debts they owe to creditors. If you declare bankruptcy, it is a major negative tag on your report. Bankruptcy can stay on your report for up to ten years, severely impacting your credit score and making it challenging to obtain credit in the future.
5. FORECLOSURE
Foreclosure occurs when a lender takes possession of your property due to non-payment of a mortgage loan. A foreclosure is a significant negative tag on your report, reflecting that you were unable to meet your mortgage obligations. It can remain on your report for up to seven years.
6. SETTLED ACCOUNTS
A settled account is one where you and your creditor agreed on a reduced payment amount to close the account. While settling an account is better than defaulting, it still indicates that you did not pay the full amount owed. Settled accounts can negatively impact your credit score and remain on your report for up to seven years.
7. LEGAL JUDGMENTS
Legal judgments refer to court decisions that require you to pay a debt. These judgments appear on your report and can significantly damage your credit score. They can stay on your report for up to seven years.
How to Address Negative Tags
While negative tags can be concerning, there are steps you can take to address and mitigate their impact:
1. CHECK YOUR CREDIT REPORT REGULARLY
Regularly reviewing your report helps you identify negative tags and errors. Obtain your report from CIBIL and other credit bureaus to ensure that all information is accurate and up-to-date.
2. DISPUTE ERRORS
If you find inaccuracies or errors on your report, file a dispute with the credit bureau. Provide supporting documentation to prove that the information is incorrect. Resolving errors can help improve your credit score
3. NEGOTIATE WITH CREDITORS
If you have overdue accounts or are struggling with debt, contact your creditors to negotiate repayment plans or settlements. Demonstrating a willingness to resolve your debts can sometimes lead to more favourable outcomes and less severe negative tags.
4. MAKE TIMELY PAYMENTS
Going forward, focus on making all payments on time. Consistently paying your bills and loans on time will help rebuild your credit and improve your credit score over time.
5. WORK WITH A CREDIT COUNSELLOR
If you’re overwhelmed by debt or negative tags, consider working with a credit counselor. They can provide guidance and help you create a plan to manage your finances and improve your credit profile.
CONCLUSION
Negative tags in your report are serious indicators of past financial difficulties, but they don’t define your entire credit history. By understanding these tags and taking proactive steps to address them, you can work towards repairing and improving your credit score. Regular monitoring of your report, addressing inaccuracies, making timely payments, and seeking professional help when needed are key strategies for overcoming negative tags and achieving a healthier credit profile.
Your report is a snapshot of your financial journey, and while negative tags can pose challenges, they are not insurmountable. With diligence and effective financial management, you can turn things around and build a strong credit history for the future.