Do not be surprised if your loan application is rejected even after you have paid off your much due credit card outstanding balance. The bank might have called you and given you an option where you could just pay a specified sum, in return for a settlement letter. Once you do that and get the settlement letter, it doesn’t for a moment mean that the slate has been wiped clean. You apply for a personal loan or a home loan and the lender will simply let you know that it isn’t interested in lending to you because your name comes up in the Defaulters list on the Satyam or CIBIL list.

When you go in for a settlement, banks can and will legally report you as a defaulter - to the extent of the dues foregone by them - at the credit bureau. All details concerning your default stay at the credit bureau for 7 years. You must understand that you CANNOT remove your name from this defaulters’ list. It will be removed from the list only after seven years, provided you do not default on any subsequent loans (if you manage to get it, that is). What you COULD do is to try applying for a secured credit card - a card that is offered against your term deposits at the bank. This type of card is available at many banks. Build a good credit record with it. This will not remove your name from CIBIL defaulter list but it will improve your credibility in your credit report. This would also increase your chances of getting credit facility from various banks at decent terms in future.

Know your rights as a credit card customer. Because, it is not just that your payment record is independent of anything else. Your payment record can affect your financial planning, such as loan applications.

Consider the consumer who has been pristine in keeping up card payments, without defaults and on time. This person has a personal loan as well which he has been exemplary in keeping up with EMI payments. Now, if this person were to default on just one payment, his credit rating goes for a toss. The next credit card he applies for, nine out of ten times he would be rejected as being a defaulter.

Credit rating agencies do not capture the accent of defaults. One-off defaults are given the same weightage as serial defaults. Which means, in the above-mentioned example, the guy is on par with the slacker who has taken a personal loan, defaulted multiple times on his repayments and is waiting for divine intervention or daddy to get him through to safe ground.

The sad part is we cannot do anything about this. But there is an indirect way of dealing with this. Always be aware that you are well within your rights to know the reason why your credit card application was rejected. The RBI, on 24 July 2008, has issued fresh guidelines for the credit card issuers that the issuers should not reject a credit card application without assigning reasons in writing. So if the bank refuses to give a reason for the rejection, you can and should approach the Banking Ombudsman (www.bankingombudsman.rbi.org.in)

Are you aware that if you have a credit card from the bank that you have an account with, the bank is under no legal obligation to inform you before debiting your account towards your credit card outstanding?

For instance, let’s assume you have a credit card from the bank where you also have a savings account. You swiped your card towards a few purchases and ran up a hefty bill. Your credit card bill has come in. And the next one. And the next one. You have not paid off the dues despite repeated instructions from the bank.

The bank is now well within its right to freeze your account and debit a portion of the outstanding. These debits will continue until the outstanding is fully paid off. Meanwhile, you will not be able to operate your account (except perhaps to deposit money into it!). Once your dues are cleared, you will retrieve operating rights on your account.

Banks usually resort to this extreme after repeated letters and warnings. Note that the letters and warnings DO NOT warn you that they are going to dip into your savings account. That’s a surprise that will come completely undiluted once you line up at the bank ATM to withdraw much needed cash. Therefore, make sure that you pay at least the minimum required payment towards your credit card outstanding. Banks love customers who keep paying minimum payments. It means that the outstanding balance keeps collecting interest and let’s face it, banks love interest payments.

I was using a HDFC credit card issued in Hyderabad. I have been constantly travelling and shifting places as a part of my job requirement. In the meanwhile, I have ended up defaulting, not having made a payment due, even after four months passed by. A couple of months later, the collection agents called me for regarding the payments due. I made the payment promptly. My card is still blocked and I believe they have marked me as a defaulter in the credit bureau. As a result, I am not getting any other credit card. I requested them to unblock the card which didn’t happen (don’t know the reason). I am not receiving any statements from them and I am being told to make the payment due (which is not a fact).

I am charged a hell lot of amount as late fees and all, whereas they don’t care to send me a statement. I have logged a complaint in their website recently and am waiting for a reply. I don’t think this is a fault all from my end. Please advice me how to deal with this and what to do about the Credit Bureau?