How banks can goof-up with your credit report

The prudent see danger and take refuge, but the simple keep going and pay the penalty, goes an axiom. This applies to everything in your life, but more so in your money life because here you should learn from others’ mistakes.

For example, take the goof-ups banks make on your credit cards, bank lockers, ESC and the like. If you are wise, you would learn from others’ experiences and ensure that you don’t face a similar situation. Tracking your finances, especially loans regularly is imperative, especially since nowadays credit reports and credit score matter more than ever before.

So, what can go wrong between a loan and a credit report? To know more read on.

[caption id=“attachment_1114375” align=“alignleft” width=“380”]  What can go wrong between a loan and a credit report? Reuters[/caption]

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Picture this: Suppose you have a loan with bank A. You repay regularly until it is completely paid off. A few years later, you approach bank B for another loan. But to your shock, you are denied one on the basis of your credit report that shows your earlier loan is still outstanding. If you thought this is just an imagination, it is not.

According to an RBI document, the customer in question investigated further and found out that even though he had repaid his loan to Bank A, the bank had not cleared his credit report for several years. Hence, he was unable to get a better deal with the new bank. He then requested bank A to update his Cibil credit report. However, the bank said it had already done the needful. After several requests, he still saw that his credit report did not show the latest update. Finally, he approached the banking ombudsman’s office of the RBI.

**What the ombudsman said:**The banking ombudsman found that the bank had failed to get the Cibil database updated for the customer even after four years after the complainant had repaid the loan. “When the bank finally got his Cibil credit report rectified it did so without compensating the customer. The banking ombudsman observed that by not updating Cibil database in time, the bank had violated RBI/Banking Codes and Standards Board of India guidelines and therefore passed an award directing the bank to pay an amount of Rs 5,000 as token compensation towards cost of pursuing the complaint,” saidthe RBI document.

What we can learn: There are a few things we can learn from this example. For one, do not think that your bank will automatically update your Cibil credit score, though technical they have too, above example shows, they might just miss doing so. Ensure that you review your credit report a few months after you close the loan to check if the bank has updated the latest information about your loan account to the credit bureau or not.

Another important thing to keep in mind is that the loan is not closed with just paying your last EMI. You need to tie a few loose ends to close the loan properly, for example get a no-dues-pending letter once the loan is paid off. Tracking your credit report once a year, is a good idea.