You took the loan with full honesty, but due to some special reason, you could not repay some EMIs on time. Later, when you check the CIBIL report for a new loan or credit card, you are surprised to see the Written Off status. Is there no need to pay EMI now? Is the loan completely exhausted? And will it become difficult to get loan further? The truth is that Written Off in CIBIL does not at all mean that your loan is forgiven or extinguished. It simply means that the bank or lender has recorded the loan as a loss in its accounts due to non-payment for a long period (usually 180 days or more). Let us understand here what is Written Off in CIBIL, what is its impact on your credit score, and what are the practical ways to improve it.
Understand the meaning of ‘Written Off’ in CIBIL
According to herofincorp, when a borrower is unable to pay loan or credit card installments consistently, the lender declares the account written off after several reminders and recovery attempts. This is the accounting process of banks – they write off the amount as loss with little hope of recovery. This information is then reported to CIBIL (Credit Bureau), and Written Off status appears in your credit report. The thing to note here is that this status does not indicate that the loan has been waived off. You still remain legally responsible for the entire outstanding balance. The lender or recovery agency may make recovery efforts in future also.
Consider Written Off as different from Settled (agreement on partial payment). In Written Off the bank gives up the recovery, whereas in Settled you settle the matter by paying less amount. Both are negative, but after full payment the status can be changed to Closed or Written Off Paid.
Impact of Written Off on CIBIL Score
Written Off is a serious negative mark as it indicates non-payment for a long period of time. This has many serious effects. Your CIBIL score drops significantly (sometimes by 100 points or more).
There is difficulty in getting a new loan, home loan, personal loan or credit card – banks either refuse or charge very high interest rates. In future, there may be problem in increasing credit card limit or other financial facilities. This status can typically remain on your report for 7 years from the date of default, even if you make a payment later. However, by taking action at the right time, you can get this status updated and gradually improve your credit profile.
How to correct Written Off status from CIBIL?
step 1: Download your report from the official website of CIBIL (cibil.com). Check carefully which account is written off, what is the outstanding amount and what is the date of default.
Step 2: Talk to the lender (bank or NBFC). Get accurate information about the outstanding amount and ask about payment options. If possible, try to pay the full amount – this is better than a partial settlement.
Step 3: After paying the entire amount, ask for a No Dues Certificate (NOC) in writing from the lender. Request them to update the account status to Closed or Written Off (Paid) and send this information to CIBIL.
Step 4: If not updated then file a complaint with CIBIL. File a complaint in the “Grievance” or “Dispute” section on the CIBIL portal. Attach NOC and proof of payment.
Step 5: It may take 30 to 45 days or more for the update to take place. Keep checking the status of the complaint and contact the lender again if necessary.
Important things to keep in mind
- Only the lender has the right to update the status – CIBIL itself cannot change it.
- In case of partial settlement, the status may become Settled, which remains negative. Therefore it is better to pay the full amount.
- Always keep the written proof (NOC) after payment.
- Even after correction, the old record may remain visible for 7 years, but the score will gradually start improving.
- In future, always pay EMIs on time, take loan as per your income and keep checking CIBIL report regularly.