Do you know the effect of a derogatory remark on your credit report?
Satish, a software engineer from Mumbai, had applied for a home loan from various lenders but faced only rejection. He had a credit score of 800 yet his loan applications were rejected. He couldn’t understand the reason. He spoke to his banker friend who told him the reason for his application rejection. It was then that Satish found out that the reason for his loan rejections was a derogatory remark in his Credit Information Report (CIR). He had availed a personal loan ten years back and defaulted on its payments for a long time after which the loan was settled on a lower amount. The credit report mentioned this negative remark which was making lenders reluctant to lending a loan to Satish.
Here’s what a derogatory remark is and how it can affect your score:
A negative remark in your credit report is called a derogatory remark. Your credit report lists all previous and existing credits which you have on your name. If you have a bad credit history pertaining to any particular loan or credit, such history would be reflected negatively in your credit report in the form of a derogatory remark.
How does it affect your loan eligibility?
Whether or not you would get a loan depends on the remarks mentioned on your credit report. Though a good credit score is important, it is not sufficient. If, against a good credit score, you have a derogatory remark in your credit report, there are high chances that your loan application would be rejected. Just as Satish found out to his regret, a derogatory remark of his earlier loan being settled adversely affected his loan application eligibility.
Which remarks are considered derogatory?
There are many types of remarks mentioned on your credit report which are considered derogatory. Some common remarks include the following:
- Suit Filed – a seriously damaging remark, Suit Filed means that you didn’t repay your loan and the lender had to file a suit against you to collect its dues.
- Written-off – when the lender writes off your loan account because of being unable to collect the outstanding amount from you. It is called a loan written-off.
- Post (WO) Settled – this means that the lender wrote off your loan and then the loan was settled between you and the lender at a reduced amount.
- Adverse remark for Days Past Due (DPD) – DPD is the number of days beyond the repayment date for which the repayment is due. If you repay your instalments within 90 days, it is categorized as STD (Standard). A STD remark against the DPD is good. However, if you get any other remark, like SUB (substandard wherein repayments are made after 90 days), DBT (doubtful wherein your account is considered substandard for 12 months) or LSS (where your account is uncollectible and considered as Loss), it would be considered as a derogatory remark.
Where you can find your credit remarks?
The ‘Account Information’ section of your Credit Information Report (CIR) shows the various remarks, favorable or derogatory. This section contains all your loan account details, the types of loans you have availed, the type of ownership of your loan, the loan account opening date, current balance, if any and your repayment history.
Is there a way to correct the derogatory remarks in the credit report?
Any derogatory remark which you have in your credit report stays there for quite a long period of time. As long as the remark stays, it jeopardizes your chances of availing a loan. So, try and avoid causing any type of derogatory remarks on your credit report by making timely repayments on all loans which you avail.
The Final Word
Satish got his lesson. He swore never again to default on his loans anymore to avoid any additional remarks in future. A derogatory remark is a crippling factor in your credit report. It affects your loan eligibility adversely and should be avoided at any cost. Though you might get a personal loan with bad credit, a derogatory remark might be a drawback. To find out whether you can apply for personal loan, you can check your personal loan eligibility. So, in the meantime, be wise and take precautions to avoid any such remark in your credit report.