Poor credit history is a deterrent for getting loans

My husband had two credit cards from ICICI and HDFC banks from 2004 to 2008. In 2005, he lost his ICICI credit card. He reported the loss and locked the card. With the HDFC card, he made a purchase of about Rs8,000. As he did not repay the amount before the due date, he accrued an interest of Rs20,000. A friend advised us to settle the account for Rs8,000. In 2008, we planned to take a home loan, but it was not approved due to his credit history. The credit report shows three credit cards, one outstanding for Rs73,000 and another written off. The loan sanctioned on my profile is very low. I have asked Cibil for my husband’s credit report and expect to get it soon. Can you please tell us how we can ensure a smooth transaction for a housing loan?
— Sharwari Parulekar
The credit information report is important from the point of view of bankers in deciding whether to entertain or reject a loan request.

A clean report, indicating no default, no settlements undertaken with any lender, a person who has reasonable borrowing, not having too many credit cards are some of the factors which play a big role. In your case, you have three credit cards, out of which one is already written off, there is an outstanding amount in case of the second card and for the third you are planning to go for settlement. Such a situation will affect the credit score and bankers will be a bit averse in granting a loan. However, you may try to explain to the bankers the circumstances under which all these things have happened to enable the banker to take a view. Moreover, you may convince the bankers of availability of security with substantial value against your loan requirement, which according to you is small. The bankers may consider your request. Technically, bankers do not entertain requests for loan from an NPA customer.

— The writer is chief counsellor, Abhay Credit Counselling, a trust sponsored by Bank of India. He will answer credit card and loan queries and can be reached at dnadebtqueries@gmail.com