Will My CIBIL Score Drop Further After a Written-off Status on My Loan?
When a loan or credit account is marked as written off, it can have a significant impact on your CIBIL score. This article explains the reasons behind this impact and offers guidance on how to rebuild your credit after such a situation.
Immediate and Long-term Impact of Written-off Accounts
When an account is written off, it reflects a serious delinquency on your credit report. This immediate decline in your credit score can occur as soon as the account is marked as written off. The impact doesn’t stop there. A written-off account can remain on your credit report for up to seven years, affecting your score during that entire period.
The Duration of Impact
The fact that a written-off account can influence your credit score for up to seven years highlights the long-term impact. During this time, lenders may view your written-off account as a red flag, making it harder for you to obtain new credit or loans. This can severely limit your financial options and affect your ability to finance important purchases or business ventures.
Impact on Future Borrowing
Given the duration of the impact, lenders are more likely to assess your creditworthiness by considering the written-off account. This could result in higher interest rates or even rejection of loan applications. Additionally, if you attempt to obtain a loan or credit card after a written-off account, the impact on your CIBIL score could prevent you from qualifying for favorable terms or even having the application processed.
Rebuilding Your Credit Score
While the written-off status will undoubtedly hurt your credit score, there are ways to rebuild it over time. Here are some steps you can take:
Timely Payments: Make sure to pay all your remaining credit accounts on time. Delinquencies or late payments can further harm your credit score. Reduce Outstanding Debt: Pay off as much debt as possible to clear the outstanding balance. This not only helps with your credit score but also reduces the financial burden. Avoid New Delinquencies: Be diligent and avoid any new delinquencies or late payments. Clearing your outstanding balances and maintaining a good payment history can begin to improve your score.Understanding Written-off Status
It’s important to understand that a written off status means you were not able to pay your loan or credit card. Financial institutions consider it a bad debt and will mark it on your credit report. This action does not mean that they won’t ask for payment anymore.
If you have a written-off credit card, the card will be permanently blocked. However, you are still obligated to pay the full outstanding balance immediately. Missing payments can lead to a rapid decline in your credit score, with each month of non-payment causing a significant drop.
The Process of Written-off Accounts
When you miss a payment, your credit score will drop significantly. The impact is compounded each month you continue to miss payments. For example, if you miss a payment on January 1, your credit score may drop 30 points. If you miss the next payment on February 1, your score can drop an additional 60 points. Each subsequent missed payment will result in a further 30-point drop. This vicious cycle can severely damage your credit score.
A settlement can be a solution to avoid this constant anxiety and debt stress. While a settlement might cause a significant drop in your credit score, it can prevent further damage. Once you settle your debt, you can focus on improving your credit history by paying your remaining obligations on time.
Conclusion
The written-off status on your loan or credit card will indeed affect your CIBIL score, but you can take steps to rebuild your credit over time. Be proactive in managing your finances and making timely payments to improve your credit score. If you find yourself struggling with debts, seeking professional advice or consulting credit counseling services can also be beneficial.