Loan Closed but Not Updated in CIBIL Report? What You Should Do

Generally, your loan closure is updated to the credit bureaus within 30 to 60 days of closure by the lenders; however, due to lengthy processing or reporting cycles, it may be delayed. If a loan reflects as an outstanding debt even after repayment, it can negatively impact your credit profile. It can also have an impact on your future borrowing opportunities. 

This blog explores the reasons why closed loans may not get updated in your credit report and what steps must be taken to resolve this problem.

Understanding Credit Reports
 

A CIBIL report, also known as a Credit Information Report (CIR), is a detailed record of a person's credit history maintained by TransUnion CIBIL, one of India's leading credit bureaus.   It provides detailed information such as your personal details, outstanding debts, credit card usage, repayment history, and any defaults. 

The credit report additionally includes the CIBIL score, which is a three-digit number that helps lenders assess your ability to repay a loan and your financial behaviour.

A good credit score can help you obtain loans at affordable interest rates, while a poor credit score can lead to higher interest rates or rejection of your loan application. The credit score ranges between 300-900, and ideally, it should be more than 700, as it would provide you with better financing opportunities.

Read Also: Essential Credit Score Monitoring Tips for Better Financial Health

Importance of Loan Status in CIBIL Report

You may wonder how accurate loan status matters to your CIBIL report. Here are some reasons why it is important:

1.    Impact on your CIBIL Score: If your closed loan is not updated to your CIBIL report, it will reduce your CIBIL score.

2.    Affects the New Loan Approval: Lenders will analyse your CIBIL report before taking a decision on your new loan application. When the CIBIL report reflects an outstanding loan, lenders may hesitate to offer you a new loan, as taking on more debts will increase your debt-to-income ratio. Also, lenders may offer new loans at higher interest rates.

3.    Credit Utilisation Ratio: The credit utilisation ratio is the proportion of your available credit limit that you currently use. If your closed loan is still showing active in your CIBIL report, it may indicate increased utilisation of credit, resulting in a lower CIBIL score.

4.    Financial Credibility and Trustworthiness: An active status on a completed loan might misrepresent you as a high-risk borrower, affecting your credibility with lenders, as well as at a time of seeking new employment or during background checks for a rental house.

Why a Closed Loan May Not Get Updated in CIBIL Report?

Here are the reasons why your closed loan may not get immediately updated to your CIBIL report:

1.    Lenders Reporting Late: If your lenders are reporting late about the closed loans to the credit bureaus, it can result in a delay in the processing time or system updates by the credit bureaus.

2.    Improper Loan Closing Documents: Submitting incomplete or incorrect loan closing documents to your lenders can also result in a delay in updating closed loans. Therefore, provide the correct documents to your lender on time.

3.    Errors by Credit Bureaus: Sometimes, it may happen that a particular credit bureau may have a technical glitch or make a mistake while processing your information. This will lead to a delay in updating the closed loan to your CIBIL report.

4.    Pending Loan Settlement Charges or Dues: If there are any outstanding charges, late fees, or payments in partial amounts, the lender will not mark the loan as paid off in the credit report.

5.    Disputes Under Review: When you or the lending institution submits a correction request for any dispute to the credit bureau, the closed status may not be reported until the issue is resolved.

Steps to Take if a Closed Loan is Not Updated in CIBIL Report

Even if your loan is entirely repaid, your CIBIL record may still display it as active. If this occurs, take immediate action to ensure that your credit report truly represents your current debt status. Here are the steps to follow:

1.    Check your Loan Statement and Documents: Confirm that you have fully repaid your loan and have received all loan closing documents from your lender. Also, make sure to check the loan closing date and repayment details.

2.    Contact your Lender: Contact your lender to ensure that they have notified the loan closure to the credit bureau. Delays may occur because of late reporting or difficulties with processing on the lender's end.

3.    Submit Correct Loan Closure Documents: For a timely and correct update of your loan closure to CIBIL, submit correct and complete documents to the lender.

4.    Raise a Dispute with CIBIL: You can file a dispute with CIBIL directly through their website if the lender certifies closure; however, the report still indicates the loan is ongoing. Submit every supporting document, such as the statement of accounts and your loan closure letter.

CIBIL generally takes 30-45 days to resolve the dispute. During this time, they may contact your lender for any clarification or verification, such as cross-checking the document information to prepare the correct CIBIL report.

5.    Follow Up Regularly: Until the loan closure is updated on your CIBIL report, keep track of your CIBIL score. Also, stay connected to your lender and CIBIL for a correct and updated CIBIL report.
If the update process is complete, CIBIL will notify you, and you can observe the changes made in your CIBIL report. The update of the loan closure to your CIBIL report will also positively affect your CIBIL score. 

Also Read: Advisory: Personal Loan Mistakes That Affect Your CIBIL Score

To Conclude

A closed loan that is not updated in your CIBIL report is a matter of concern and should not be neglected. Maintaining a high credit score and reflecting your genuine creditworthiness requires regular monitoring and timely changes. 

You can ensure that your records remain accurate by reviewing your credit report regularly and resolving any discrepancy. You can check your free CIBIL score in just a few taps on the Poonawalla Fincorp website. Try now to check your latest score for free.

Frequently Asked Questions

Should I contact my lender or CIBIL if my closed loan is not updated in the CIBIL report?
It’s always suggested to reach out to your lender first, as CIBIL just updates information provided by the lending institution. 

What documents should I preserve once a loan is closed?
Always get the loan closure letter, the No Objection Certificate (NOC), and the account statement with a zero balance. In the event of disagreements, these serve as evidence.

Is it possible to raise a dispute with CIBIL directly if there is any loan closure issue?
Yes, you can submit an online objection to CIBIL with attached documentation, such as an NOC and closure proof, if your lender failed to update your record.

What can be the impact of not updating a closed loan in CIBIL on future car loan approval?
If your loan is closed in reality, lenders may still consider it as active or overdue in your CIBIL report. This will reduce your car loan eligibility and lead to higher interest rates or even rejection of new loan applications.

How does a closed loan in CIBIL impact future loan approvals if not updated?
Lenders believe you have more outstanding debt than you actually have if your report still indicates an ongoing loan that has been closed. This may affect your eligibility or the amount of the debt consolidation loan that is approved. Prior to applying for new loans, it is essential to make sure that your CIBIL report has been updated accurately.