Know all about the period CIBIL holds the record of defaulters.

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Failing to meet loan and credit card payment deadlines can lead to your inclusion in the defaulter's list. The significance of your CIBIL credit score cannot be overstated when it comes to accessing credit products. If you fail to make repayments on your credit card debt or a loan you've taken, this information will be recorded on your CIBIL credit report for a specified period. This negative mark on your credit report will likewise influence your CIBIL credit score. Credit bureaus maintain records of individuals with past borrowing and credit card usage. A CIBIL credit report contains a comprehensive overview of your financial transactions, assisting lenders and financial institutions in evaluating your creditworthiness. Based on the information within your credit report, they determine whether to extend a credit line to you. Therefore, it is imperative to ensure the cleanliness of your CIBIL credit report.

What constitutes a CIBIL Defaulter's List?

Contrary to popular misconception, CIBIL does not curate a defaulter's list. The responsibility for overseeing this list lies with the Reserve Bank of India (RBI), and it is publicly accessible through its official website. Periodically, the RBI introduces new frameworks aimed at fortifying and ensuring a more equitable financial operational system in the nation. One such initiative, introduced in April 1997, mandated that all banks and financial institutions must report the details of wilful defaulters with outstanding debts of Rs.25 lakhs and above. The RBI classifies the list of defaulters into two categories based on the circumstances leading to the default: wilful and non-wilful defaulters. This classification helps distinguish between those who are genuinely overwhelmed by debt and those who are intentionally avoiding repayment. If your name appears on the RBI's list of defaulters due to non-payment of your dues, CIBIL will recognize you as a defaulter.

For what duration does CIBIL retain records of defaulters?

CIBIL keeps a record of defaulters for a period of 7 years from the date of the last report. During this time, it compiles and maintains a comprehensive record of an individual's financial history. This information is a valuable resource for banks, non-banking financial companies (NBFCs), and other lenders as they assess the creditworthiness of potential borrowers. It's important to emphasize that neither CIBIL nor any other credit bureau possesses the authority to eliminate your name from the defaulter's list. As a result, if your name appears on this list, it's crucial to take proactive measures to enhance your CIBIL credit score.

Ways to Eliminate a Legal Case-Filed Account from Your CIBIL Report

In the unfortunate event that you have defaulted on a loan, your bank or financial institution may take legal action by filing a complaint in court, and initiating a lawsuit. This legal process is initiated by the bank or financial institution from which you have borrowed, and it is done to seek economic relief in cases of non-payment of dues. If the outstanding amount has crossed the Rs.1 crore threshold or if you have willfully defaulted on an amount exceeding Rs.25 lakhs, your financial data may become part of the public database. So, what steps can you take to address a suit-filed account that has been reported to CIBIL? The first course of action is to reach out to your lender and request them to consider an out-of-court settlement where you agree to pay the entire outstanding amount. If your lender agrees to this alternative, they must notify the court and retract the legal action initiated against you. However, the lawsuit will only be formally withdrawn once you have successfully settled your loan. It is essential for your bank to report this settlement to CIBIL so that they can update their records accordingly. While this may seem like a convenient and straightforward solution, there is a critical point to keep in mind. If you have negotiated a settlement that involves a concession in the payment of your dues, your CIBIL report will indicate a 'settled account' status, even after the lawsuit is dropped.
This 'settled account' notation will remain on your credit report for a duration of 7 years. However, if you find yourself unable to pay the outstanding amount to your lender, you have the option to present your reasons in court. In such cases, the bank may consider offering a settlement amount, which you would need to pay without further inquiries.

Improving Your CIBIL Credit Report:

If you find yourself in a situation where your credit report includes records of defaulters, there are steps you can take to improve your credit profile:


1. Timely Payments:

Start making all your payments on time to prevent further defaults.


2. Debt Repayment:

Work on paying off any outstanding debts. Lowering your debt load has the potential to enhance your credit score


3. Regularly Monitor Your Credit Report:

Review your credit report regularly to check for inaccuracies or discrepancies. If you find any errors, dispute them with CIBIL to have them corrected.


4. Credit Counseling:

Consider seeking credit counseling or financial advice to help you manage your finances more effectively and avoid future defaults.