Monday, 1 July 2019

6 Bad Reasons for Taking Personal Loans

People take personal loans all the time. This is because not everyone saves a lot of money in their bank account. Some are not able to save due to big expenses, while others don’t have enough cash due to investments in real estate or some other investment scheme. Either way, personal loans are able to solve the problem of cash crunch rather easily. However, you have to be careful when you apply for one yourself.
Not every reason to take a personal loan is a good one and you don’t want to take a loan only to face problems when you have to improve Cibil score or create unnecessary debt. The following are some of the reasons that you need to keep in mind when you consider applying for a loan:
1. Wedding
When you are about to start a new life with someone, then you want it to be free of stress and worries. However, if you decide to finance your wedding with a personal loan, then you may get the opposite of what you want from your new life.
In India, weddings aren’t just ceremonies of special events but rather small festivals of their own which comprise fanfare, delicious food, elaborate performances, and more. However, this costs a lot of money. So, those who can’t arrange lavish weddings on their own, take loans which is something that’s not recommended by experts as that can create a huge debt that’s shared by two individuals who start a new life.
2. Illegal Activities
Most banks won’t disburse loans for unlawful activities. So, it’s a bad idea to hide your real reason and get a loan under false pretences. If the lender learns about the real deal, then you can face legal action.
3. Loan on Someone Else’s Behalf
Let’s say that a friend of yours checked their free credit score and realized that it’s not up to the mark. They tried getting a loan but failed time and again. They may then ask you to take a loan on their behalf if you have a good score yourself. Saying yes to that request could be a really bad idea and can even ruin your relationship with them.
4. Investment in Stocks
There is nothing wrong with purchasing stocks for financial gains. However, stock markets can be quite volatile which is why if you want to invest, then use your own money rather than a personal loan.
5. Luxuries
You are free to choose a lifestyle, even if it’s quite expensive. However, if you need to take a loan from a bank to maintain it, then it’s better to eliminate some of the luxuries instead. You don’t want to give rise to debt just so you can enjoy a lavish lifestyle.
6. Paying Off Other Loans
You don’t want to take a loan to pay off an existing loan unless the new loan offers a much lower interest rate to make up for the expenses that will incur. You should be careful as this concept can also lead to bad financial habits.
Let’s take a look at some of the reasons for which it’s a good idea to take a personal loan and use repayment to improve cibil score as well:
When you take an education loan, then your purpose is to increase your value. For instance, you can use the funds to increase your qualification or to get certification in a particular domain that can help you to get better jobs. This means that you will get to earn more money, and the banks understand this. This is why most of them approve education loans easily if your paid or free credit score is good and your academic history is bright.
Home Purchasing
Real estate is an appreciating asset. This is because the financial value of commercial and residential buildings increases over time. So, when you want a personal loan to buy property, then again, it can be easy to get approval from banks or NBFCs. However, you may not get a huge loan unless you run a highly profitable business or have a big salary. In most cases, you will need to fund a portion of the price with your own pocket.
So, as you can see, there are both good and bad reasons for taking personal loans. You just need to ensure that you always pick the former. Good luck!

Monday, 24 June 2019

Credit Solutions for those without any Credit History

Well, Credit Score, Credit Report, Credit History are the few things that we have been listening pretty often these days. Whenever one wants to apply for a credit card or a loan, these things are checked. Only on that eligibility, an individual’s application will be accepted or rejected. So how does this work? How one establishes the score? There are so many questions that would arise if we are new to this whole concept. Let’s start with understanding about these 3 things, Score, Report and History one by one and in detail.

Credit Score
A credit score is a three-digit number ranging from 300-900. Categorised in Low, Average and High Score. A score that is between 300-600 is considered low, the one between 600-750 is average and the one above 750 is a good one. The score determines the status of a loan or a credit card application.
How is the score determined?
There are five factors that determine the credit score.
1. Payment History
This determines how consistent and on time the individual has been in paying the credits that are taken. So basically paying the credit card bills on time and loan EMIs on time.
2. Amount Owed
This one determines the amount that has been taken till date in various form of credit.
3. Length Of Credit History
The older the account the better is the score. So, this determines how old is the credit account.
4. New Credit
Applying for new credit also is one of the factors that determine the score. But, one must know that they should not keep on applying it too often else that would hamper the score.
5. Types of Credit
There are 4 types of credits. Secured and unsecured type of credit and Fixed and revolving based credit. A combination of all for determines the score.

Credit Report
A credit report comprises of three things.
1. Credit Score
2. Personal Information
3. Detailed information of all the credits taken
An applicant’s name, address, email, identification document’s details are mentioned in the report along with all the credits they have taken and their payments. Any new application if that is applied, if any of the application is rejected.

Credit History
Credit history is well, the combination of both. It has all the details about the credits that are taken.

After understanding all these three concepts, the question that arises is: how are these three made? When there is any credit taken, and then repaid eventually, one gets the score and the history and the report. And that determines the eligibility for credit. But, what if there hasn’t been any credit that is taken and one wants to apply for the new credit? Now, this becomes a catch 22 situation. Without a score, one can’t get any credits and without having any credit one does not establish the score. So, what to do in that case?

In such a situation, a small loan or a credit card help. With usual salary slip, for an employed person and the earning sheet of a business person, banks would agree to give a small personal loan of Rs. 50,000 or something or also a credit card application could be approved. While starting with that, and making regular payments, the score can be established. A credit score is established after six months of the first usage of the credit that has been used. And once that is done, it would be easier to apply for any new one.

Always remember, do not miss the due dates of the EMIs and Card bills. Also, try not to make late payments. Only one late payment won’t make any difference – Thinking that one must cultivate that habit and screw up the score. Try taking professional help if the score is down and you can’t understand what to do! But, be credit healthy!

Saturday, 22 June 2019

What is the ‘magic’ that happens when your credit score is 750+?

Are you in search of the perfect credit score? Having one, or coming close to one is considered to be one of the best things you can do to build a strong credit history. It’s common knowledge that higher the credit score, better it is to secure your financial future.

What makes the credit score important?
Let us say that you apply for a car loan. One of the first things that the lender will do is to go through your credit report and check your CIBIL score. This all-important three-digit number tells the lender just how creditworthy you are, i.e. how likely you are to pay off the loan, or possibly default on payment. Ranging from 300 to 900, the closer you are to 900, the better it is for you. A score of 750 and above is considered to be a good score.

What are the factors that influence the CIBIL score?
While every bureau may have slightly different scores to assign, the fact remains that the parameters considered by them all remain constant. Here is what you should know about what goes into calculating your credit score:

What happens when your CIBIL score is high?
We have now established that having a high credit score is important. In fact, a score above 750 can open almost all doors when it comes to your financial life. Let us take a look at the ‘magic’ that can happen when you increase CIBIL score and it is 750+!

Better chances of credit approval – When you have a good score, you have a better chance of getting your credit card or loan application approved by a lender. So, you needn’t be afraid of your application being turned down by a lender – approach them with confidence because your request is more likely to be viewed favourably.

Approval for higher limits - With a lower score, on the other hand, it’s possible that a lender may be reluctant to lend you the entire amount you have requested for and you will wind up with an amount that may just prove to be insufficient. Your repayment track record which reflects on your credit score is one of the main parameters that a financer checks before approving the loan amount they are willing to extend to you.

Better interest rates - A lower score lowers your chances of getting a loan or credit card at the best possible terms. For instance, unless you increase CIBIL score, chances are that you will be offered a loan at a higher rate of interest than someone else with a better score would. So, aim for a high score to get a competitive loan when you really need one.

Better negotiating power – With a score above 750, you get higher bargaining power to negotiate other terms and conditions on your loan. For instance, you can request for a waiver or reduction of processing fees, foreclosure charges etc. With a poor score, a lender is more likely to refuse all such requests.

Better insurance rates – While this might not be a common practice in India currently, in some countries globally, insurance premium is determined by the credit score. Insurance companies opine that a person with a low score is more likely to file more claims, which is why their premium would be consequently higher.

Approval for home rentals – Again, this is a practice that is currently ongoing overseas, wherein a home owner checks the credit report of a prospective tenant to decide whether to rent out their homes. It’s simple: they believe that a person with a bad score is more likely to skip paying their rent or delaying payment and would therefore deny a request for rental.

Tips to maintain a good credit score
While building a score takes time, similarly maintaining it also takes some effort. It is very important to track your CIBIL score at regular intervals.
  • The first thing to do is to request for your credit report from any of the four credit bureaus in India today. Ensure that all the information in the report is not just accurate, but that it pertains to you.

  • When you’ve availed of a loan or credit card, make timely and complete payment. These two parameters are extremely important and weigh heavily on your score.

  • Don’t maximise or use up the credit limit you have been assigned. While this is calculated across all your credit cards, the fact remains that utilising over 30 percent of the credit limit makes you appear to be a credit-hungry person. A lender tends to be more cautious when extending further credit to such individuals.

In conclusion
If you have consistently been working on your credit score to bring it to the magical number of 750+, you should give yourself a pat on the back! Keep doing what it takes to maintain a good credit score so that you can reap the rewards of being diligent when it comes to your personal finances.

Watch the magic unfold!

Friday, 14 June 2019

How Your Cibil Score Facilitates the Loan Approval Process

It doesn’t matter how successful you are today, there is no telling what tomorrow will be like. If you are a salaried professional, then you may lose your job if the economy goes south. In the same way, if you run a successful business, then you may lose it to an emerging rival. Either way, if you want to be financially secure, then you must pay attention to your credit score. This is because if you face cash crunch one in an unfortunate time, then you want to be able to get a personal loan or business loan as quickly as possible which is viable when your credit rating is good.
Why is Cibil Score Important?
When banks and non-banking financial institutes (NBFCs) approve loans, they take risks. This is because they never know for sure if a borrower will repay the loan on time, if at all. In fact, the banking industry is still facing the massive problem of Non-Performing Assets aka NPAs due to which its revenue has taken a hit as well. This is why now the lenders take different kinds of measures to minimize risks and maximize revenue. Cibil score allows them to succeed in that endeavour.
Your Cibil score is the score of your entire financial standing. A bank is free to check your credit report, and most of them actually do, when they have to approve a personal loan, home loan, or even a credit card, but they can learn a lot from your score alone. For instance, if your score is above 750, then it means that you are a responsible credit user and are likely to repay every loan and credit card bill on time. In other words, you can get loans without any problem.
How Your Cibil Score Speeds up Loan Approval Process?
If your paid or free CIBIL score is high, then it helps with loan approval in the following ways:
Those who achieve high credit score are ones who pay their credit card and loan payments on time. So, if your own score is high, then it gives the bank the assurance that you won’t miss the payment deadlines and pay the loan on time.
History of Defaulting
When a borrower is misses the deadline for an EMI, then the banks usually wait for up to a month before they inform the credit rating agencies and call the borrower to intimate about the same. If they refuse to pay or are not in a condition to pay, and several months pass by, then the bank may consider them a defaulter. This is a serious offence and makes it really difficult for the borrower to ever get a loan again.
If you have a good credit score, then it’s unlikely that you have defaulted in the past. This is another good sign for a lender.
Interest Rate
High credit ratings also make you eligible for some of the best interest rates in the market. This is because the lenders are comfortable in offering better rates compared to those when they know that they money is going in safe hands and that they won’t face any challenges in recovering the same with interest.
Loan Amount
There is no telling how much amount you may need in a loan should a requirement arise. However, when your credit rating is high, then you can easily qualify for a high amount without any problem. On the other hand, when your score is low, then the banks may find it risky to approve big loan amount.
As you can see, there is certain merit in achieving a good credit score. You benefit in not just financial ways, but also an emotional way as you know that if there is ever an emergency, then you won’t have to struggle getting a loan. So, highly recommended that you check your free Cibil score today itself so that you know where you stand today. If improvements are required, then you can also take appropriate steps to take it above 750. Good luck!

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!