Wednesday, 26 April 2017

This is how you should be dealing with errors on your CIBIL report

Being credit healthy is important in current times not only because it reflects your financial health but also because it impacts one’s chances of getting a loan or in certain cases it can impact job prospects too. Following certain basic rules can help you stay credit healthy and have a good credit score. However what if your credit score is in the red not because of your irresponsible credit behavior but due to an error in the CIBIL report. Errors in the CIBIL report can cause more than expected harm and must be addressed immediately.
Types of Errors:
There are various types of errors that can occur in your credit report; some may affect your score others may not. However irrespective of the impact on the score it is essential that you get them rectified at the earliest by contacting CIBIL. Errors that deal with miss-spelt names, wrong contact details or inaccurate information about employment etc will have no bearing on the rating but these still could cause trouble or could indicate something more serious like an identity theft in rare cases. Hence these also need to be looked into and the required action needs to be taken.
Some errors like a delayed payment information when the same has not happened or a loan that does not belong to you being included in the CIR can cause adverse impact on the rating. When one needs a loan then this could become a big stumbling block and at that time you may not have enough time to get it rectified. Before you start researching on how to get loan for CIBIL defaulter we have some suggestions to offer that can help you get the error rectified.
Dealing With the Error:
CIBIL is a rating agency; hence it collates the data that is sent to it by various lenders across the country. This data relates to an individual’s loans, past and current both, payment history, open credit cards, credit card usage, credit enquiries and also non credit related information like personal/employment/contact details. Thus it is possible that in so much data being collated about each individual some errors may occur. These rarely occur at the CIBIL level and are generally due to some erroneous report by a lender. Though uncommon sometimes an error can also happen if data is entered incorrectly at CIBIL or there is some mix-up at the time of data entry.
Obviously the first thing to do is to go through the CIR carefully. Without going through your report in detail it is not possible to spot an error so that is a must and should be done periodically. Once you identify the mistake you need to fill a Dispute Resolution Form which is available online at the CIBIL website. You need to fill in the required information correctly. This information relates to your personal details (name, date of birth, contact details etc) and also about the dispute. Dispute details includes the control number which is nine digit number mentioned on the top of the CIR, the date of the credit report and the details about the dispute (the exact nature of the error as per the complainant). Once this form is submitted you get a Dispute Id which is required for all future correspondence; this will also be mailed to you. 
Once the dispute reaches CIBIL they need to identify whether the error is at their end or it is due to some incorrect data provided by the lender. If the error is at CIBIL level they will fix it and the let you know else they will get in touch with the concerned lender. Since CIBIL just collects data, it cannot make any changes to the data and hence has to wait for the lender to respond. Depending on the lender’s response the necessary action will be taken by CIBIL. In this case also you would be sent the required update. This can take up to 30 days and once you get a word about the mistake being rectified you can access your CIR again to see if the error has been fixed. CIBIL takes approximately seven days to update its records once the relevant clarification is received. If it is an error that affected your CIBIL score calculation then your score is likely to improve.

However if you are not satisfied with the resolution you can raise the dispute again and CIBIL will try and resolve the issue whether it is by looking at their own records or contacting the concerned lender. 

Tuesday, 11 April 2017

What is a Business Credit Report? Does it affect your Loan Application?

What is a Business Credit Report? Does it affect your Loan Application?
If you have ever applied for a home loan or a personal loan, then you probably know what a CIBIL report is and why is the CIBIL score important. In fact, the significance of credit reports is increasing with time, as companies especially the financial institutions have started taking them into account when evaluating job applications. However, what you may not know is that credit bureaus also maintain credit reports for companies as well. These credit reports are called Company Credit Reports (CCR).
Why is a CCR important?
A CCR is important for the same reason that a CIR (Credit Information Report), which is issued for individuals, is important.  A Company Credit Report is reviewed by the financial institutions when a company approaches them for a loan. It provides them all the critical information that can help them making the final decision, such as how much debt the company has, the balance amount, and even the details of the lawsuits that have been filed against the company if there are any.
It goes without saying that if your CCR will leave a negative impression on the lenders then you are unlikely to obtain a loan from them. Thus, it’s important to pay attention to your CCR and make improvements from time to time if necessary.  But how do you do that? Before we discuss that let’s take a look at the sections of your CCR (issued by CIBIL in this instance) itself, which are:
This is the first section of your CCR which contains the details of the current report. For instance, it tells when the report was generated, by whom, and whether it was because of a self-inquiry or an inquiry made by some other institution. It also has a unique identification number which generated every time the report is issued.
This is the second section of your CCR which contains all the details of your company. Apart from the basic details such as the company name, contact details, etc. it also contains a unique identification number called DUNS that’s different for every company registered by CIBIL.
Note: If your DUNS number is represented as 99-999-9999 then it means that a proper DUNS number has not been assigned to your company by CIBIL yet. It shall be assigned in the future.
Report Summary
This is the most important section of CCR. It lists the number of loans your company has taken in the past, and the amount of credit along with the sources behind it. If there is a guarantor involved, then it’s also mentioned here.
Credit Information and Enquiry Summary
In this section, the credit extended to your company is explained in detail. It provides the types of loans, overdraft, credit types, etc. along with the credit amount associated with each one.
Since business loans are usually risky lenders are extra careful when sanctioning them. They pay a lot of attention to the applicant’s CCR. If you want to ensure that your loan gets approved then make sure you take notice of the following:
·        Timely Repayment: If you have taken a business loan from a financial institution then make sure you repay it on time without delay.
·        Accuracy: Make sure the information given in your CCR is up to date and accurate. Even a small discrepancy can cause your loan application to be rejected.
·        Reasonable Amount: It is easy to feel an inclination towards a large loan in business. However, if you are unable to repay the loan it can be disastrous for the credibility of your company. Thus, be sure to put only that amount on the application that you are comfortable with.
Lenders often consider many other factors as well when assessing loan applications other than the CCR. For instance, if you have certain documents that serve as a proof of high cash flow and ownership of assets then the bank may feel more comfortable with sanctioning your loan.
Most businesses take loans at least once in their lifetime. However, getting one is not always easy. Be sure to monitor your CCR from time to time so that when you need to apply for a loan it gets passed without any problems.

Wednesday, 5 April 2017

Why Free Credit Reports are not so free in India?

Effective from 1st January, 2017, every single credit bureau of India has to provide one free full credit report (FFCR) per financial year to any person who has a credit history without any charge when requested by the individual. This is a result of a new rule implemented by the Reserve Bank of India (RBI).
Currently, there are four major credit bureaus of India viz. Transunion CIBIL Ltd., Experian Credit Information Co. of India Pvt. Ltd., Equifax Credit Information Services Pvt. Ltd., and CRIF High Mark Credit Information Services Pvt. Ltd. Thus, you can get up to four free credit reports every financial year without paying anything. Sounds amazing, right? However, the reality is quite different.
Before we jump to how the RBI policy has changed the structure of working, let’s take a look at the basics first.

What is a CIR?
CIR, or Credit Information Report is a formal report maintained by all the credit bureaus of India, which contains the details of your credit history. For instance, you can find our bank account details, loan and payment history details, etc. apart from basic personal information. When you apply for a loan or a credit card then the financial institution requests for your credit report from their partner credit bureau, based on which they decide whether or whether not to approve your loan application. CIBIL, which is the most prominent credit bureaus of India, states that more than 70% of the loans sanctioned are for the individuals who have a CIBIL score greater than 750 (the CIBIL score ranges from 300 to 900).

The Reality of free Credit Report
RBI has ordered all the credit bureaus of India to put the process of getting a free credit report for their customers on their respective websites, and they have followed so. However, the actual process varies from one credit bureau to another. Let’s take a look at a few of them:
Equifax has clearly displayed a link for the free credit report process on their homepage You can directly jump to the page by clicking this link.  The entire process is simplified through the following steps:
·        Download Equifax App on your Android or Apple phone.
·        Login to the app by providing your email address and a temporary PIN which will be sent to the email address itself.
·        Provide personal information and Aadhar card for verification, after which you need to provide an OTP sent on your registered mobile no.
·        Once authentication process is completed you will get your free credit report within 2 days.

CRIF High Mark
Just like Equifax CRIF has also put a link for the free credit report process on their homepage You can start the process by logging in with your credentials and then filling out a form with some basic details. You will also need to provide your UID or PAN for verification. The details will be confirmed by the company in a few days after which you can activate your account and get your free credit report within a few more days.

Transunion CIBIL
CIBIL has put a link to free CIBIL report on their homepage but rather at the bottom, thus making it easier to overlook. Using the link you can go to the page where you can download a required form. You can fill out the form and mail it to the company along with your KYC documents at your own cost. According to the FAQ section you can get your free CIR within 7 days of the form submission.

Although the RBI has mandated the credit bureaus to provide free credit reports to their customers it is clear that the process has not been made convenient at all. In fact, many people have claimed long delays in receiving their reports. Thus, RBI should perform a check on how well the new rule has been practiced by the credit bureaus and how the customers can avail the free CIBIL report service easily. 

Friday, 31 March 2017

Know the relation between credit report and credit score

A CIBIL report and a CIBIL score are the lifeblood of your financial life. All lenders assess them to decide whether they would lend to you or not. So if you ever need a loan, your credit history determines whether you will be approved for it and at what terms and interest rates you will get the funds. Very often both these terms are used interchangeably because they both provide insights into how you have handled credit in the past. But in reality there is a big difference between the two.
Read on to find out the prime difference between the credit report and score and why it is necessary to check both of them regularly.
Credit report
A credit report is a comprehensive document that contains the complete history of all your credit cards and loan accounts (including student loans, home loans, auto loans) and how you have paid them over time. It records information relating to delinquency, collections and bankruptcy as well. In India the Credit Rating Agencies like Equifax, Experian and TransUnion receive data from various banks and lending entities. They maintain the record of all your current and past credit accounts, outstanding balances, payment history, credit utilization, credit limits, types of loans, collections or settlements and other information relating to your debts.  They also keep a record of the no. of enquiries made by the lenders to assess your credit profile. All this information is processed to make a detailed credit report for each customer. One should check the report periodically to make sure that all the reported information is correct and free from any discrepancies. Checking the credit report also helps you uncover cases of identity theft where someone opens fraudulent accounts in your name.
Credit Score
A credit score is a numerical figure between 300 to 900 that is statistically generated using the information in the credit report. Different credit bureaus use different mathematical algorithms to arrive at the credit score but broadly they all use the same parameters to arrive at this number. These are the payment history, amount owed or the credit utilization, age of accounts, type of credit and recent credit activity. Your credit score does not consider factors like your income, employment, age and salary.
This number provides a clear snapshot of your financial health. It gives a quick glimpse of the credit risk to anyone who wishes to extend you credit. A high score implies that you are a creditworthy individual who is likely to make the payments on time. A low score puts a doubt on your future financial behaviour. A score more than 750 usually implies less risk of default and is considered to be a good score to please the lenders and get attractive interest rates. So if you are in need of financing you should check your credit score yourself to see how the lenders will perceive you.
Relationship between credit score and report
While a credit score is just a numerical value the credit report gives far more qualitative and quantitative inputs to the lender. The exhaustive information in the credit report helps him take an informed decision of whether to lend money to the applicant or not. As a borrower it is of paramount importance that you check both the report and score to get a fair idea of how you stand in the eyes of the lender. This helps to avoid any unpleasant surprises during the approval process. If your credit score is low you need to analyse the credit report to find out the reasons such as missed payments, high utilization, mistakes in the credit report or identity theft. A careful analysis of the report will help you to identify areas of improvement. You will be able to pinpoint exactly what credit habits are pulling your score down.
You are entitled to one free credit report from each of the three bureaus every year. But you need to pay a nominal fee to get your credit score. There are several sites that provide a free estimate of your score so that you can get a rough idea of where you stand. But you need to pay a fee to get the actual credit score from the credit monitoring agencies.

Thursday, 16 March 2017

Why Foreclosure of loan impacts your CIBIL Score

Though all kind of loans have become very common now yet most borrowers feel that it is kind of a burden that they should get off as soon possible.  It may seem like a good idea to repay the loan earlier than the original term specified (if one has surplus funds) to reduce the interest cost and also the mental burden that one associates with a loan.  Before foreclosing a loan the borrower needs to consider various aspects like the tax factor in case of home loans, prepayment charges if applicable, the savings in terms of the interest paid compared to the loss of an investment opportunity (the funds that are used for foreclosure can be invested elsewhere). Apart from this another factor that must be considered is the impact on the CIBIL Score if any.
Loan Foreclosure Explained:
Loans are taken at an agreed rate of interest for a specified time period which is known as the loan term. When the borrower pays the amount before the specified term it is known as foreclosure or part prepayment depending on how much is paid. When the repaid amount is part of outstanding amount then it is known as partial payment and if the entire outstanding amount is repaid then it is known as foreclosure of loan. Depending on the lender’s policies and the type of loan the rules for pre-payment and foreclosure may vary.
How Loan Foreclosure Impacts CIBIL Score?
The borrower may feel foreclosure is a good thing financially as well as for the credit rating but it is not so. From the lender’s perspective this may not be the case as the lender has planned for interest inflow for the entire loan tenure, prepaying a loan can upset the lender’s projections. Foreclosing a loan leads to idle cash being piled up at the bank which can cause them worry. Lenders generally try to dissuade borrowers from paying early on foreclosing a loan but for home loans the penalty charges have been waived off by most lenders for home loans at least.
Now let us assess the impact of foreclosure on the credit rating. When one repays a loan regularly it creates a healthy credit trail which helps in creating a good credit score. Repayment history is the biggest factor that contributes (35%) to the CIBIL Score. A deeper credit history gives a better picture about the loan bearing capacity and also the creditworthiness of an individual which helps the lenders in assessing the applicant. A well serviced loan that runs for the full duration will help in creating a healthy credit rating.
A healthy credit mix is very important for a good credit rating; this means that there should be good balance of secured loans like home and car and unsecured loans like a personal loan and credit card borrowings. So if the borrower repays a secured loan then it is likely to skew the ratio of secured and unsecured loans which is likely to adversely impact the credit rating.  However repaying a personal loan is not likely to impact the credit rating so much and in certain cases may actually benefit the credit rating.
A person with higher ratio of secured loans presents a more reliable picture then someone with only unsecured loans. Secured loans are backed by collaterals and have lower EMIs when compared to unsecured loans, which means in case of default the risk is mitigated. Repaying a loan also compromises the liquidity of the individual temporarily. A loan that is managed well and runs the course of the entire loan tenure reflects a person who is good at managing his finances and planning ahead.
In certain situation foreclosing a loan may be beneficial. This could be if one has an expensive loan which he/she wants to repay or if one is already overleveraged then they might want to repay a loan and try and take some time to get their credit rating back in shape
The impact of foreclosure of a loan may vary from situation to situation. In some situations it can help the person better his score; like if they are prepaying unsecured loans to balance the ratio of secured and unsecured loans or if they are already overleveraged. In some situations foreclosing a loan may temporarily dip the score but it will be a short term impact only.
Before foreclosing a loan one should consider all aspects (as mentioned in the beginning) and not only the impact on the credit rating before making this decision.

Wednesday, 8 March 2017

Do not let Cash Crunch Impact your CIBIL Score

No one wants to get in a cash crunch. However, life is unpredictable and you can never tell when you are going to get short on cash. A good example of this is the bold step of demonetisation taken by our Hon’ble Prime Minister Shri Narendra Modi recently. Although it has been a while since the movement started, the effect is still there. In many parts of India people are still having money problems. There are still long queues outside of ATMs and inside of banks.
Although in an event of cash crunch you do have to face a lot of inconveniences, it can also impact your CIBIL score. By not paying attention to your credit score you can make things even worse for yourself.
Here are some of the ways you can deal with a cash crunch and protect your credit report from damage:
1. Save Money by Cutting Expenses
The most important thing you need to do to is cutting on expenses. You can’t afford to spend on luxuries when there is a shortage of physical cash. So, round up your expenses and identify the ones you can do without. For instance, you might want to stick to eating homemade food only, doing with whatever clothes you have in your wardrobe, etc. for the time being. Use the saved money in repaying your credit card bills, loans, and also other important expenses that can’t be ignored.
2. Try to Get Longer Credit Periods
If you are a businessman then cash crunch can be especially troublesome for you, as you have to pay your vendors and employees apart from handling your own personal expenses. Thus, what you can do is explain your situation to them and request for longer credit periods. People are usually quite understanding, and if your vendors have been associated with you since a long time they will be happy to extend credit terms to you. 
With favorable credit periods, you will be able to keep your business operational, and thus make money while paying your loans and credit card bills.
3. Using Plastic
Since the government is pushing electronic payments they have lifted many types of credit card charges. Thus, now is a good time to use credit cards as much as possible. Not only you will get some respite this way, you will also save money as well. However, be sure to keep your credit utilization in control as excessing usage can be detrimental to your credit score. Ideally, you should not spend more than 30% of your credit limit. Thus, if the limit on your credit card is Rs. 2 lakhs then you should spend less than Rs. 60,000 a month.
Many people have started using credit cards excessively due to the demonetization. However, this has resulted in many of them ruining their credit reports. If you really have to use credit cards often then maybe you can talk to your bank about it and explain that your excessive utilization should not be put in a bad light. Understanding your situation your bank may decide not to have CIBIL record your activities in a negative way.
4. Staying Alert
Cash crunch can easily cause panic, and you can end up making rash decisions that can affect your credit score negatively. While you should perform a credit check irrespective of whether there is a cash crunch or not, its significance is definitely greater in that particular event. You can easily get your CIBIL rating online and you can even pay the fees the same through wire transfer or credit card, etc. For instance, CIBIL has a simple online process for a customer who wants their CIBIL rating and CIBIL report. You can fill out a small form, submit fees, and get your report in a few days. By checking your report every once in a while during cash crunch you can see if your score is dropping. In case it does, then you can take appropriate measures to prevent further damage and recover the lost points.

Cash crunch is never fun for anyone. However, you should not let it affect your credit score as improving it later can take a long time. So, stay focused and stay positive even in the most difficult cash crunch period. Like all bad times, it too shall pass. 

Wednesday, 1 March 2017

Good CIBIL score is an outcome of good credit management

What you sow is what you reap. You learnt this idiom in school and saw its application in various aspects of your life. You got good marks if you studied hard. You landed a good job if you prepared well for the interviews. The same “Law of karma” applies to credit management as well. Good credit management habits lead to a good CIBIL score.

Your credit report is a reflection of how you handle your loan and credit card accounts. A good payment behavior builds a sound credit profile and leads to a good credit score. This helps you to easily qualify for loans at low interest rates. Cheaper loans mean that you have more money in your pocket to save and keep for emergencies.

It is very important to develop good credit habits from the start. From the time you get your first credit card you should know how to shoulder the responsibility of taking a debt. You should be well aware of the interest charges and the importance of making payments on time. It is very common for youngsters to land up in serious debt when they open several credit card accounts without fully understanding how to use them. If you do not want to make that mistake then you should follow some fundamental rules of good credit management that will help you build a good credit history.

Borrow but wisely

It is true that you need to take on a debt in order to demonstrate your repayment habits and improve your credit score. But do not borrow if you cannot afford to pay. It is good to make a budget and stick to it.  Identify an amount that you can set aside each month to repay the debts and stay within that limit. Use different types of credit instruments like credit cards and installment loans to show your ability to handle various types of credit.

Keep balances low

The ratio of the outstanding balances on the credit card to the total available credit limit determines a large part of your credit score. Keeping your balance low is a sign of good credit management. It signals that you are not overly dependent on credit. This gives a boost to your credit score.

Pay the card balances in full

Credit cards give you the option of rolling over your balances to next month by paying only the minimum amount due. But since credit card debts attract huge interest charges it is not a good habit to do so. Pay the balance in full to keep your debts under control. If you can’t pay it full at least pay a substantial amount to show your willingness and ability to repay your debts.

Pay on time

On time payments of credit card bills and EMIs help in building a solid foundation of your credit score. Late or missed payments, or any remarks of foreclosure or collections signify that you are a risky borrower. These negative remarks get reported to the bureau and have a rippling effect on the credit score. Set up a direct debit from your account to make sure that the payment is always done before the due date. You may also set up mobile or email alerts to remind you of the payment due date.

Check your credit report
It is always a good habit to check your credit report at least once a year to monitor your own credit performance and identify areas that you can work upon to improve your credit score. A careful review of the report also helps in uncovering errors. Report the errors immediately to avoid it from ruining your reputation as a trustworthy borrower.
Have an emergency fund
Put aside at least 10% of your monthly income to build up an emergency fund. Such a reserve saves you from a lot of worries when an unexpected expense comes up.
Good credit habits not only help you in maintaining a good credit score, but they also help you to take charge of your finances as well. So make these habits a part of your financial plan.