There are various terms and components present in a CIBIL report and it is important to understand each one of them to accurately read it. One such term present on the CIBIL report is ‘Written-Off’ and it negatively affects your CIBIL score. Read on to know what it means and how it can be cleared off.
When you take out loans or use a credit card and do not pay back, typically after a period of 180 days, your credit report / CIBIL report shows a written-off status. Then the lender writes off the amount owed to them as a write-off or write-down the outstanding balance as a loss in their financial books - hence, written off.
This term is bad for your CIBIL score and it indicates that you cannot be trusted with money in future. However, you can get this off your CIBIL report.
Since lenders may have tried multiple reminders and calls or collection contacts for agency recovery and have made little or no effect on the matter, lenders often decide to write off the amount for their accounting treatment and once and for all regulatory treatment.
The write-off does not eliminate the borrower's responsibility to pay, and the lender is still entitled to collect. In many cases, lenders will sell the write-off balance to collectors, and their efforts will intensify, so the lender can remain compliant with regulatory treatment on a borrower's unpaid and unsecured by lender balance.
When the lender has done a thorough evaluation, they writes-off the balance, the lender would then report it to credit bureaus, including CIBIL. Once reported and when available to loan officers and lenders in their evaluation of a consumer's creditworthiness. It will indicate on a consumer credit background that the consumer has been a credit risk. That they have had a history of not paying off the loan or obligation.
A written-off status or treatment is a big deal in terms of indicating a negative event for being a borrower, and it will follow you on your credit profile for a significant period of time. A written off status implies you were in financial or situational distress and may have ruined your credit reputation. It will be harder to access new credit in the future if you are not diligent in your finances and stay fiscally responsible in the future.
Lenders and credit bureaus breakdown written off accounts into two types. It is important to understand the difference, as each type will impact your credit score / CIBIL score in different ways:
Note: Though both types of written off status will negatively affect your credit health, a total written off will usually be considered a larger detriment to your future credit opportunities. Either way, both situations will severely affect your financial position and the plan to turn around your credit position should be strategised and implemented.
Having a written-off status has a major long-term effect on the credibility of your finances. Having a written-off recording and status may mean that your credit / CIBIL score is drastically lower, often below 550, which is categorized as poor. Obtaining new loans/credit cards with this low score is extremely difficult.
Written-off accounts are viewed as being ‘high risk’ for repayment by all lenders. This will affect your eligibility for loans, interest rates or credit limits. This remark will remain on your credit report for up to 7 years and it continues to affect lenders' decisions after your repayment behavior has improved.
Here’s the different ranges rated by CIBIL score and their effect on obtaining loans:
CIBIL Score Range | Loan Approval Chances |
750–900 | High |
650–749 | Moderate |
550–649 | Low |
Below 550 (with written-off status) | Very Low |
A written-off status is indicative of financial hardship; it will lower your credit score / CIBIL score and lower your chances at acquiring loans with favorable terms. It is best to deal with this as early and strategically as possible in order to rebuild your credit health.
Steps below on How to Remove/Clear Written-off Status on Credit/CIBIL Report:
When a borrower finds it impossible to repay the remaining loan because of various life events, be it loss of job, hospitalization, unexpected personal emergency, etc., he or she will reach out to the lender to ask for some changes to the terms of the loan repayments.
If the lender agrees, both sides will sign a settlement. The borrower pays a lesser amount, and lender agrees to keep the loan a loan, that is, the lender will stop collection on loan for the remainder amount after the borrower pay. The borrower can then close the loan out without having paid the full amount and in some cases, it could ease the strain, however, there are implications for your credit rating.
After receiving settlement amount the lender would report account status to credit bureau, such as CIBIL as 'settled.' The credit rating agency will report status indicating that the loan was not a full repayment of the original loan.
The 'settled' status will be present on your credit report, or equivalent for CIBIL, indicating that the loan is settled and not a full repayment of original loan terms. In not being a ‘closed’ repayment, it has the potential to cause problems for future lenders when they check your credit report.
Before you get to the settlement stage of the loan process. You have options, loan restructure, longer payment terms for repayment to increase monthly payments or moratoriums, all aim at resolving financial struggles without damaging your credit score, or CIBIL score.
Your credit or CIBIL score is affected by the ‘Settled’ status. Here is how:
Re-establishing your credit score or CIBIL score after settling a loan is not instant - it takes time and planful action to resolve. Follow the steps below to accomplish this:
A CIBIL report may contain one of the below-mentioned errors:
Here are a few tips on how avoid getting written-off status:
One of the best ways to avoid a written-off status on your account, is to make sure all your loan EMIs, credit card payments, and other borrower obligations are paid on time. Any missed or late payment , adds up and can result in a notice of default. An account in default can result in the lender eventually writing off the account. If you make payments consistently and on time, you are demonstrating power and control of your finances and have helped maintain a good credit history.
If it becomes challenging to make a payment, because of situations you may find yourself in, you should initiate communication with the lender. Communication can be enlightening to the lender as they are not surprised, they have a clear understanding of your circumstances, and may be able to provide options such as a temporary deferment or modified repayment plan. Communications that are clear, and well documented, enhance credibility as a borrower.
Many lenders provide loan restructurings, moratoriums, or adjustment or amendments to payment schedules to borrowers who find themselves in a financial burden. This would allow you to settle default notifications, thereby maintaining your repayment status.
Overall, having a good handle on your finances, paying on time or consistently paying borrower obligations will go a long way to preventing borrowers' status that may be written off. Proactivity is key to saving your credit score and preserving a healthy financial future.
You can raise a complaint with CIBIL by following the steps mentioned below:
Once you have completed the process, your request will be verified by TransUnion and its status will be updated in a month’s time.
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A 'Written-Off' status means that the lender has identified the loan as uncollectable, after they have put forth every effort possible to collect the amount due. The 'Written-Off' status can hurt your credit score and will remain on your report for up to 7 years.
This status can have a drastic impact on your credit score and make it very difficult for you to borrow more money in the future.
Yes, after you settle the remaining amount with the lender and ask for a 'No Dues Certificate', you can ask the lender to update the loan status. After the lender has done that, you can dispute with CIBIL yourself.
CIBIL usually updates the status whenever the lender has uploaded the case to CIBIL, which should generally happen within 30 days.
No, CIBIL cannot make changes without consent from lenders. The lender must go through the process of uploading the status for CIBIL to go based on that.
If the lender refuses to cooperate, you can take it to the Banking Ombudsman or an attorney.
Yes, the same way, you will have to pay the appropriate dues owed. Once settling with the lender, obtain a NO DUES CERTIFICATE from the lender, then ask the lender if they would be willing to change the case to a 'closed' status, and then you can dispute it through CIBIL.
Make timely payments, if you are in need of financial help be proactive in communication with lenders regarding your situation and do not default.
Try negotiating with the lender for a very reduced amount for the settlement agreed upon with the lender; however, ask to obtain a no dues certificate once the settlement payment has been made. Ask the lender for an updated query response from CIBIL regarding the account and obtain said documents.
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