A loan marked as active after repayment can make borrowers appear more indebted than they are. Here is how to gather proof, contact the lender and escalate an unresolved error.
A loan that has been fully repaid should not keep dragging down a borrower’s financial profile, yet credit reports often lag behind reality. According to News18, some people only discover the problem when they apply for fresh credit and find an old account still listed as active, or showing an unpaid balance. That can make a borrower look more leveraged than they really are and may slow down a new application or affect the score a lender sees.
The first step is to gather proof that the account has genuinely been closed. LiveMint and other personal finance guides say borrowers should keep the final payment receipt, the lender’s closure letter, the no-dues certificate and relevant bank statements. It also matters to distinguish between a loan that has been fully closed and one that has merely been marked as “settled”, because those are not the same thing in a credit file.
For secured loans, there may be extra formalities beyond the credit report itself. News18 noted that a paid-off vehicle loan, for example, may still require the hypothecation to be removed from the registration certificate. Once the borrower has the paperwork in hand, the next move is to contact the bank or finance company through its official customer service route or branch and ask it to update the account status with the credit bureaus.
If the lender does not fix the error promptly, borrowers can raise a dispute directly with the credit bureau that is carrying the incorrect entry. LiveMint and Moneycontrol both say the dispute should include the account details and supporting closure documents, while borrowers should also check reports from the other major bureaus in case the mismatch appears elsewhere. If the lender still does not respond, the complaint can be escalated through the institution’s grievance process and, if needed, through the Reserve Bank of India’s complaint system. Legal commentary on credit reporting also notes that closed accounts can remain on a credit file for years as part of a record of borrowing, but any account that is still reported as active after repayment should be corrected.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
