What Happens When You Get Blacklisted by Banks?

We have all experienced financial difficulties in some form or another. Some just give up and refuse to remedy the situation, exacerbating their financial difficulties by defaulting on their loans. Those persons join the ranks of others on the “blacklist” due to poor financial records and poor credit history. There are options you can still avail of should you find yourself in this difficult financial situation.

What does “blacklist” mean?

A blacklist usually refers to a list of individuals or groups who have defaulted on their debts after a series of nonpayments. The effects of being blacklisted can be considered which include loss of credibility and goodwill. It can negatively impact your business, your clients and eventually lead to business decline, financial losses, or even financial hardship. When a person’s name is included in the blacklist, it becomes harder for that person to avail of the various financial services of a bank. You will encounter difficulties especially when you are dependent on borrowing to refinance or expand your business. The consequences can affect any person in different ways, some to the extent of their social life.

A person becomes blacklisted when factors such as existing unpaid debts, poor credit payment, and loan default contribute to a bad credit history. You can also read how to check if you are blacklisted for credit in the Philippines. The person’s credit record becomes available to banks affiliated with the credit bureaus. Thus, when that person applies for a loan, banks will just pull that person’s credit record. Banks will not hesitate to reject your loan application if you are marked as unworthy of credit.

How can one get out of being blacklisted?

Fortunately, a person with a bad credit history can make amends for his actions in the past. While the process can be difficult and lengthy, the only road to repair your bad credit is to pay all your debts and have a certificate of completion.

In the Philippines, there is still no national credit agency to serve as a centralized credit data service for all financial institutions. Therefore, the risks in lending are higher resulting in limited financial products and services. Although the list does not exist, your bad credit history will hinder you from availing of their services in the future. So, the only way of getting out should you be on the  “blacklist” or have a bad record is to settle your debts. If you choose to ignore your debt, your problems will not go away. You cannot escape from your unpaid loans. Although no person shall be imprisoned for debt as long as you do not commit any fraudulent acts to avoid paying for your loan, it does not mean you can run away from your creditor/s. Banks have many options to get back their money. Even if you stopped paying, overdue balance, interests, penalties, and other charges will still be imposed on you. Your debt will pile up and the lender will also close your other existing loan or credit card accounts you have with them. Your property will be foreclosed and put up for sale and if that property is not enough to cover the loan, you will still have to pay the difference in amount.

What is bad credit history?

Sean Martin D. Plantado, head of Digido.ph Customer Care notes that Filipinos often miss credit payments and have gaps in their credit history. However, improving one’s credit score takes time, and when an emergency happens, people can’t fix it instantly.

The bank will report unpaid loan accounts to credit bureaus who are tasked to compute your credit score. With a bad credit history, it is harder to apply for a loan in the future but if you are lucky and your loan is approved, you might be charged a higher interest rate. Therefore, avoid unnecessary headaches and act responsibly.

Go to your bank and negotiate lower interests and seek better payment terms. Banks are in the business of lending so they will be glad to help you settle your financial obligations. Ask for their financial advice. You can also seek the services of a financial management adviser. This will help you find the best solution in fulfilling your obligation.

After you have finished repaying all your loans, request a certificate of full payment from the bank. It will clearly state that your loan has been paid in full and that the debt is settled. The certification will also include a provision that the borrower is released from any future liabilities resulting from the original loan agreement. Keep this as you might need it when you apply for any financial services from a bank later.