Being one of the leading RBI-regulated credit bureaus in India, TransUnion CIBIL regularly upgrades and implements new changes in their credit reporting format. As a consequence, recently you may have acquainted with a new terminology “Written off and Account Sold” which might appear on an account that was previously reported as written off due to default. No doubt, a ‘Written off’ status has a severe negative impact on an individual’s creditworthiness, but what about “Written off and Account Sold”? What does it actually mean?
Can you remove Written off and Account Sold status from CIBIL report? Here, in this article, we have covered all the points in detail, so that you can get a better understanding on the topic and deal with the situation accordingly.
What does it mean by “Written off and Account Sold” status in a CIBIL report?
Let’s start the discussion by understanding the terminology “Written off and account Sold” as a Credit Facility Status in an individual’s loan account. If you notice carefully, this phrase comprises two terms: one is “Written off” and the other is “Account Sold”.
Typically, when an individual fails to pay his loan EMIs or Credit Card bills for a long time (means 3 months or more), his loan account is treated as an NPA (Non-Performing Asset) or loss.
After a certain period of time, when the lender finds that the chances of recovering the debt are very minimal, they remove such bad assets from their books of account. This process of eliminating the bad assets from the balance sheet is known as Write-off. Simultaneously, the lender reports to the Credit bureaus and updates the loan status as “Written-off”.
At this point, the lender may take any of these approaches to recover the loss. First, they can initiate a lawsuit against the borrower or pressurise him to repay the loan in full. Secondly, they can offer the borrower for one-time settlement.
And lastly, to avoid the collection headaches, they simply sell out the bad asset to another regulated entity, usually an Asset Reconstruction (ARC) Company. And this is the scenario, where the primary lender discontinues the bureau reporting from their end and updates the final loan status as “Written off and Account Sold”.
Now, you may think, what about the Asset Reconstruction Company? Will they report the same account again? Actually, yes.
Almost all ARCs are regulated by the RBI, and as per the CIC Act 2005, they are also obligated to update the borrower’s credit information on his credit report. Now, if you pay your loan outstanding to them, they will update the loan as ‘standard closed’ in your CIBIL report.
Can you remove Written off and Account Sold status from CIBIL report?
Ultimately, in the debt sold and purchased case, both lenders submit their bureau reporting separately. That means the same credit facility will be reported twice in your CIBIL report. At this point, you might wonder, “Since I paid the loan outstanding and the new lender also updated the loan account accordingly, so can I remove the previous lender’s reporting from my CIBIL?”
Actually, you’re not absolutely wrong. As a credit repair agency, we have handled many cases like this. Two to three years back, when a regulated entity sold a borrower’s bad asset to another NBFC or ARC company, they automatically suppressed their reporting from the borrower’s CIBIL report.
In case they forgot to do so, based on the borrower’s complaint, they would have removed their reporting from their end. In fact, in TransUnion CIBIL’s previous reporting format, there was no such option, so that a lender could update a borrower’s loan status as “Written off and Account Sold”.
However, recently the scenario has been changed. According to the new changes in credit reporting format, if a loan is transferred to another regulated entity (Other NBFC or any ARC Companies) after being “Written-off”, the primary lender can report the loan status as “Written-off and Account Sold”.
You neither remove the entire loan account nor the particular “Written-off and Account Sold” status from your CIBIL Report. But importantly, the loan should be closed with a zero outstanding. Additionally, the Written-off Principal & Total Amount also should be zeroised.
Does “Written off and Account Sold” impact on your CIBIL score?
Now, the most important point: if the lender reports the loan status as “Written off and Account Sold,” will it hamper your CIBIL score? In terms of Credit Facility Status, various terms that can be seen on an individual’s CIBIL Report, such as No Suit Filed, Restructure Loan, Restructure Due to Covid-19, Account Sold, Account Purchased, Account Purchased and Restructure, Post Write off and closed, including Written-off and Account Sold, but it does mean that all the loan status impact negatively on the individual’s CIBIL score.
There is no doubt if the status is only “Written-off”, then it will harm your CIBIL score badly. But here, the primary lender updates the loan status as “Written off and Account Sold,” which means they have closed the loan from their end and sold it to another regulated entity, now they have no obligation from you.
In case, you have already paid the loan outstanding to the ARC Company, and they also updated the loan status as standard closed, then the “Written off and Account Sold” status in the primary loan account would not damage your CIBIL score.
However, the delay payments reported in both loan accounts’ repayment history might damage your CIBIL score slightly.
How to deal with difficulties arising due to the “Written off and Account Sold” status in your CIBIL report?
As we discussed earlier, TransUnion CIBIL has recently implemented changes in their reporting format, that’s why most of the bank managers are not aware of them. When you apply for a new loan or credit facility, you might face challenges convincing the bank manager that you are not a loan defaulter. In this scenario, you need to take certain precautions to overcome these difficulties.
- Typically, when banks sell your bad loan to any other NBFC or ARC companies, simultaneously they send an imitation to you by mentioning that your loan account had been sold out as delinquentto XYZ Asset Reconstruction Company, from now onwards, you are only obligated to them. In case, you don’t have any written confirmation like this, then contact the primary lender to collect the same.
- When you are paying your loan outstanding to the Asset Reconstruction companies, don’t forget to collect the No Dues Certificate from them. Additionally, ensure that the respective ARC reports the loan as standard closed.
If the bank manager denies your loan application due to “Written off and Account Sold” status in your CIBIL, then show him all these details (Such as NDC and written imitation by primary lender) as proof of your payment.
Even though you can’t remove Written-off and Account Sold status from CIBIL report, these tips definitely help you to deal with the difficulties.
