Life is so unpredictable. One bend round the corner in life’s journey and it can completely derail your aspirations. It so happened with Jitesh Motwani. This is his story.
Jitesh Motwani, had prepared a huge bucket list of things he was certainly going to do in 10 years. Comes the recession of 2008 and he lost his job. His bucket list went out the window when he couldn’t find a job for the next nine months. In the absence of income he began to default on his ICICI Bank Personal Loan despite having clean intentions to meet his obligations. But circumstances were such that he couldn’t repay his outstanding credit card bills and his personal loan of Rs. 50,000/-.
Collection agents began to bother him so he avoided all bank calls. Soon he moved cities in search of employment. And as life has it, things don’t remain the same for too long. By 2011, Jitesh had picked up the reins from where he left and was going steady at work. Soon he left the past behind him including his debts. He never thought about those horrible days and did not want to contact the bank fearing the agents would be back to hound him.
Got married by the end of 2014 and with Priya’s salary adding to family income, things became sunnier. Soon they were planning to buy a car and Priya wanted a car from the sedan segment. Jitesh said a smaller car would be more like it for he was not sure if they should apply for a loan, especially with ICICI. He feared his past pending debts with ICICI would resurface. Finally they agreed on a bigger car and a HDFC Car Loan.
Jitesh was sure things would be fine since ICICI was out of the picture, yet he crossed all his fingers. If only HDFC did not check his background they would get a loan smoothly. If only HDFC would understand that the Motwanis had every intention to repay their debts. Priya was in tears when their loan application was declined due to Jitesh’s bad CIBIL score.
It was now a matter of pride for Jitesh and he assured Priya that there were many fishes in the sea. This time they will apply to another bank for a loan. Some bank will certainly give them a loan without doing a background check. This time Priya was not sure it was such a good idea.
Unfortunately, all of Jitesh’s auto loan applications came back negative. In this process his score went from bad to worse due to many lender inquiries. He finally gave up. That is when Priya suggested they must seek expert help.
How seeking professional guidance helped
When the credit counsellor first set his sight on Jitesh’s CIBIL report, it was severely ravaged. Red flags everywhere and a miserably poor score. It was a sorrowful sight for he was a man clean at heart but a victim of circumstances. All he wanted was one bank that wouldn’t probe his past. He was explained that it wasn’t going to happen. Every lender would undertake an examination of credit history.
Lenders assess every loan application individually for every borrower is unique. They gauge every applicant primarily with two objectives:
While the ability is calculated based on income level and outstanding debt obligations, the intent is estimated using CIBIL reports. The thumb rule states if the borrower has fully repaid debts in the past then the borrower has proved his or her clean intentions. If you measure up well on both these parameters then you are eligible for a loan or else not.
Sometimes harsh circumstances deter a person from meeting financial obligations. At such a time the borrower must constantly stay in touch with lenders and at the first opportunity must repay the debt. Don’t carry the burden of debt for long.
It is delusional to hope that unpaid debts in the past would simply melt in thin air and not seen again.
The credit counsellor suggested that Jitesh and Priya must address to issue of past debts first and till that time they must not apply for any loans or credit cards. All efforts were directed at improving Jitesh’s score who began repaying outstanding on written off card bills and personal loan. They reviewed his credit report every quarter to ensure their efforts were paying off.
In the initial quarter there was hardly any difference. By the third quarter they could see a substantial change. By year end he was able to improve CIBIL score substantially. It was still a long way from 750 but they were on the right track. His score was now good enough for a car loan.
Of late they have been planning to buy a car and Priya wants a car from the sedan segment. Jitesh smiles. His debt obligations are truly in the past now.
‘Written by Arun Ramamurthy, Director, Credit Sudhaar & author of Unlock the Power of Your Credit Score: India’s first book on Credit Scores’