Rebuild ‘reputational collateral’ if you are listed as defaulter

My bank started levying unprecedented charges on my credit card account without any prior intimation. I took up the matter with them and insisted that they reverse the charges since I was neither informed beforehand, nor did I ever undertake to pay such charges during all these years when I was their customer. Despite efforts from my side, there was no resolution of the matter till the end. Eventually, I refused to pay these charges and discontinued the card. Now, I plan to approach a bank for a housing loan. Will I face any difficulty given my credit history? Kindly explain what I should do now. —R Venkataraman

It is likely that the bank may have reported you as a defaulter based on your transaction history with them. If you believe this has been incorrectly reported, you have the option of raising a dispute with the bank through the credit bureau’s website. However, the ideal way to proceed would be as follows:

Apply for your credit information report (CIR) in order to see where you stand. Given your intention of applying for a housing loan you should first purchase a copy of your CIR given that the CIR will be used to evaluate your loan application. You can purchase your CIR from the credit bureau’s website. Scrutinise your CIR for account status for the credit card account in question. If it shows a ‘default’ status this confirms that the bank has reported you as a defaulter for your refusal to pay those charges.

Rebuild your reputational collateral. Given that your outstanding dues are likely to negatively affect your home loan, I would recommend that you pay your dues.  However, if you are still adamant that your were wrongly charged, the only other options would be to continue paying your other obligations on time and rebuilding your “reputational collateral”.

When you consistently make payments over time and your late payments move more into the past, loan providers are likely to begin to view your loan application more favourably.  Hence, pay your dues on time consistently before applying for a loan.
Apply for a loan. Once you have paid your dues consistently for about 12 months you will be in a better position to apply for a loan. However, it is important to remember that every loan provider has different criteria while evaluating loan applications.

The writer is senior vice-president - consumer relations, Cibil, and
can be reached at  creditwise@cibil.com