CIBIL Written Off: Meaning and Steps to Remove It from Your Report
A ‘Written Off’ status on your CIBIL report makes it tough for an individual to secure loans or credit in the future. But what does ‘written off’ really mean, and more importantly, is it possible to remove it from your credit report?
In this guide, we’ll break down what a ‘Written Off’ status is, its impact on your credit score, and the steps you can take to recover from it.
What is CIBIL Written Off?
“Written off” status in a CIBIL report implies that the lender tried to recover the loan amount for 3 months or more but could not recover. Thus, the lender marks ‘written off’ in the credit report. This has adverse effects on the credit score and affects future loan applications as well. In simple terms, it indicates the borrower has failed to repay their outstanding debt for an extended period, usually more than three months, and the lender has given up on recovering the money.
Difference Between ‘Written Off’ and ‘Settled’ Statuses
Aspect | Written Off | Settled |
Definition | “Written off” implies the lender has declared the loan as a loss due to non-repayment. | “Settled” implies the borrower and lender agreed to settle the loan for less than the outstanding amount. |
Impact on credit score | Negatively impacts the credit score | Negatively impacts the score but slightly less than a written-off status. |
Repayment Status | No repayment. The lender considers the amount is non- recoverable. | An agreed upon amount is decided that is acceptable to the lender. |
Future Credit | This status makes it tough to secure loans or credit in the future. | Slightly better than written off but still raises red flags for future lenders. |
Solution | This status can be resolved by repaying the full outstanding amount to the lender. | This status can be resolved by paying the waived amount and getting a “Closed” status. |
Common Reasons for ‘Written Off’ Status
If a borrower fails to make payments for more than 180 days, their loan is marked as ‘written off’ as a status in their credit report. Some of the common reasons for a borrower getting a ‘Written Off’ status on their credit report:
- Financial Constraints: Borrower is unable to repay due to job loss, medical condition or other unexpected financial crises.
- Low Recovery Chances: The lender has exhausted all efforts to recover the dues from the borrower but determines that further attempts would be unproductive. As a result, the loan is marked as ‘written off’.
- Bankruptcy Declaration: If a borrower declares bankruptcy, then it makes it difficult to recover debt.
- Deceased Borrower: If a borrower passes away having no assets or co-signee.
- Fraudulent Borrowing: If the loan was taken with under false documents.
- Operational Write-Off: Lenders choose to clear bad debts to improve their books.
Also Read: RBI Guidelines for Personal Loan Recovery, Agents & Process
Impact of ‘Written Off’ Status on Your Credit Score
The ‘Written Off’ status can have a significant negative impact on your credit score. Here’s how:
- Lower Credit Score: A ‘written off’ status leads to a sharp decrease in your credit score. It can reduce your score by 100-150 points or more.
- Long-Term Effect: The written-off status can stay on your credit report for 7 years, thereby making it difficult to get a loan or credit in the future.
- High Loan Rejection: Having a ‘written off’ status on your credit report increases the likelihood of loan rejection. Lenders view the individual as a high-risk borrower, unable to make repayments.
- Strict Loan Terms: If you manage to secure a loan with written-off status, the lender may offer a secure loan with written-off status, the lender may offer a loan at high interest rates, short tenure or demand collateral to mitigate their risk.
To recover from this, you would need to improve your financial habits, repay any outstanding dues, and ensure you maintain a good credit history moving forward.
Steps to Remove ‘Written Off’ Status from Your CIBIL Report
If you have a ‘written off’ status on your CIBIL report, check for errors. If it is an error, raise a dispute with the credit bureau to get it corrected. However, if it is due to non-repayment of loan, follow the steps below:
Step 1: Contact the Lender
Reach out to your lender and find out how much amount needs to be repaid. Work with your lender for a repayment structure.
Step 2: Settle the Outstanding Amount
Pay whatever amount is left including the principal amount, interest and other charges
Step 3: Obtain a No Dues Certificate
Once you successfully settle your dues, request a formal “No Dues Certificate” from your lender.
Step 4: Request Lender to Update Credit Report
Ask your lender to update you with a new status to improve your credit score.
Step 5: Verify the Update on Your CIBIL Report
Check your credit report to see if the change in the status is made. If the lender delays or denies removing the status, raise a dispute with CIBIL to get it resolved.
How Long Does It Take to Update CIBIL Report After Rectification?
It can take up to 30 days for the updated information to reflect on your CIBIL report, as credit institutions typically submit data to CIBIL within a 30 to 45 day window. You may need to wait a few weeks to see the update on your credit report.
It is important to check your credit every few months to keep track of your credit history and credit score.
Conclusion
It is imperative to understand the ‘Written Off’ status as it can severely impact your CIBIL score. It also makes it difficult to get any personal loan or credit in the future, as lenders check borrowers’ credit reports. If you understand ways to rectify this situation and take measures to improve your CIBIL report, you can significantly improve your CIBIL score. By clearing your outstanding dues and maintaining healthy financial habits, you can clear off the ‘written off’ status from your credit report.
Frequently Asked Questions
What Does 'Written Off' Mean In A CIBIL Report?
“Written off” in CIBIL report implies the person was unable to repay the loan and the lender has “written off” the loan.
How Does A “Written Off' Status Affect My Credit Score?
The “written off” status negatively affects your credit score it implies that the lender was unable to collect a loan from you, leading them to mark the loan status as “written off”
Can I Remove The 'Written Off' Status From My CIBIL Report?
If the “written off” status was due to an error, you can indeed raise a dispute with CIBIL or the credit bureau. However, if the loan was genuinely written off by the lender due to non-payment, the status will remain on your report for up to 7 years.
How Long Does It Take To Clear A 'Written Off' Status?
The “written off” may take several months to a year to clear from your credit history. It depends upon the lender’s response and the complexity of the case.
Is 'Written Off' The Same As ' Settle' In Credit Terms?
No, “written off” and “settled” are not the same in credit terms. “Written off” means a lender has given up on collecting a debt, “settled” indicates that a debt was paid off with an agreement between a lender and borrower, to settle the loan at a lower amount.
What Documents Are Needed To Rectify A 'Written Off' Status?
A “No Dues Certificate” (NDC) from your lender is needed to rectify the ‘written off’ status. Additionally, you may also need to provide a copy of your payment receipt and your latest CIBIL report to dispute the status.
Can A 'Written Off' Status Prevent Me From Getting A Loan?
A ‘written off’ status lowers your credit score significantly. Lenders may not approve loans with low credit scores. They may also view ‘written off’ status as borrower being untrustworthy.
How To Make A CIBIL Report Clear?
You can make your CIBIL report clear by making responsible financial decisions like timely payments, clearing existing debts, limiting loan or credit application and keeping a credit mix.
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