Saturday, 8 June 2019

Important Ideas for Achieving a Good CIBIL Score for a No-Score Customer

One of the most common problems that new credit users run into is the absence of a credit score. It’s a classic catch-22 situation- you need credit to get credit, but you can’t get credit when you don’t have credit. However, there is hope.
It’s possible to build a credit score even if you don’t have any credit management experience at all. The following are a few ideas that you can consider to build a credit score or CIBIL score from scratch:
Get a Credit Card
Credit cards are a lot easier to get compared to loans. This is because the risk with them is much lower for the provider, and you can even get a secured credit card in which you can deposit an appropriate amount with the card issuer to facilitate the process as the deposit becomes security.
Credit cards are a great way to build and increase CIBIL score. All you have to do is to be careful with the payments and ensure that every single credit card bill is paid on time. You also need to keep the credit utilization ratio below 30%. For instance, if your credit card limit is Rs. 1 lakh, and you are spending around Rs. 40,000 a month with the card, then the ratio will be 40% which is higher than the recommended level.
Get a Small Loan
Another good option to pick if you want to increase CIBIL score is to get a small loan. Since you don’t have any score at all, getting the loan could prove to be challenging. However, it will still be easier than getting a loan of a few lakh rupees. There are many easy and simple loans that you can get- online loans, payday loans, etc. You can also take a secured loan by offering collateral like gold, stocks, etc.
Apply for a Joint Loan
As the name suggests, a joint loan is a loan that you take with someone else. Most people who take joint loans are either couples or siblings. Here is why taking a joint loan is easier than a standard loan- the responsibility of repayment is put on two individuals rather than one. In fact, one of the co-applicants in these loans often don’t even have a decent CIBIL score but they are able to get the loan because the other applicant has a good one.
Things to Remember
The following are some of the things you need to keep in mind if you want to build a good credit score:
  • Your repayment history plays the biggest role in credit score-building. So, make sure that you always pay your loan EMIs, credit card bills, etc. on time. One way to do that is to authorize your bank to automatically debit the loan EMIs from your account every month.
  • Use credit cards responsibly as eating up your limit can reflect a “credit hungry” behavior. This can turn away lenders as they may think that you can’t pay for your expenses yourself and need credit all the time.
  • Credit variety can help in giving your score a boost. So, if your credit history is based on a personal loan alone, then you can get a home loan or apply for a credit card to increase the variety and hence the score.
  • Don’t close old credit card accounts on a whim. This is because the length of your credit history can also affect your score. Even if do have to close an account, then pick one that’s relatively newer. This will ensure that your CIBIL score is safe and protected.
  • Avoid becoming loan guarantors for others at all costs. This is because when you become one, then you take the responsibility for their repayment. If the person refuses or is unable to repay the loan, then your own score can get affected.
Bottom Line
Every individual starts building credit score from scratch. So, don’t fret if you don’t have any credit history- you are not the only one. Just try to find ways to open an account and then take the steps above to ensure good growth and proper maintenance of the report. Good luck!

Saturday, 1 June 2019

Procedure of Individuals Who Maintain 750+ Credit Score

If you know one thing about credit score, you know that you need to take a variety of measures to keep it as high as possible. This is because a good score allows you to get all kinds of loans easily and that too at attractive interest rates. You are also able to avail bigger loans and higher credit card limits when you have a good rating.
When it comes to CIBIL, then the score range followed is 300 to 900, and the lenders consider a score above 750 “good”. The question is- what process is followed by individuals who score above 750? The following are the main steps they follow:
1. Report Checking
The first thing that anyone who wants to increase credit score needs to do is check their report. This is because in it you can find all the information you need to take the right steps if your score is dropping. You can also check if there are any discrepancies, mistakes, or typos in your personal information or financial information. These mistakes can hurt the rating but can also be removed for a better score.
2. Timely Repayments
One of the biggest factors that play a role in your credit development, is the way how you handle your debt. If you are late with the loan EMIs and credit card bills from time to time, then it can have an adverse effect on your rating. However, if you ensure that every single payment is made on time, then you can also observe a healthy growth in your credit rating.
One thing that many credit users don’t know is that every single EMI or credit card payment pays a role in the calculation of the credit score. Your lender may not update CIBIL if there is a late payment. However, there are lenders who update the rating agency about the smallest activity that involves you. So, if you want to achieve a score of 750+, then you should try to be careful with every single payment. You can also check your free credit score if you made a late payment to see if the lender reported the same to CIBIL.
3. Lower Credit Utilization
Credit utilization is the ratio of the amount of credit you use with your credit cards and the total credit that’s available to you. For instance, if your average monthly spending is Rs. 40,000 with the cards, and the credit card limit on your two cards is Rs. 50,000 each, then the utilization ratio can be calculated as:
Rs. 40,000/Rs. 1,00,000 (50k+50k) = 40%
If you want to achieve the best score possible, then you should try to keep the utilization ratio below 35% which, as you can see isn’t the case in the example above. However, you can solve this problem easily by taking any of the following measures:
  • You can limit your credit card usage and try to pay with cash or some other form of digital payment like mobile wallets, net banking, etc.
  • You can get another credit card so that your total credit card limit is increased and the utilization ratio is lowered
4. Responsible Loan Applications
It’s pretty common for the people to approach several banks at the same time when they need a loan. The idea behind this concept is that the chances of loan approval are higher when there are multiple applications involved. However, this approach is flawed when we look at what’s goes behind the scenes.
When you want to check your free credit score and apply for the credit report yourself, then it’s called a “soft inquiry”. It doesn’t have any impact on your credit rating. However, when you want a loan, then the lender also fetches your credit report from the agency which is called a “hard inquiry”. This does have an impact on your rating. So, when you apply for a loan at various banks, it results in several hard inquiries which can harm your score.
If you want to increase credit score, then you should be careful with when you apply for loans. It’s highly recommended you place a gap of at least a week in your loan applications to prevent unnecessary damage.
So, these were some of the basic things that individuals with 750+ credit score follow. You too can follow these steps and improve the score for a safe and secure financial future.

Friday, 24 May 2019

How failed credit card and personal loan payments reduce your credit score

Have you ever failed to make a credit card payment, or not paid the EMI due on a personal loan? If you have, and if you’re also wondering whether both these factors can bring down your credit score, you’re not wrong. The answer is unfortunately a resounding yes, and it does have a negative impact on your financial health.

What a failed payment does
Even one single failed payment can have an adverse impact on your finances. For starters, the lender will levy interest costs, finance charges and fees that can add up to a whopping amount. This is a financial setback – imagine if you could invest this money elsewhere instead! When you eventually repay the amount that is outstanding, you’d have wound up paying far more than you otherwise would have, with timely and full payments!

Further, a delayed or missed payment also affects your credit score, and that’s a loss which can affect your financial future going forward.

What is a credit score and what impacts it?
A credit score is a numerical representation of your credit report, ranging between 300 and 900. A score that is high is considered to be good, with lenders looking favourably at your loan and credit card application. Typically, a score of 750+ would help you get the best deal there is, even if otherwise a personal loan for low CIBIL score is available. Reason enough to work on your score, we say!

Here are the factors that determine the credit score. Note that while each bureau may have a slightly different evaluation, the basic criteria remain the same.

Considering the above, it’s important to call for your free credit score from any of the four credit bureaus in India currently. This information can be your stepping stone to financial health, if you are able to maintain a good credit score going forward.

How to build and maintain a good score
Financial discipline is the key to achieving a good credit score and also being able to maintain it. Remember that you alone can take charge of your financial health and it is entirely up to you to be prudent when handling debt.

Here are ways to get good credit health:
  • Make payments on time – This is a golden rule you should live by, if you want to maintain and retain a robust credit score. Timely payments indicate to a lender that you can handle debt responsibly, and let’s face it – who would want to lend to someone who appears to be iffy with repayment, right?

  • Have a healthy credit mix – When a lender sees a mix of secured and unsecured loan products – a home loan, credit card and a personal loan, for instance – in your credit report, they would see you as a person who can handle all sorts of debt. Thus, a credit mix can do your CIBIL report a world of good!

  • Watch your credit utilisation – We know that it’s often tempting to utilise your credit limit when you’re out shopping! But, stop right there! Experts opine that not more than 30 percent of the limit should be used, across all your credit cards. This would mean that you’re heavily dependent on debt, and chances are that your future loan or card application will go through smoothly.

  • Clear all outstanding debts – Don’t rely on part-payments or minimum payments to see you through. Again, give a lender a sense of comfort when they view your credit report by indicating that you don’t have any difficulty in repaying amounts owed. Further, a ‘settled’ or ‘written off’ loan or card account on your report can adversely impact your score. It’s therefore best to pay off all outstanding dues so that your score doesn’t take a nosedive.

  • Identify errors in your credit report – You need to check your credit report carefully to make sure that all the details therein are accurate and more importantly, pertain to you. If not, it is likely that you are a victim of identity theft. Report such inaccuracies to the concerned bureau immediately, not just to better your score but also safeguard your identity.

What you need to do next
The first step would be to get your free credit score from any of the credit bureaus. This would tell you your current position, and just how much you need to work on building your score. While you may get a personal loan for low CIBIL score, for instance, it would never be at the best interest rates like someone with a high score would get. Also, imagine a personal contingency wherein you require funding urgently. A good score would be your gateway to getting the assistance you require, right when you require it.

Not just loans and cards, a credit score can determine your financial future over the long run, which makes it important to work on it now. With our pointers above, we’re sure that your journey to building a robust credit score can now begin!

We wish you every success!

Friday, 17 May 2019

Do Banks Check Credit Score Before Loan Approval?

If you know one thing about loans, you know that they are not easy to get. However, it’s also not hard to see why that is the case. After all, a lender takes a big risk every time they approve a loan. If the borrower becomes a loan defaulter, then it doesn’t have any other option but to put it under the non-performing assets (NPA) category. To avoid situations like these, all lenders conduct background checks on the loan applicants.
What Kind of Measures Banks Take When They Check Loan Applications?
Different banks follow different protocols for loan disbursements. However, the following are some of the things that almost all of them consider carefully:
1. Debt to Income Ratio
Debt to income ratio is pretty much self-explanatory. This is the ratio of the debt that you have to repay and your average monthly income. When it is high, it means that you are under a lot of debt and your current income isn’t enough to accommodate another loan. So, the lender may turn down your loan request reckoning that you won’t be able to repay the money.
2. Assets
If you have immovable or moveable assets, then you can take a secured loan and offer the assets as collateral. Doing this can make the lender more comfortable about approving the loan. For instance, if you want to take a home loan, then the bank may approve the request knowing that even if you become a loan defaulter, it can seize your property and sell it off to get its money back.
3. Co-applicants
If you want to increase the chances of loan approval, then it’s a good idea to apply with a co-applicant who can be your spouse, sibling, or even a parent. This is because when you do this, then the responsibility of the loan’s repayment is shared equally between you and other co-applicant which is something of huge assurance to the lender.
4. Loan Amount
With bigger loans come bigger risks. So, if you are asking for a big loan, then the bank will check all kinds of details which include your loan history, income, nature of the loan, etc. If the amount is too high to be justified by your current profile, then they may reject your application.
What About Credit Score?
One of the most important things that a lender checks when someone applies for a loan is their credit report. This is because the report shares all the important details that they need to review for deciding the fate of the loan application. These include personal details, income, bank and loan accounts, etc.
A credit report also shares the credit score of the individual which is easily one of the most important details that the lenders need for loan evaluations. This is because the score instantly provides them an overview of the loan application and helps them decide whether they want to give a nod or not.
The following are some of the most important things that you need to know about credit score:
  • Credit score and credit report are provided by credit rating agencies like Equifax, CRIF High Mark, TransUnion, etc. However, the biggest agency in India is CIBIL. So, if you have to check your score, then it’s best to approach CIBIL rather than others.
  • A high credit score doesn’t guarantee loan approvals. There are many things that can affect your application status. For instance, if you have been a loan defaulter in the past, then the bank may refuse to approve a loan no matter how high your score is.
  • Different credit rating agencies follow a different scoring range and may consider different factors to calculate your score. For instance, CIBIL follows the range 300-900 and a score above 750 is considered a good score.
  • If your credit score isn’t up to the mark, then you can take various steps to make improvements. For instance, you can clear old debts, remove errors and typos from your report, limit credit card usage, etc.
As you can see, the banks almost always check your credit score before approving loan applications. There is no way around it. So, it’s best if you can start making improvements on yours so that you can get any kind of loan you want in an event of emergency.

Saturday, 11 May 2019

Just Say no if You're Asked to Cosign a Loan: Here’s Why

It’s no secret that getting a loan can be quite difficult sometimes. So, if a friend or family member is unable to get a loan due to a low credit score, then you can help them by becoming a cosigner if you have a good score yourself. The question is, is that really a good idea? The answer is “no”.
Who is a Cosigner?
When you become a cosigner for someone, then you take formal responsibility for their debt’s repayment. In other words, if this person takes a personal loan, home loan, etc. and fails to repay the loan after a few months or years, then the lender may contact you for the repayment.
There are many reasons why someone may ask you to cosign a loan with them. For instance, they can do that if they want a better personal loan or home loan interest rate, or just want to get a loan faster. In fact, by cosigning a loan, you can also improve your own credit score if the applicant is a responsible individual and pays their EMIs on time. This is because your credit history is influenced as much as theirs.
Is Cosigning a Loan a Good Idea?
Cosigning a loan is usually not recommended because of the following:
Credit Damage
When you cosign a loan, then you take a huge risk of ruining your own CIBIL report. This is because even if you know the person well, or in case they are a family member, there is always a small possibility of them defaulting on the loan. For instance, they may lose their job or become critically ill. In situations like these, they may not be able to pay the EMIs, and burden of the repayment of the debt may fall on your shoulders. This can also cause permanent damage to your own credit rating.
When your CIBIL report is marred due to the non-repayment of loans by your co-signer, then you can face problems like difficulty in getting loans at affordable interest rates or not getting loans at all.
You Can’t Change Your Decision
Once you have become a co-signer after signing on the required documents, then you bear the responsibility till the end i.e. until the cosigner repays the loan. In other words, if you realize that you have made a mistake and don’t wish to have the responsibility anymore after a few months have gone by, then you can’t just opt out of the arrangement. This is true even in situations in which you see that your co-signer is openly making decisions that can lead to huge financial losses thereby making it difficult for them to repay the debt.
Your Relationship Can Take a Turn for the Worse
A lot of times, it’s married or unmarried couples that take loans together. The same can happen with you as well if your spouse or significance other decides that they need you to cosign a loan so that they can get a good home loan interest rate or get the loan from a particular lender that’s refusing to give approval for their application on their own. If you agree to cosign, then you can end up putting your relationship in a jeopardy.
There is a reason why financial gurus advise that you should be wary of taking joint loans or becoming cosigners. This is because personal finance can be tricky at times, and if things start going south, then differences can emerge between two people who otherwise love each other. So, if you don’t want disputes with your beloved, then you should seek alternatives to cosigning a loan.
Bottom Line
Obtaining a loan is not easy, especially when someone’s credit score is low. However, there are always options other than getting you to cosigning a loan with them. For instance, they can work on improving their score or take advice from a professional who can review their credit history and offer practical solutions. Cosigning a loan should always be the last resort i.e. when no other path can be taken due to certain circumstances. So, if your brother/sister, spouse, or relative comes to you for help, then don’t give in to your emotions, and try to say no in a polite manner. If they really love you, then they will understand.

Monday, 29 April 2019

Do you feel that there is a lot of enigma around your Credit Score?

You are living a happy life personally and financially. One day you decide on buying a house and start making plans for the same. You, with your family start making all the savings you can and are getting close to buying your dream house. You collect enough to make the down payment of the house and start house hunting with your family members. You finally shortlist a property and are ready to proceed further. You make the down payment and of course are seeking help of a lender to finance your house purchase. You are happy that your loan will be processed in no time and you will be a proud owner of a house.
Suddenly, you get a call from the loan lender stating your loan application is been rejected, reason being no credit score. You start wondering how it is possible and the bank should not have any problem financing you as this is the first time you are taking a loan. You get back to the developer and explain this situation to them and luckily they are ready to wait and process your loan after a year’s time.
Now, you start scraping the internet on how you can establish and get the credit score up in no time. You are in a fix and every article has a different approach towards credit.
If you are encountering the same kind of a scenario, then you are at the right place. We will clear your enigma around your credit score,
What is a cibil score?
A cibil score is a three digit numeric representation of how you are doing financially. This score is used to evaluate if you are credit worthy and the lender can provide you a new line of credit.
Who decides the scoring system and where is the information stored?
Your credit line information is sent by the lender to various credit bureaus and is stored by the credit bureaus. Equifax, Trans Union and CIBIL are the main credit bureaus we deal with in India. The most preferred rating system is cibil which is used by almost every lender in our country.
There are various aspects through which credit score is calculated and then stored with the bureaus. You can also opt for a free report and check how you stand credit wise.
How do I start one and maintain the same?
You can start your cibil report just by opting any credit or a credit card. You just have to make sure that all your payments are made on time and you can easily maintain the same. If you do not make your payments on time, you will definitely see a dip in your credit score and also you will start getting a lot of calls from the collection agencies.
What happens if my cibil goes down?
Life is uncertain and you would not know what will knock at your door. It can be a great offer from the bank or an emergency where you will have to opt for a quick loan. In both the cases you will have to be ready with a good credit score. If your cibil is in the low side when such an emergency arrives, it will difficult to get a loan and you will be stuck in an infinite loop of financial problems.
Apart from getting a financial product, a cibil score can help you in many other ways. It can help in getting a job and many more. Just make sure to know your numbers on a regular basis.

Monday, 22 April 2019

Start learning the basics of your credit score

There is always a first time for everything. That can be your first home, your first car and many more. You tend to have the same feeling about your first salary or application of a fresh new loan. But have ever thought about where does your financial transaction lead you to? All your financial transactions lead you to your credit report.
Now what is a credit report and how does that matter you may ask?
A credit score is nothing but a numeric representation of how you are doing financially. The score ranges from 300-900 and higher the numbers, higher are your chances to get a loan or a financial product. A good cibil score can not only help you get a quick loan but will also help you in many other ways like landing you in your dream job, etc.
It is really important to know the cibil score and also the basics of how the score calculation works. If this is your first time encountering such a thing, you are the right place. Today we will sight you some basics of cibil score and how it is calculated.
Do I have a credit score?
Yes! We all have a credit report. If you are making any financial transaction, you will have a credit score in place. If you have never applied for any credit, your cibil score may be on the lower side or even no cibil score, but you definitely have a report in place.
Checking your own credit score does not affect the score
This is the top most myth which revolves around the credit score and its calculations. There are two types of inquiries, hard and soft. A hard inquiry is made whenever you are applying for a loan or a credit card by the bank and it gets reflected towards the report. On the other hand, if you are personally inquiring about your report, it is termed as a soft inquiry which is not reflected on the account and does not take your credit score down.
How is the score calculated?
The cibil score is calculated on many grounds. Grounds like your payment history, tenure of the credit, types of credit you hold, credit inquiries, etc. What you need to understand is that cibil score calculations are always tricky. Even if you miss one payment, you will end up losing a lot of number out of the score and end up on the low cibil score section. You will have to be smart and agile when it comes to maintaining your cibil report.
Where is my credit information stored?
Your credit information is gathered and recorded to different credit bureaus in the market. The most preferred by the Indian lenders is CIBIL as a credit bureau and most of the time your cibil report is checked if you have applied for a loan.
Can anyone have access to my report?
The answer to this is a yes and also a no. The banks and lenders have special access to view report of any individual who is applying for a credit or a home loan so yes; the creditors have access to your report all the time. On the other hand, on a personal level only you have access to your credit report and no one else.
Is data theft real?
Yes, it is. Your data if not preserved properly can be used by someone else and you may end up having a low credit score. Always make sure all your information is accurate and safe so that you do not encounter such a thing.
When you are starting fresh on the credit grounds these are the basics you should know, what is much more important than the above points is, how you maintain your score for future financial transactions.