Wednesday, 31 December 2014

Can secured cards help in building your score?

Getting credit nowadays is becoming a much harder task. Lenders take a look at CIBIL reports before giving out loans and credit cards. And thus, the people with lower credit scores get stuck since nobody is ready to provide them loans due to their lower scores. So what possibly could be a good solution for these people?
With low credit scores, there are very few card options out there for such people. These people have trouble getting unsecured cards and that is why secured cards would be the solution for them.


What is a secured card?
A secured credit card is basically a card given, based on the money placed as security deposit which is taken as collateral. And that is why lenders get the confidence that they will get their money back even if you have bad credit or no credit history. The credit line in your secured credit card is determined from your ability to pay, your income and your cash collateral deposit.
Secured cards are like prepaid cards but unlike prepaid cards, your payments would be reported to the major credit rating agencies like CIBIL, Equifax etc. thereby ensuring that your account history will be reported to your credit report. Thus, secured credit cards will help you establish your credit history.

How will these secured cards work?
Secured credit card works just like unsecured credit cards. You can use them for the usual everyday transactions where you use normal credit cards. As much as these secured credit cards can help you rebuild your credit history, a default in your payments and you would be back to square one, with the card issuer keeping your collateral deposit. The monthly payments are just as important for a secured card just as it is for an unsecured card. Secured cards are also reviewed at regular time intervals, if the card issuers find your credit behaviour responsible (i.e by being regular on your monthly payments) they may qualify you to move to an unsecured credit card and get a refund of your collateral deposit.

That is how by making timely payments and maintaining your balances well within your credit limits on secured credit card , this responsible credit behaviour might help you a lot in building or rebuilding your credit score.

Tuesday, 30 December 2014

How does debt consolidation affect your CIBIL score?

When the debts you have taken pile up, the one option for paying it back is debt consolidation. Your debt consolidation report, before you combined the bills, should look better than your credit report. Ultimately, the aim is to improve your credit score, not ruin it. Debt consolidation saves us time and money when we are trying to get out of the debts of loans and credit cards. But does debt consolidation only help our credit or does it hurt it too? It depends on how we consolidate and what we do after consolidating.That is why it is important for us to understand how debt consolidation will affect our credit.

First let us understand what is debt consolidation:

In simple terms, debt consolidation is taking one big loan which would be enough to pay off your multiple outstanding debts. You get the money to pay off the debts, and then have to make only a single payment to pay the new debt. In this way you don’t have to worry about different loans and their interests but just one loan. Debt consolidation can be done in different ways- we can take a loan or make a new credit card account and transfer all our existing credit balances there.
Debt consolidation will obviously affect our credit score as we are taking a new credit card or loan. It can affect our credit score both negatively as well as positively:

Positive effects:
It is easier to deal with a single payment than managing several outstanding accounts. Instead of worrying about the fees and interest piling up on your several accounts, you now have to worry about only one account. Due to this fact, you will now be able to efficiently budget your money as you will know exactly, how much your monthly payment will be. Likewise, it will also help you save money.Personal and home loans have lower interest rates than most credit cards. Many people also use credit cards with zero percent interest rate for debt consolidation. If you have lakhs of rupees of debt at very high rate of interest, then consolidating these debts will help you save 20% or even more on your debts.
Negative effects:
Debt consolidation works only if you manage it correctly, but usually even doing the right can damage your CIBIL score temporarily. It depends on your actions on how it will your hurt your score.Missing a payment on your debt consolidation loans can bring your credit score down.
If you close your credit card accounts after consolidating, it can negatively affect your credit score. Don’t close your old accounts as they give you the longest credit history. Always wait till all your debt is paid off before you close your accounts. This is because, your debt level will stay but your available credit will start to decrease.This will make it look like you “maxed out” and can be a big risk.

When you are applying for a new loan or credit card, you apply for new credit which will eventually lead to a “hard enquiry” in your credit and your score would go down.
Your credit score also partly depends on your credit utilization ratio.If your credit cards maxed out and you open a new card it will increase your debt and will make your utilization ratio go down which will eventually help your score. But if you carry a high balance on any of these cards, your score will take a dip. If you have transferred your multiple debts and closed your credit limit, your credit score will still suffer even though your other credit cards are paid off.
The conclusion is, handling your debt consolidation properly will have a positive effect on your credit but if you go the wrong you will do more harm to your credit score.



Monday, 29 December 2014

Credit card cancellation impacting CIBIL score

The decision to cancel a credit card usually comes in mind when we want to avoid excessive spending or if the terms of the credit card are not friendly anymore. Now you want to cancel your credit card but it is more than just cutting into two pieces. But you have to make sure to do it in such a way that it gives the least damage to your CIBIL score.

Choose which credit card to cancel wisely:
if you are carrying multiple credit cards, always make sure, never to close all your credit cards at the same time. Your credit score may be badly reflected if you close too many cards at once, it may also hamper your chances of getting a credit card or a loan in the future. Credit card cancellation must go according to the terms of the banks exit policy or it will go on to reflect a very bad credit score. Try to compare the rewards and schemes the card gives, the interest rates and the other details and then choose which card will give the best advantage. Also remember that is better to close the credit cards which have been attained recently than the older credit cards to avoid any dip in the credit score.


Pay off any pending balances:
The bank will cancel your credit card only if it does not have any pending balances due to the bank. Pay off the balances on the card in full, or transfer the balance to a balance transfer card if you have found one with better terms.If you don’t want any more dues till the time you pay off your earlier dues, you can get your card frozen till the time you clear the balance and close off your card. If you want to close your credit card accounts without impacting your credit score then you need to make sure that you have zero balances on your CIBIL report for all your active cards.

Keep checking your CIBIL score for updates:
When you close a credit card it reduces your credit limit, which eventually gets reflected in your credit score. Keep checking on your CIBIL report after you cancel your credit card. This will allow you to keep an eye on how much damage the cancellation of the credit card had on your credit score. The credit utilization ratio goes down after the cancellation of each of your cards, thus hurting your credit score temporarily. Also remember that is easier to improve your bad credit score than to fight off the huge debt traps of the dues on your credit card.

Saturday, 27 December 2014

Does debt destroy your CIBIL score?

After payments, the most likely factor to either boost or drag down your credit scores is debt. Whether it will hurt or boost solely depend on your financial behavior.

Firstly, how you manage your debt is more important than the amount of your debt. Paying your debts on time matters more than the size of your loan.

But there are some differences in how the different types of debts affect your credit score:

Mortgages
Value of your house less than the mortgage value? Your credit score won’t be affected as long as you keep up with the payments. Your credit report won’t have the value of your house listed on the report, so value of your house being lower than the mortgage value won’t be an issue. Excellent credit can be still maintained even if you are financing home with hefty loans, provided that you make payments on time. But if you are having multiple mortgages with pending balances, then they are likely to impact your score.

Auto Loans
Your payment history is more important than the amount you owe on your auto loans. If you have a habit of buying too many cars or have multiple auto loans with pending balances on your CIBIL report then your credit scores can be impacted. But even then your payment history will have more importance than the amount of debt virtually at all times.

Credit cards
These loans are revolving accounts, not like instalment accounts- Hence they are treated differently to some extent from the ones mentioned above. While the number of revolving accounts you have with unpaid balances and the amount you owe are taken into consideration, the available credit you use is the most important factor. The credit score will have a look at your limits and then compare then to your current balances as reported by your lenders. This ratio is known as your utilization ratio.





Friday, 26 December 2014

How does Credit Score affect mortgage?

In simple words, a mortgage is a way to use property like land, building etc. as a guarantee to get a loan. Credit score affects mortgage to a great extent as it is one of the eligibility criteria in getting a mortgage loan. The reason for this is that lenders want to make sure that their investment would make profit or at least get recovered. Your Credit score defines what kind of mortgage rate you would get, which would in turn help you identify what kind of home you can afford.

When you are looking to get qualified for a mortgage, your credit score and credit history are the first things in which the lender would be interested in to check your eligibility.

A good credit rating always helps when you are getting a mortgage. Even during financial crisis, people with good credit scores get mortgages with very less down payments. Analysing your credit report, the lender makes decisions about the terms of pre qualification of your loan. Therefore building your credit score is the first step you can do to qualify for a mortgage.
Mortgage eligibility credit score recommended is usually above 500.A credit score of 500 to 520 is the lowest what lenders would go, anything less than that would disqualify you for the mortgage loan. People with high credit scores above 750 are the ones who get varied loan choices and also low interest rates.

Your credit history, other than contributing to your credit score, also influences the lender’s decision. The lender would want to see if you have been bankrupt, your payment history and also If you have had any collections. This will help the lender analyse your financial behaviour and if you are about paying off debts or not.
Since we saw above how credit score is important ingesting qualified for a mortgage loan, let us now deal with what a credit score is-

It is a calculation based on credit history which would help in determining your credit worthiness. It is important because it helps the lender figure out if his money would be safe with you or not.
In India there are three bureaus which report credit- TransUnion, Experian, and Equifax but the most important is CIBIL. Lenders rely on the information given by  CIBIL to determine whether lending you money is a smart move or not. If your credit is more than 750, then lenders would deem you credit worthy for a mortgage and give you their standard loan options.
Your best bet to get a good mortgage rate is to have a credit score more than 750. A CIBIL score of 500 is bad and would h. Some lenders would also expect you to part with at least 50% of the purchase values if you are trying to get a mortgage with such low scores.
So all this shows how credit score affects mortgage and how important it is to have a good credit score.








Wednesday, 24 December 2014

Things First Time Credit Card users should know


It’s always exciting when you buy your first credit. It feels like a big step and most of us look forward to it. It feels like a big step and it is- because it helps in getting a credit score which may help you buy a car or house in the future.
But it is important to keep in mind that a credit card isn't your money but it is borrowed money which you have repay back to the credit card issuer. Though credit cards are great finance tools, & help in keeping in check your cash flow, but be careful as it is very easy to fall in the debt trap.
Given below are some tips to use your credit card smartly and in turn helps in strengthening your CIBIL report and credit score:

Pay Off the Balances Monthly:
It won’t be a problem for you if you use your credit card well within your budget. To avoid interest, make sure to pay off your balances every month. Not paying off your balances will result in the interest piling up and eating away your wealth. That is why make sure to pay off whatever you use on the card every month.

Pay Your Bills On Time: 
As you know payment history is the most importance influencer of your credit score. So make sure that you pay your bills on time. Because late fees would add up quickly and late payments would impact your credit score.

Read the fine print before signing for a credit card:
You should know all the details like the duration of the grace period, interest rates and any other fees being charged. Also many people don’t know that interest rates can be negotiated so do a full research before applying for a credit card.

Access your credit score and report:
Checking your credit score and report at regular intervals helps you in managing finances better and identifying incorrect information on your credit report and also alerts you when there is a case of possible identity theft.

Don’t give out information casually :
Make sure that you keep your credit card information safe and private. See to it that you don’t give out your passwords, account number or any other information when people ask for it online or on telephone. Before giving out information, find out if the person is trustworthy and is asking you for a specific purpose. Check if the site is secure before giving out credit information.

All first time users should follow these steps to avoid falling into a credit card debt trap.


Tuesday, 23 December 2014

Mistakes to be avoided while taking a home loan

Buying a home is a very tedious process for individuals since there are many decisions involved like loan amounts, finding the right place, buyer etc. There are many do’s and don’t s while applying for a home loan. We often tend to forget the things to be avoided since we focus more on the things to do. Here are some points which should be looked at and some mistakes which should be avoided:

Checking credit score:
Before you apply for a loan, be well aware of details such as CIBIL score/credit score. It would be better to get your credit scores on a regular basis to avoid identity thefts. Credit score is a very important condition which is checked when you apply for a home loan so it is advisable to have a good credit score.

Not researching options well:
Home loans are very popular products available with many banks but with different conditions. Usually many people don’t take the effort to research the varied loans offered and thus have chances of missing out on a good deal. So it is advisable to window shop a little and evaluate the interest rates, other fees and charges, services, the time the bank would take to pay out the loan etc. Your original house documents would be with the bank from where you will borrow so it is important that you choose the right bank, which would be safe as well as economical. It is also important to start researching on the loans offered, six months before you start the property search. Don’t try opting for credit cards and personal loans because it is possible that your loan application might be rejected by your lender if he finds confusion in your CIBIL report.


Pre-approved loans not considered:
Most banks would offer you pre-approved loans on the basis of the relationship you share with them. This helps in saving a lot of time during loan processing. When you have a good relationship with the bank, they will know about your history more and the processing would become easier for them.

Over leveraged Loan:
Do not just opt for a loan because the bank is going to offer you a higher value loan. First check If the loan is affordable for you and if you have the ability to pay back the monthly EMIs. The tip is to look out for avenues whereby you can increase the EMIs and to save money on interest by reducing the loan period.

Read the clauses well:
Get a legal consultant to verify your loan documents. Read and be aware of each and every clause in the application form before you sign the loan papers. If you don’t understand any terms get in touch with the bank.
Thus, have a secure experience when you are buying a home by avoiding these mistakes and make decisions while keeping these points in mind when are you opting for a home loan.

Monday, 22 December 2014

Factors in the credit report critical for loan approval

Lenders have been using credit reports for evaluating loan applications since 5 years now. But it is only now that people are realizing the importance of being aware of their credit scores and maintaining their credit history. Analysing your credit report helps you identify the right time when you should apply for a loan in your financial life cycle thereby increasing the chances of it not being rejected. The main factors seen upon by the creditor while analysing your application are :

New credit facilities
If a creditor sees that recently you have been given a number of new credit facilities, it would indicate to your lender that in relation to your EMIs, your monthly outflows have most likely increased. Thus, it is likely to have a negative impact on your loan application.

Number of new enquiries done
Chances of getting a loan approval are most likely to suffer if you have applied for many loans at the same time in the recent past. Such behaviour gives you the “credit hungry” tag by the lenders and indicates that you may be in urgent need of money. This will make creditors more cautious when they are evaluating your application.

Payment history
There are two parts to your payment history- DPD (Days past Due), and the month, year of payment of year. DPD indicated that the payment is late by how many days in that month. “000” – anything other than this would be considered negative by the creditor. Up to 36 months of this payment history is provided in this part with the most recent month shown first.

In the CIR, Payment history appears in the account(s) section.

Current balances
Current balances also appear in the account(s) section. Current balances on your various loans show the depth of your debts. Sum of these current balances then helps the creditor determine your ability to take on more EMIs, in relation to your current income. Naturally, the lower is your current balance the better are your chances of getting a loan approved.

Check your CIR 4-5 times every year and make sure your collateral is accurately reflected. This will help when you are planning to apply for any credit facility/loan for a purchase in the near future. This will also help you access credit faster.And these enquiries wouldn't even be added to your CIR if you purchase a credit report directly from a credit bureau. High credit score is also important for getting your loan approved.

Saturday, 20 December 2014

Credit score and youngsters

Westernisation is slowly taking its roots in India. Like western countries our country's youngsters are slowly moving towards becoming financially independent at a young age too. Also increasing is the importance of credit transactions in India. Nowadays almost all transactions involve the use of credit cards, unlike the earlier use of cash everywhere. Almost everything can be paid on line now with the help of credit cards. So everyone has a credit card these days. Therefore it is necessary for young adults to know about credit scores as these credit cards will impact their scores and low credit scores or no credit history may pose a hindrance in getting a loan approved in future. So it is advisable to start building credit responsibly as early as possible. The basic things for youngsters to know about building credit responsibly


Credit score& it’s Effects:
First and foremost try to understand what credit score is. Credit score is evaluating the probability of an individual paying back the money he/she borrows.

Your credit score affects a lot of factors in your financial life. Whether it is getting a loan or getting a job. If you are aiming for a job in Finance, almost all companies check your credit report. Your credit report could give you an edge over another applicant who is neck to neck with your job.
In loans, lenders calculate the credit risk from your credit report and then decide whether to give you loan. So the lower the score, the lower your chances of getting a loan.

Get a credit card:
Credit cards can be a good way in getting yourself a credit history. Because no credit history means no credit score. You could start with asking your parents to get yourself authorized in their card; their history will get added to your history. Or you could also get your own card-lots of student credit cards are available which have low credit and income requirements.  But keep in mind to use it sparingly. Don’t keep balances and interests pending. By doing all the payments responsibly you are slowing building a history of responsible use and maintain a good credit score.

Keep checking your credit reports:
Checking your credit reports at regular intervals is a very good habit to instil in young adults. Credit bureaus like CIBIL, Equifax, Experianand  maintain a record of individual’s credit activities and make credit reports. Checking your credit reports will help you in spotting any errors or mistakes in it and getting it fixed. Getting your mistakes fixed may take a few months, but it will be worth the effort in the future when you apply for loans.

Beware of Identity thefts:
If you are offered a credit card and the people in question are asking too much personal information be cautious you can get involved in identity theft. See to it that when you are providing information do it through a secure form online or in front of the company to whom you are providing. Don’t give away information where your information would lie down on a stack on the desk and anybody could access it. Know about the people who you are giving information to, find out whether they are trustworthy or not.

Friday, 19 December 2014

What Lenders see before giving a loan?

After you apply for a loan, lenders estimate your credit risk based on a number of factors, like your income, financial situation and credit/payment history. These factors also known as ‘5Cs’ are explained below:

Credit history:
Qualifying for any type of credit largely depends on your credit history- which is the line of credit you've made by making timely payments and managing your credit efficiently. Your credit report consists of your credit history based on the information provided by creditors who have extended credit to you at a point of time. While one credit reporting agency’s information may vary from the other, all of them usually have the same information i.e the types of credit, payment history, lender’s names who have extended credit to you and more.

The lenders may also use the credit score given in the credit report. It’s of numeric value based on the information provided in your credit report. It serves as an indicator for the creditors about the credit risk involved. Usually higher the credit score, lower is the risk.


Capital:
Household income is expected to be the primary source of repayment in the cases of loans but in the cases where the person loses the job or experiences setbacks, capital helps repay these loans. Capital is the investments, savings and other assets which can help in repaying the loan. Thus capital plays a factor in the lending decisions too.

Capacity:
Creditors need to ascertain whether you can manage your payments comfortably or not. Your employment history and past incomes are a good way to determine your ability to pay off outstanding debts. Type of income, stability and amount of income can be considered. Debt-to-income ratio (DTI) which is the ratio of your current and new debt, as compared to your before-tax income, can be evaluated.

Conditions: 
Your plans on how to use the money also forms a part of the lender’s decisions. The loan’s purpose on whether it is for purchasing property or a vehicle is considered. Other than purpose, economic and environmental conditions are also considered sometimes.

Collateral (secured loans):
Credit cards, lines of credit or loans can be secured or unsecured. In secured, like a home or an auto loan, something you own has to be pledged as collateral. Value of the collateral will be evaluated, and past debts already secured by that collateral has to be subtracted from its value. The remaining value will play a part in the lending decision.

 The 5Cs is a common term used in banking. Knowing these 5Cs would help you better in answering questions the next time you apply for loan.

Thursday, 18 December 2014

Ways to make business credit worthy

Is your business credit worthy is one of the main things asked when you apply for a loan or credit card. Here are some ways to make your business creditworthy-

Make yourself personally creditworthy:
Your personal credit score pays a big role in building your business creditworthiness. If it is low, you should focus on repairing it. Pay all your dues on time i.e. any past amounts which are due and/or also those in process of collection. Pay down any revolving balances on your credit cards and in future try to avoid carrying such debts. If that is not possible for you, then make sure you pay more than the minimum amount which is due and also make these payments on time.

Establish a separate business identity:
As and when your business starts getting settled and well established and you are looking for specific credit score for your business, then set up a separate business entity from your personal affairs. Get advice from your legal advisor or attorney on which would be the best possible legal structure for your business. Register for a federal tax ID or an EIN (employee identification no) in your state. Then lastly, establish a business banking relationship to segregate your business from your personal finances.

Establish separate credit record for business:
After you've set up a separate business identity for your business and been there for a while, you would like a separate credit record different from your personal credit record, for your business too and for this you need to apply for a separate credit card for your business.

Keep up with your business credit reports:
Most businessmen say they don’t get time to check their business credit reports when in reality they are just afraid to check them. You should not be afraid because the faster you would check the reports, the sooner you’ll be able repair them or fix any discrepancies you find. The credit reports should be checked at least annually to make sure there are no mistakes; if you have a frequently changing business situation then check them quarterly. Get your most recent credit report when applying for a loan. Look at reports from all the credit reporting agencies like CIBIL, Equifax, Experian because their information may differ.

Keep checking up with the credit rating:
Keep checking up with the credit rating about your reports. If you find any inaccuracies or error in your business credit reports, report to the credit bureau directly and challenge them.These bureau are supposed to contact the lenders with the incorrect information; the creditor would then, either contact the credit bureau and correct the information or would respond to you, explaining their reasons on why they do not agree with you on issue of the disputed payment.

When you settle this issue, your credit score is most likely to go up. However, keep checking it till it does.
                             Now that your credit score has improved it would also improve your credit worthiness. This credit line can be a safety net for your business, as it makes sure that you have required cash for your day to day business activities and for handling an emergency.

Wednesday, 17 December 2014

How bank analyzes your credit worthiness

Credit risk analysis is an integral part of how banks lend money. It is a highly standardized process that tries to assess the desirability of an account by estimating the profitability and reliability of that account. Credit investigations are conducted by the banks to minimize the possibilities of experiencing loss from delinquent and late payments.

Understanding these metrics and processes that these banks use can help you in developing an approach wherein you can maximize your credit worthiness and access financing and business credit rating more effectively. So how is this credit risk measured? Let us see below:

Credit Risk Analysis Metrics


Reliability
The measures of reliability used by the banks are references from past and current suppliers, owners or management’s qualitative character and credit payment history.

Ability to Pay
The applicant needs to demonstrate through business plans and financial models that he can generate consistent cash flows and enough revenue and that he is capable to make payments within the terms. This will also give the evidence that the business has been running for a certain time and will continue to operate successfully and keep paying its bills on time.

Economic Conditions
Industry and economic trends contribute to the bank’s assessments of risks and helps as an overall predictor of a business’s ability to maintain itself and recover its potentialities. If the industry is expanding rapidly, a successful credit arrangement goes on; conversely, the bank may be on more on the side of caution while considering a credit application, when the industry is shrinking.

Collateral
The most critical consideration in credit risk analysis is whether there is willingness by the borrower to back the desired loan or credit terms with an asset(s). If the bank is assured recourse to recover the losses via liquidation of the property of the applicant, then it is likely to feel secure in such an arrangement. In difficult economic conditions, secured loans and loans are much more common.

How Does Credit Risk Analysis Inform Lending Practices
Each metric’s importance can vary greatly from one applicant to another. Not only do these metrics help the lender whether to issue credit report or not, but they also influence the credit limit, payment terms and other additional assurances.


Tuesday, 16 December 2014

CIBIL score myths

There are various articles on the internet about the importance of maintaining a good CIBIL score to speed up your chances of getting a loan approval.But,more often than not this information may get confusing for the public. As a result, many of these people may go on about their works as usual, unaware that this indifference might cause a negative impact on their credit scores.

Nowadays it is extremely important to have a good CIBIL score. RBI has made it compulsory for all lenders to take into consideration the CIBIL report before making their credit approval decisions.

As we mentioned above,there is a lot of misinformation on the internet about maintaining the perfect score therefore we attempt to bust some common myths about the credit score below.


Higher income is the reason for higher Credit score:

CIBIL credit score gets affected by your credit behaviour, not your income. Irresponsible credit behaviour can be shown by high income groups which could lead to low credit scores.It is the length of credit history which helps in strengthening your credit score.

Checking your CIBIL score will have a negative impact on it:

It is said that enquiring about your CIBIL report or CIBIL score may get you a negative marking so many people avoid checking the score.This is quite opposite to what the truth is. infect checking your CIBIL report at least once a year is good financial practice.
Checking your own CIBIL score is considered as ‘soft enquiry’ and won’t have an impact on your score but if credit card issuers or lenders ask CIBIL to give access to your CIBIL report, it will be considered as ‘hard enquiry’ as it will get recorded in the enquiry section of your report.
Loan applications given to many banks at a point of time may lead to enquiries in quick succession which will be tagged as ‘credit hungry behavior’ which will have a negative impact on your score. However checking out your CIBIL report once a year, is like getting a health check.It won’t hurt you score at all.

No credit equals to a good CIBIL score:

Many Indians have grown up with the belief that it is a bad thing to live on credit. There are many of such people who avoid loans and credit cards like the plague and assume their credit score would be perfect because they are not using credit.These people are more in the line of fire than those who hurt their score by over-leveraging themselves.
The people who don’t borrow don’t have a credit history and thus, they cannot be assigned a credit score by any of the credit bureaus. These people would then find it hard to get a loan. Therefore ,it is better to use credit responsibly than have no credit history at all.
Having a credit or taking loans is a good thing as long as you keep making timely repayments.This helps you in maintaining a good CIBIL score and is considered as good financial behaviour.

There is only one credit bureau that maintains your records:

Even those people who know about credit report and credit score think there is only CIBIL that keeps financial records. When in fact there are three other credit bureaus other than CIBIL. They are Equifax Credit Information Services Pvt. Ltd, CRIF High Mark Credit Information Services Pvt. Ltd ,Experian Credit Information Co. of India Pvt. Ltd.
This means that when you apply for a credit card or loans, the lender may get your credit report and your credit score from CIBIL or any of these institutions. All these bureaus have different scoring models, so your score can differ from one bureau to another.But, even though their scoring models may differ, these scores are highly correlated.So if your credit behaviour is considered good by one it will considered good by the others too.

Conclusion

Responsible use of credit and low credit utilization rate have a good effect on your CIBIL score. If you are doing this then you don’t have to worry when you are in need for credit.

Monday, 15 December 2014

Loan rejected despite of high CIBIL score? Read This

Having a high credit score is a must for lending banks but it does not guarantee the loan approval. Other than credit score, there are also other factors considered before granting a loan. Eligibility and quantum of loan to be given depends on different parameters and criteria which may differ from bank to bank.

Approving of your loan application depends highly on your CIBIL credit score. But a host of other factors are required for your loan application approval process too. The reasons for rejection of a loan are:


Overleveraged:
You are expected to have at least 40% of your income towards everyday living expenses. When you are paying more than 60% of your income towards various dues i.e. car loans, home loans & credit card card bills or have way too many active loans, you are considered to be “overleveraged” by banks,
Though your CIBIL score may be above average(because you are applying for more credit) and you would be prompt in paying your loans you would still be rejected since banks consider you as “overleveraged”.

CIBIL report having Derogatory remarks: 
Your credit report is plagued with derogatory remarks such as "Settled “and "Written Off" status. Financial institutions(NBFC’s) and Banks are cautious when lending money to individuals who have such derogatory remarks on their report because such remarks indicate that you didn't pay off the payment in past transactions or if you did make the payment you did not pay it in full. Most banking agents will insist that you go with a "Settlement" with the bank as you won't have to pay the full amount, but don’t get lured and always go for a full closure.

Credit Hungry:
When we are in urgent need of money, we do the mistake of applying in multiple banks and financial institutions all at once. For example, if are applying for a loan in Bank P, Q as well as R. You will think that the other bank will not be aware of you applying in the other two banks. But this is a wrong thinking because every application will be recorded as an enquiry for credit.

Now, this could result into: your CIBIL score being lowered by at least 10 – 17 points (approximately) every time you even enquire for loans. And also this will give the impression to your lenders that you are always borrowing beyond your comfort level.

Guaranteeing a defaulter:  
As a guarantor of the loan you are equally liable to pay the loan as is the borrower. If you are the guarantor for a loan which is showing late payment pattern or has been settled with the bank with partial repayments, your loan gets affected too, for guaranteeing a defaulter.

Do not have adequate taxpaying history:
If for some reason you have recently started filling returns then the bank may reject your loan application. Banks usually need at least two years worth of income tax to be filed by the borrowers they consider favorable.


Saturday, 13 December 2014

Factors impacting your CIBIL score

With banks and RBI becoming more and more stringent about the loan eligibility of borrowers, it is imperative to have a good CIBIL score in order to qualify for a loan with an attractive rate of interest.

Maintaining a good credit history is needed to have a good CIBIL score, the details of which will show up in your CIBIL report. Based on how your credit is been serviced, the CIBIL score can then be compared to a grade or a rank.

The study of the link between credit history and credit score will help to keep your CIBIL credit score as high as possible. Here is a low-down on the factors that have the greatest impact on your CIBIL score.


Repayment history:
The first and most important thing that impacts your credit score is your repayment history. In order to maintain a good repayment history, all the bills and loan repayments should be cleared well within the dates stipulated. Even a single default has a negative impact on your score. It accounts for 35 per cent of your credit score.

What you owe to lenders:
Calculating what you owe your lenders is referred to as credit utilization. There are two basic consideration- First is the total of your credit card limits sanctioned to you and secondly the percentage of your money which you are utilizing. Your credit utilization ratio is thus calculated as balance outstanding on all your credit cards as a percentage of total credit limits on all your credit cards. If your credit utilization ratio is more, your profile is considered to be "risky".

How long have you been servicing debt:
The amount of time for which you have been using credit has an important bearing on your credit score. Therefore, if you have been servicing debt for a longer period of time and making timely repayments etc., it will have a positive impact on your CIBIL score.

Amount of new credit taken or applied for:
The banks and other financial institutions run an inquiry on your CIBIL report every time you apply for a new credit such as a loan, credit card etc- to check your credit history, to find out about your financial health and repayment capability. If there have been too many such inquiries on your CIBIL report, it has a negative bearing on your credit score. . It accounts for 10 per cent of your credit score.

The mix of credit:
This factor has a bearing of 10 per cent on your CIBIL score. In order to score high on this ground, you must have a healthy mix of credit comprising of secured and unsecured loans and must have ability to service them well in time. Those with a mix of various credit types such as mortgage, personal loan, car loan, credit card etc. are likely to score higher than those who have a single type of credit.

These factors can be used to improve your credit score. A good credit score will ensure that you get a loan without any hassles at best interest rates when you really need one.

Friday, 12 December 2014

How Does Bank Loan Settlement Impacts Your CIBIL Score?

If you are one of those guys who have availed a bank loan that may be a home loan or a small amount of personal loan or you have used credit card and haven’t been able to pay the amount in time, this article might be worth reading for you.

At this point of time, you have the chance to settle the bank loan which means you are asked to pay a much lower amount than what you are owing to your lender.


Does Bank Loan Settlement Impacts My CIBIL Score

Settlement of banking loans is only a temporary solution to your daily worries like frequent reminders by your lender to make payment and harassment by the recovery agents, but it is not a permanent solution. According to Credit Bureau rules, all cases of “Non Payment of Loans in Full” have to be reported to CIBIL and CIBIL would intern give you a much low credit score once you have made a settlement against your bank loan.

Example: If you have a bank loan which you are unable to pay and you decide to settle the bank loan with the bank. You would also receive NOC from your bank in such a case after you get your loan settled. Your bank would report your bank loan settlement case to CIBIL and CIBIL would mark you settled for next 7 years and it becomes quite difficult for any individual to get a loan passed in the next 7 years and even after 7 years, you need to work quite hard to improve your credit score to enable yourself get a bank loan or a home loan.

Credibility Crisis (disaster)

While settling the loan will give you respite from recovery agents, but it will damage your credit history. This is because after the paperwork, the lender will report the settlement to the credit bureau.
Though your creditreport will not show any amount overdue against your name, the account status will show 'settled', which means the loan has been repaid only in part. This is enough to spoil your credit report. When you approach another bank for a loan, it is highly likely that your application will be rejected. This is because your credit report says that you have in the past failed to fully repay a loan.

If a customer avails of the settlement before the write-off, the flag in the credit report is updated as "settled"; after the write-off, it is updated as "post write-off settled". Both are considered negative by banks and financial institutions.

Tuesday, 9 December 2014

Cibil Score and Home Loans

People often think that one can get a home loan easily if they have a decent income. They believe that lenders check only the income factor of the borrower. But this is not true.

Borrowers do check the income factor of the borrower but they also check the CIBIL score. Now you will think that what CIBIL scores have to do with home loans?

Home loans are loans taken by people who wish to get a house but do not have enough cash to get it. The buyer has to pay some amount in Advance generally known as “Down Payment” and the rest of the amount in equal parts known as “EMI”.

Lenders want to ensure that the borrower will pay the balance amount in time and will not default. They basically want that they get the entire money that they have provided as finance from the borrower. 

CIBIL helps the lenders to gives an overall idea of the past behavior of his finance. CIBIL provides with a report known CIBIL report which gives a brief description of all the accounts taken by the borrower and the behavior towards those accounts. It also discloses if the borrower has made any late payments, or has defaulted on any of the EMI’s.

CIBIL also provides with a three digit number known as “CIBIL score”. This number is generated by a special technique, which gives overall idea about the creditworthiness of the borrower.

The CIBIL rating ranges from 300 to 900. A score of more than 750 is considered to be a good score.

The CIBIL score and report helps the lenders to analyze the borrower behavior towards his finance in the past. This analysis will help them to predict the future behavior of the borrower.
If the borrower has maintained his finances efficiently, then his chances of getting the approval for the loan will be higher and vice versa.

For a borrower to get access to loans easily, they will have to maintain their finances in an efficient manner and have a good credit score.

Friday, 5 December 2014

Learn about CIBIL Trans Union score

CIBIL Trans Union Score is the one of the most reliable credit scores in India. This score is generated by Credit Information Bureau (India) Limited. The Score is derived by using the details found in the “Accounts” and “Enquiries” sections on your Credit Information Report (CIR) and ranges from 300 to 900 points. The closer your Score is to 900, the more favourably your loan application will be viewed by a lender. The Score plays a critical role in the loan approval process.

The CIBIL Trans Union Score has become the industry standard for credit decisioning, widely used by most leading lenders in India to make objective, fast and reliable credit decisions.

Most consumer finance providers use CIBIL Trans Union Score to ascertain whether or not the customer availing any credit facility from them is likely to become delinquent within a year. Therefore, they can access such credit scores and credit reports without paying any money. Other lenders and banks that do not provide information about their borrowers cannot access such scores without payment. Individuals can ask for their credit score from the CIBIL Bureau.


CIBIL Trans Union Score has integrated the system. Therefore, it is now not possible for borrowers to provide wrong information to different lenders and avail more loans than they can manage.

While CIBIL Trans Union score calculation formula takes into account all mortgage instalments and other regular payments, the fact remains that many Indians are averse to borrowing. This is the reason lenders in India do grant loans to people who do not have the required level of credit scores.  In western countries it is unlikely that a person does not have a credit profile.

Trans Union has been active in the Indian marketplace as the technical partner and a shareholder in CIBIL, the first credit bureau in India. As a result, we have a strong understanding of the Indian financial services industry and are uniquely qualified to deliver solutions that can help you meet your challenges.

Thursday, 4 December 2014

Tips on Improving your CIBIL Score

CIBIL Credit score is a 3 digit numeric summary of an individual’s credit history. CIBIL is an Autonomous Body whose full form is Credit Information Bureau (India) Limited. The Credit Score is gaining importance as any person having any kind of loan (Personal Loan, Home Loan, Car Loan, Two Wheeler Loan, Business Loan etc) or credit card with Financial Institutions for taking loan - has all its details captured in the loan report.

The score ranges from 300-900. Higher the score, higher the chances of getting new credit facility. Every bank has its own credit sanctioning policies and prescribed credit scoring cut-off. Generally a score of 750 and above is looked upon favourable by bankers.


CIBIL score is derived from the month on month record of an individual’s loan related transactions like timely payment of EMIs, clearing off credit card outstanding etc. The more you delay in clearing off your loan liability, more it affect badly on your credit score.

Bad repayment track record: This is no briner that if you are not regular in honouring your loan EMIs on time, then this will badly affect your credit score.

First thing first, when you have taken any loan, serve it on time to have a good credit score.

Credit card usage – The way you use your credit card also affects CIBIL Credit score. If you are using this facility to the full credit limit then you are messing up with your credit score.

 If you have number of credit cards, don’t cancel all of them but use them wisely by properly distributing the usage and making timely and full payments.

Having more unsecured loans: The composition of loan portfolio also affects your CIBIL report. If you are having more unsecured loans like Personal Loan, credit cards in your loan portfolio, you have chances of low credit score.

If you've already messed up your credit score and not getting any loan, then start with Gold loan, or loan against fixed deposit. These are the types of secured loans and timely repayment towards these will surely result in improvement of your credit score.

Enquiries- Your enquiries towards loans also impacts badly on your credit score. Many times you apply for credit cards just because it is giving cash back on few purchases.

Follow a budgeting exercise, control your expenditure and have a healthy lifestyle, so the urge for loan should not arise at all. Take loans for needs and not for desires.

Sometimes it takes months, years to arrive at a decent score. Following the above mentioned tips, if followed religiously will surely help you.

Wednesday, 3 December 2014

How errors can ruin your credit report

Want to correct the errors in CIBIL Report and remove your name from CIBIL? Firstly let’s understand the type of errors that can be on your CIBIL report. Before that, the first thing you need to do, get your CIBIL Report.

Banks and financial institutes keep updating CIBIL about your credit behaviour on monthly basis. So, at the time of entering some data, there can be some human error which can occur. Even though these are human mistakes, still they are responsible and correctly blamed by a lot of complaints

Remember that each of these little things is very important and different banks have different criteria and weight age on a particular thing. So getting each thing right is very important for your future loans. Make sure you have all of them corrected.


At times you will see things which do not belong to you, it comes into the category of “human error” or actually it might be on your name, just that you are not aware of it, this might happen if your documents are misused by some other person. This happens and has happened with lot of people. So take this seriously. Note that you might not see a recent update in your CIBIL report if you have applied for a CIBIL report within 45 days of a transaction. It takes time to update it in CIBIL report.

Once the loan provider confirms that there is an error, it will provide CIBIL with corrected data. CIBIL then updates the data and informs you as appropriate. Always remember, it is the duty of CIBIL to help you resolve your request.

Please remember that CIBIL score does not make changes to any information on its own. It is only a custodian of information received from credit institutions. CIBIL is permitted to make changes to your credit information only when it is confirmed by the relevant loan providers.

Tuesday, 2 December 2014

What affects your CIBIL Report

Many people believe that a single payment delay won't hurt the CIBIL credit score if you can quickly catch up with the time lag. This may be partly true. It really depends on the timing of your missed payment and the severity of the payment. If it was just one or two payments that you delayed in the past, it may hurt your score temporarily.

Missed and delayed payments are things lenders frown upon. However it is important to understand the difference between minor and major defaults. Any payments that are delayed or missed less than 90 days are considered minor defaults. This is considered minor because lenders believe that such a default could be cleared

If you have not defaulted and honored your debt obligations, you are likely to get a good credit score. A good CIBIL score is important to improve your creditworthiness if you are planning to take a loan. A bad score means you are going to find it increasingly hard to get a loan or credit card.

What inquires affect credit score:-

1. The impact of credit inquiries will differ from person to person depending on their own unique credit history. An inquiry can have a greater impact if you have lesser accounts and a shorter credit history.

2. Most credit inquiries are required to remain as a part of your credit report for at least one year, and up to two years.

3. Multiple inquiries also raise the red flag about identity theft. It serves to alert you of a possible identity theft in case you have not been making those inquiries.

4. Inquiries remain on a credit report for two years, but they're included in your credit score for the first year only. This means all of your inquiries over the past two years are probably not being counted in your score.

If yours is a minor default, you can actually catch up with the payment and your CIBIL score will eventually bounce, though not to its original score, but somewhere close.

So try not to miss your payments ever. If you do, catch up with it as quickly as possible

Monday, 1 December 2014

How to protect your CIBIL score

CIBIL score is a 3 digit numeric number that indicates your credit and financial health basically it is not only reflects the past but is also a reflection on the future. The score is calculated and provided by Credit Information Bureau (India) Limited (CIBIL) which is the first bureau in India.

 Once you understand the importance of a CIBIL Score, you should know why lenders (banks/NBFC) want to know your CIBIL Score. Lenders can get an estimate about the person’s past record in making timely payments. CIBIL Score helps the lender make a logical guess about the person’s creditworthiness for the future.

You can access CIBIL Score and understand your eligibility for the loan.


Payment history plays an important role in your score card. Late payments indicate that you are having problems in fulfilling your obligations. It is also important to maintain a proper mix between secured and unsecured loans.

Check your CIBIL credit report: After you get your credit score please check if your name, age, dates of birth, PAN numbers are accurate. If not, report this to CIBIL immediately. Then check for the accounts held and loans being services under your name.

Maintain a good Credit Mix It is advisable to have a good mix of secured (home loan, auto loan) and unsecured loans (personal loan, credit card)

Pay your dues in full: Every bill will show you minimum amount due. Don’t get excited that the amount is much lesser than what you actually owe the bank. Always pay your entire amount, because the remaining amount will show as overdue in your CIBIL score,

Anybody can get their CIBIL score by visiting the CIBIL website and paying the required amount. Once you know about your position on the CIBIL Rating Scale you be preemptive about the loan processing.