List of Loan / Pay Later Accounts on your Credit Report

Credit Loans
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Q: I noticed unknown loan entries on my CIBIL Report. I haven’t taken any loans. What are they? How to close them?

Ans: Unknown entries on your CIBIL (or Experian or any other credit bureau) may be surprising to you, however, in most cases, it is NOT a thing of worry. Let me explain.

Broadly speaking, there are 2 types of ‘Credit Lines’:

  1. Credit Cards.
  2. Loans.

Credit cards are self-explanatory. However, anything that is NOT a credit card, falls under the ‘Loan’ category. This includes instant loans, and the BNPL category (Buy Now Pay Later).

What is the difference between traditional loans and BNPL?

Traditional loans may include education loans, house loans, car loans, etc. These mainly fall under the secured loans category, since they usually have collaterals. You are charged interest on these loans from Day 1 of the loan sanctioned until you pay it back fully.

BNPLs are credit lines that offer you an upfront loan amount, however, you are not charged any interest if you don’t utilize it. Even if you utilize it, if you pay it back BEFORE bill generation (and in some cases, after bill generation but BEFORE the due date), you won’t be charged any extra fees. These are unsecured loans.

These include Buy Now Pay Later services such as Amazon Pay Later, Flipkart Pay Later, PayTM Postpaid, OlaMoney PostPaid, etc.

Coming back to your query, most likely, the chances are that you have opened a BNPL account, which is showing up as a loan. You must check this post to know the List of Pay Later Accounts that may show up on your Credit Report.

Are these Loans on my Credit Report affecting my Credit Score? Should I close them?

Ans: There are different factors that cumulatively contribute towards a credit score, so it is hard to explain. However, I will give a general idea of what can be inferred as a ‘positive’, ‘neutral’, or ‘negative’ factor towards calculating your ‘Credit Score’.

  • If you use BNPL services every month and pay back on time: Positive.
  • If you just keep your BNPL services open and don’t use them at all: Neutral.
  • If you use BNPL services and don’t pay back on time: Negative.

So, my general recommendation will be this: If you are using them, fine. If you are not using them, you can still keep them active, since they are not contributing to your credit score negatively.

BNPLs can strengthen your overall credit profile with time as they increase your credit age. They also can maintain a ‘balance’ between ‘Credit Card’ type and ‘Loan’ type Credit Entries on your credit profile, which is considered good practice in general. (compared to a situation where you have 100% credit cards and 0% loans)

How do I close my Unknown Loan / BNPL entries on my Credit Profile?

I have already written detailed posts for permanently closing the most popular Pay Later Accounts. Follow the links:

Thank you for reading. Don’t forget to join our FinTalks Facebook Group & FinTalks Telegram Channel for regular updates on banking and finance.

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