Positive credit history in most cases - a guarantee of approval of an application for receiving money from the bank. Even if you don’t have a stable income, you have a chance to get a loan. If you have a bad credit history, then you automatically end up on the so-called “black list”.
Formation of a credit history
According to the law Russian Federation all information about borrowers is collected in single base data. A special credit history bureau collects and stores data. Each bank sends information about its clients there. And he also has the opportunity to request it about any borrower.
The following must be remembered:
- Changing or correcting history is quite difficult (although not impossible);
- Data is stored for 15 years, so don't expect to be "forgotten";
- When changing your passport, place of residence, last name, etc., the history is not “reset”;
- Any bank and any credit organization can get access to information.
Credit history contains not only negative, but also positive points. In fact it's kind of valuable asset borrower. Having earned a good reputation, you can count on more favorable lending conditions. Therefore, you should take care of the “purity” of your credit history.
Checking status
Not only the bank, but also the borrower himself has the right to access information. You can do this in the following ways:
- Send a request to “your” credit institution. Once a year, everyone can receive information for free;
- Take advantage paid service at any bank or any bureau.
There are several organizations involved in collecting and storing information about borrowers. This complicates matters somewhat. You can find out exactly where your credit history is stored on the Central Bank website. There is a special section there - “obtaining information about the Credit History Bureau”.
Credit history information is provided in the form of a three-part report. The title part contains personal information about the borrower. The main one includes information about loans and their repayment. The last one contains information about the lender.
Why is it worth checking your CI?
It is useful to have a credit history on hand. Especially if there is a trial with the bank or you need to challenge the bank’s decision when refusing a loan.
Correcting your credit history
If you have a bad credit history, it becomes difficult to take out a loan. It is necessary to take measures to correct the situation.
If you can prove that there are errors in your credit history, they will correct it for you. Such situations happen. For example, the bank did not credit the borrower’s contribution on time. If the delays arose through your fault, then no one will correct anything.
So how to fix your credit history in this case?
A person must prove his trustworthiness. There are several methods you can use:
- Prepare certificates of timely loan repayments from other banks;
- Demonstrate that there are no debts on utility bills;
- Provide information about new job with stable pay.
In this case, even timely paid alimony and fines to the traffic police help. The most important thing is to achieve negotiations with the bank. In other words, you must prove your worth and reliability.
Any citizen of the Russian Federation who uses various banking services has a credit history. It is stored at the credit bureau, where financial institutions transmit information about borrowers and from where they themselves receive information about the client they are interested in. In this article we will understand what a bad credit history is and what it means. What credit file is considered bad and what the consequences may be.
What credit history is considered bad?
Depending on how well the borrower repays the loan, the credit score can be good, average or bad.
A credit history is a document that consists of three parts and contains the following information:
- Full name of the borrower, passport details and registration address;
- obligations under loan agreements;
- the terms within which the client took out and repaid loans;
- changes in timing;
- payment schedules and information about their execution;
- data on litigation regarding debt.
This information helps to judge how conscientious the borrower is and how he fulfills his obligations under the contract. This information is very important for banks. They always pay attention to the borrower's credit history before approving a loan application.
Depending on how conscientiously the borrower repays the loan, the state of his credit rating can be good, average or unsatisfactory (poor).
A good credit history is formed when:
- Payments are made on time and in full.
- There are isolated cases of delays, not exceeding a total of 30 days.
Loan servicing is considered average if:
- Payments are made at the expense of Money provided by a credit institution (if it has assumed such obligations) or at the expense of collateral.
- The loan was restructured.
- There are delays of more than 60 days.
- The loan was provided to the borrower to pay off previous debts.
- Payments were overdue by more than 60 days.
- The loan was restructured, and there are also arrears under the new payment schedule.
- The loan was provided by a credit institution to repay a loan that already had problems (late payments).
Causes
Credit history can be damaged due to:
- borrower;
- creditor.
The borrower spoils his CI by:
- Fails to make monthly loan payments on time.
- Regularly allows delays of more than one month.
- Implements mortgaged property, brings the matter to trial, not wanting to cooperate with the bank.
Any negative fact entered into your credit history will affect future relationships with banks. If late payments occurred rarely and were short-lived, the chances of taking out a loan from another bank are very high. If the borrower did not make monthly payments for a long time, avoided communicating with the bank, or brought the matter to court, the chances of getting a loan in large bank on good conditions are equal to zero.
Sometimes your credit history can be damaged due to the fault of the lender. These are situations when bank employees transmit erroneous information to the BKI. For example, a bank client at the last moment changed his mind about taking a loan, but the data had already been transferred to the bureau. In this case, an unclosed loan will appear in the file. There are times when operators make mistakes in dates or numbers.
To avoid becoming a victim of accidental mistakes, it is recommended to contact the BKI once a year and check your credit rating. If an error is discovered, you can immediately submit an application, and the bureau employees will clarify the real state of affairs with the bank. If false information is confirmed, a fine will be imposed on this bank or BKI.
Bad credit history - consequences
Having ruined his reputation and been refused by several banks, a person begins to wonder how credit history is adjusted and what to do if he plans to borrow a large sum in the near future.
For 2020, the conditions for correcting a credit history include traditional credit recovery tools, however, there are important nuances that must be taken into account when choosing methods for correcting entries in the credit history book.
Is it possible to change your credit history?
If unpleasant moments have accumulated in the past when it was necessary to resolve the issue of closing an overdue debt, then the issue of correcting the CI is not idle, and the next time you apply, the risks of being refused increase many times over.
The first thing banks pay attention to is an extract from the BKI with the credit dossier of the candidate for a loan. If borrowers spoil the CI by frequent delays, the chances of successful approval rapidly decrease. What to do if banks do not give loans due to a damaged credit score is determined taking into account the individual situation and the reasons that led to the fall in the credit rating.
Cannot be changed within short term attitude towards oneself after late payments and refusals to repay. I'll have to go to additional expenses associated with interest overpayments and strict lending conditions. This is the real price to pay for whitewashing your own mistakes. If someone offers to fix the problem in an instant, this at least means trouble with the law. Thus, the client is blacklisted by banks and will not be able to achieve a positive response for a long time.
To avoid unexpected problems, you should periodically check your credit history online. Sometimes this source contains extremely unpleasant information about the presence of outstanding debts, lawsuits, and late collections. This happens when, during information exchange, bank and BKI employees make mistakes, when a negative entry about a namesake is created using the last name of a completely different borrower.
Frequent errors that lead to the need to correct CI are:
- Incorrect transfer of the borrower’s personal parameters (city, address, full name) into the BKI database. These errors are identified quickly, and the bank does not object to correction.
- Errors in recording the moments of loan repayment. Some lenders, intentionally or not, do not share closing information. credit debt. BKI considers the debt overdue, and the bank has not been interested in the former client for a long time. Usually mistakes are accompanied by the deprivation of a license and the introduction of a temporary manager.
- This is pure fraud, when scammers obtained personal information or used fake documents to obtain cash from a bank in someone else’s name. After some time, the bank begins to worry about the lack of payments, but the scammers disappeared without a trace, instructing the victims to get out of trouble on their own.
There are also cases where the client could not influence the payment deadline in any way (force majeure circumstances arose, and the borrower did everything in his power to transfer the payment on time). Seeing a sincere interest in a peaceful resolution of the issue, the lender is ready to meet the borrower’s request and leave the fact of the overdue payment unnoticed.
If a person is truly not involved in the negative entry that appears and has not violated the terms loan agreement, you will still have to initiate proceedings with the bank. No one will voluntarily be interested in discrepancies in data if the client himself does not pay attention to it. In a written request, the borrower asks to check the information and make corrections based on updated supporting documents.
Having monitored the registration of the incoming application, the borrower waits for the bank to sort it out and independently remove the negative entries. If the bank insists on the borrower’s involvement, there is nothing left to do but go to court and demand restoration of the CI as part of the lawsuit.
If a negative entry appears in the CI, the bureau (NBKI, OKB or other organization) will store the information for 15 years. It is unlikely that such a correction period will suit future borrowers. There is a desire to quickly remove the yoke of an “unreliable client”, regardless of how much this service costs. On the Internet you can find companies that are ready to make changes to the database right now, canceling negative information about the delay.
The law does not allow stories to be corrected unless there are objective grounds for doing so. If there are no errors in the client’s dossier, remove references to delays in an official manner no one can. Only by gradually and step-by-step repayment of several loans, without delays and claims from the bank, can additions be made about successful repayments. This is the only correct course of action.
If someone suggested solving a problem with a credit dossier, you need to understand that only a limited circle of authorized persons of the bureau have access to the BKI database; the information is reliably protected from penetration by fraudsters. By agreeing to the mechanical deletion of records, the borrower will make a mistake by participating in a criminal act.
Methods for free CI correction
If the borrower finds that he can no longer use favorable conditions lending, and banks refuse one after another, it’s time to think about the reasons that provoked such an attitude of creditors. There are several ways to correct CI for free, using available credit instruments, where the requirements for borrowers are minimal and overpayments are the highest.
The easiest way to restore your credit rating is to start using a credit card and pay your monthly fees on time. In standard situations, 5-6 payments are enough for the former delay to be forgotten. If you have accumulated long-standing debts that are overdue for more than a month, updating your records is not so easy. It may take a year of payments for the story to become good again.
A credit card should be used very carefully, since new non-payments will only aggravate the problems. You can make a profit from issuing a new credit card by saving interest and receiving bonuses if you pay attention to:
- Maintenance cost.
- Availability of free options.
- Connection to Internet banking.
- Accumulation bonus points or rubles, which are then spent on paying for goods and services of the bank’s partners.
- Availability of a grace period of 55-60 days for non-cash purchases with a zero interest rate.
With proper setup of work with a credit card, it is possible not only to correct the CI, but also to make money on lending by depositing funds in a timely manner before expiration grace period. It is important to ensure that the balance of available funds is line of credit did not drop to 30-50%. This way the borrower will convince the bank that there is no urgent need for funds and that there is a stable, sufficient income.
An alternative to an open credit card would be participation in one of the existing credit recovery programs. Sovcombank launched special program“Credit Doctor”, designed to “treat” bad credit histories. The cooperation scheme offers to improve the reputation of a defaulter free of charge through active participation in short-term loans. By gradually increasing the limit amount, the bank gradually regains lost trust in the client. A step-by-step description of the product is provided on the bank’s online resources.
Credit lines barely exceed 5-10 thousand rubles, and only a few months are allotted for repayment. A serious disadvantage is high percent, charged by the lender.
It’s even easier to get a limit agreed upon through a microfinance organization, but a loan from a microfinance organization can hardly be called profitable. When contacting an MFO to restore your credit history, you should first calculate how much it will cost to restore your reputation as a reliable payer. The amount of overpayment is calculated for each day of use of the borrowed amount, and there is practically no time left for repayment.
You should not contact an MFO if:
- there is no certainty of a full refund of the amount before the expiration of the contract;
- there are risks of delays in revenues and debt formation;
- The MFO does not work with BKI and does not transmit information about repaid obligations.
If payment terms are acceptable, strict adherence to repayment and closing procedures is closely monitored credit account. The advantage is the possibility of round-the-clock registration within 5-10 minutes.
If an error is identified in the CI and he realizes that he is right, the client files a lawsuit demanding that the record be corrected, eliminating negative reviews. Since the creditor is initially considered responsible for the correction, a pre-trial claim is submitted to the head of the banking institution, where they explain and prove in as much detail as possible why it is necessary to introduce a change in the BKI. The bank itself does not have the right to initiate actions with the file in the credit history bureau without coordinating them with the borrower.
Typically, the reason for invalidation of a record through a court is technical errors, or bank employees themselves make mistakes when indicating the name of the borrower, the amount and payment term. We should not rule out the intervention of fraudsters who obtained passport data and used credit funds at our own discretion.
Open a bank deposit
If the problem is with a damaged credit rating limited to a few late payments in the distant past, it is more profitable to try to extract additional benefit from holding funds on bank deposit. If the account has not yet been opened, you should contact the bank with favorable credit programs, hoping to ultimately establish mutually beneficial cooperation and receive an individual offer for lending to an existing client.
When the reason for a bad credit history is related to the need to service several loans at once, it is worth trying to even out the situation through refinancing. The borrower applies to the bank with an application to combine several loans into one loan through a refinancing program.
In addition to the established repayment of inconvenient payments, the borrower saves on overpayments, since most refinancing programs offer a reduced rate. Once back on schedule, it is important to avoid further delays. It will not be possible to refinance the debt again.
If life circumstances have led to the fact that all banks refuse to lend funds, you have to look for alternative options that will help cope with the difficult financial situation by mobilizing other resources. With total delays, there is no point in hoping for a quick restoration of reputation, but there is hope in a couple of years to plan a large purchase, starting to improve from now on.
People who do not use borrowed funds may not even be aware of the existence of the Credit Bureau and what a credit history is. However, those who are planning to take out a mortgage should study this issue in more detail. The fact is that when checking an applicant for such a large and long-term loan, even the slightest black spots in his credit history can cause a refusal. We’ll talk further about what a bad credit history means.
What is credit history and how is it formed?
The concept of the term credit history is deciphered in Law No. 218-FZ of December 30, 2004 “On Credit Histories”; the procedure for creating/liquidating and regulating the activities of the Credit History Bureau (BKI) is also spelled out there. According to this normative act, is information that reflects the borrower’s fulfillment of loan obligations, stored in the BKI. It consists of open and closed parts. The open part of the credit history contains personal information about the borrower (full name, passport details, registration address, etc.), as well as data on the fulfillment of loan obligations, in particular:
- total loan amount;
- total period of use of borrowed funds;
- loan interest repayment period;
- making changes to loan agreement, including regarding increasing the loan repayment period, etc.;
- date and amount of actual loan repayment by the borrower;
- repayment of the loan using collateral (if any);
- facts of litigation regarding the execution of loan agreements.
The closed part contains information about credit organizations, with whom the borrower dealt, as well as about all entities that requested information about him from the BKI. is formed on the basis of information submitted to the BKI by creditors. It is worth noting that since 2014, not only banks, but also credit cooperatives, as well as microcredit organizations are required to cooperate with BKI. At the same time, there are about 23 CI Bureaus operating in Russia today, and not all of them have integrated databases, and banks, as a rule, work with only a few of them. Consequently, different BKIs may contain different information about the borrower.
Reasons for bad credit history
Credit history can be damaged:
- due to the fault of the creditor;
- due to the fault of the borrower.
The bank is able to spoil the borrower’s credit dossier for the most part by transmitting false information about his credit obligations to the BKI. For example, there may be a case where the borrower agreed to receive a loan, but ultimately decided not to take it, and an overly proactive bank employee has already transferred the data to the BKI. Thus, an unclosed loan may appear in the file of a failed borrower. Errors may be of a different nature, but the essence remains the same - the borrower should not count on receiving a new loan until he corrects the situation.
As they say: “saving drowning people is the work of the drowning people themselves,” the borrower himself will have to correct the bank’s mistakes. To do this, you will need to contact the bank from which the BKI received false information, with an application to transfer data about the true state of affairs to the bureau. It is for this reason that experts recommend that borrowers look into their credit file information before applying for a mortgage or other large loan. Moreover, once a year the borrower can do this for free.
As for the borrowers themselves fulfilling their obligations under previous loans, the following facts can spoil the credit dossier:
- any delay in making monthly payments;
- the presence of regular or long-term delays;
- loan repayment through the sale of the collateral and litigation under loan agreements.
The prospect of you receiving a new loan will depend on how poorly your relationship with the previous lender ended. So, if a loan payment is late by no more than 5 days, and if it is repaid carefully and completely, the likelihood of being denied the next loan is small. Regular or long delays guarantee that you will be refused a loan from a large bank on standard terms, but you may be able to get a loan at a high interest rate from a small lender. But the categorical non-repayment of the loan ended legal proceedings, will probably block your access to new bank loans.
How to fix your credit history?
In order to correct your credit history, after closing an unsuccessful loan, you need to take out several more loans on time and repay them carefully. This will improve the overall impression of the borrower's file. In addition, if there is a logical explanation for the presence of overdue loans, then, in addition to other documents, it is worth attaching evidence that problems in the credit history are caused by objective or circumstances beyond the control of the borrower. For example, it could be a total delay wages during a crisis or serious illness of a close relative. This way you will show the bank that you yourself are a fairly disciplined and responsible debtor, but in in this case Factors beyond your control played a role.
In addition to justifying negative aspects in your credit history, you can submit invoices to the bank for payment utilities or communication services that will demonstrate your high financial discipline. If there was a slight delay due to technical or other reasons, you can try to immediately agree with bank representatives so that they do not transfer this information to the BKI (although the chances that they will meet you are low).
There are also illegal ways to clear your credit history. Some organizations undertake to do this for quite decent money. Also a number credit brokers offers to improve the borrower’s credit history for a percentage of the transaction amount with the bank. However, when turning to such organizations, remember that any illegal actions sooner or later risk being discovered, and then the bank will not only refuse to issue you a loan or demand its early repayment (if the truth became clear after receiving the loan), but will also put you on the bank’s blacklist , which will prevent you from taking out any loans at all from any credit institutions.
