Sumit is negotiating to buy a property. He is a lawyer with a good income. He has been saving up for some time because he plans to build assets and set up a small side business in the future. However, when he approaches his bank for a loan to fund his business, he is refused as he does not have a good credit score. This is the result of an unpaid credit card bill that he had completely forgotten about. What should he do now?
Sumit should know that the process for sanctioning loans has changed. There was a time when it was easy to acquire loans and credit cards with limited documentation, but now banks refer to the credit information bureaus to check the credit history of a borrower. If the borrower has a poor record of repayment, or instances of default, banks may refuse loans. Sumit should have a clean track record as a borrower, to get loans as well as a good rate on his borrowings. This is even more important as he plans to borrow for his own business, and might need more credit later.
Sumit can request for a credit score from the credit information bureau. He should then initiate the process of cleaning up his records. He should get in touch with the bank whose credit card payments he defaulted on, and seek a negotiated settlement. He should also request the bank to notify the bureau in order to modify his credit score. He can then go back for new loans.
One should keep in mind that good credit habits are immensely helpful when applying for loans. Sumit can avoid delays in processing if he has a good credit history. As a professional with varying income levels, who might need more loans in the future, it is crucial for him to establish his credibility as a borrower. A healthy credit score is the first step towards this.
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