Thursday, 24 May 2018

Can you improve your Credit score after bankruptcy?

When your loans become unmanageable and you cannot afford the payments, when your debt collectors hound you day and night; how do you get yourself out of such a situation? Sometimes filing for a bankruptcy seems to be the only option left. Of course it provides a temporarily relief, as the lenders stop calling you. But on the downside it has an extreme negative effect on your reputation, self-esteem and credit. A person may see a drop of 150 to 200 points on the credit score after declaring a bankruptcy. Improving your financial situation and credit profile after filing a bankruptcy is a long haul process. But it isn’t impossible. You need patience and perseverance to gradually raise your score. Here are some practical and real ways of getting your financial health back on track.

1. Review Your Credit Report
After filing for bankruptcy you won’t be responsible for the debts that you incorporated while filing. So the first thing that you should do is to review your credit report and make sure that all the information reported there is correct. Get one copy from all the three bureaus to ensure that each of them has updated the report correctly. Are there any duplicate entries? Are there any debts or outstanding judgements that should have been eliminated? If anything is stated incorrectly file a dispute with the respective bureau so that the mistakes can be corrected.

2. Manage your finances
If poor spending habits led to a situation where you had to file for bankruptcy, now is the time to take control of your finances. Make a budget, and most importantly stick to it. If you do not have sufficient funds to make monthly payments, you will need to cut down on costs or look for ways to increase your pay. Start building an emergency fund slowly. Having some cushion of money to meet unexpected expenses will give you peace of mind. 

3. Timely payments
The fastest way to improve your score is to pay attention to the factor that makes up 30% of the score- and that is your payment history. Make payments of your credit card bills on time. Set up reminders or automatic payments so that you never miss a due date. Timely payments over a period of time will help you boost your score. If your payment is overdue for more than 90 days the lender may enter your name in the loan defaulter’s list. This will bring your score further down. 
Apart from the credit card bills you may still have some secured loans that survived bankruptcy. These are known as reaffirmations. You can continue making timely payments on these loans. Since the lender will report the treatment of this debt to the credit bureau, it is good opportunity for you to make timely payments on it and rebuild your credit score.

4. Secured credit card
After a bankruptcy not many lenders might be willing to give you credit. But to boost your score you need to take on some debt and show that you are responsible with the payments. A good way to start out is to get a secured credit card. A secured credit card is backed by a deposit and doesn’t require you to have a very good CIBIL score. Since the credit limit is determined on the basis of the amount of deposit, the issuer isn’t exposed to any risk. Since the activities on the card are reported to the bureau, making timely payments will help in rebuilding your score. The interest rate on these cards is usually on a higher side, so after a year or so you may request for a shift to a regular card.

5. Take a loan
It is true that just after filing a bankruptcy not many lenders would be willing to lend money to a high risk borrower. But you can look for personal loans for CIBIL defaulters that may help you rebuild credit. You can also consider co-signing a loan with someone with a good credit score. You may even ask someone to make you an authorized user on their credit card. When positive payment activity gets reported on your report it helps to improve the score.

When positive information starts getting recorded on the credit report, the effect of previous negative information starts fading away. But one needs to be patient and persistent. It may take an effort of 3-5 years to get your score back in shape. Be committed to your goal and follow healthy credit habits. 

Thursday, 17 May 2018

How to Survive Identity Theft to avoid bad credit

Have you ever received a call from a bank asking you to pay up your dues on a personal loan which you never availed or a credit card bill that you don’t possess? Beware; you may be a victim of identity theft where the fraudster used your contact information to take loans, which he will of course never repay. But if the payments become overdue your name may enter the loan defaulters list of the bank and affect your score negatively. Of course you wouldn’t want to suffer the consequences of someone else’s misdeed. Here’s what you can do.
If you find out that you have become a victim of identity theft, you will need to act fast. Remember the fraudster will work as fast as he can to use your information, and before you may even realize it can have a serious negative impact on your credit score. So if you have a slightest doubt about your identity is being misused, you must take necessary steps to shield yourself from the potential damage.

Fixing Your Credit Report

CIBIL score calculation is entirely dependent on the information visible on your credit report. You need to ensure that the recorded information is up to date and correct. Order your credit report from all the three bureaus and analyse each and every piece of information carefully. Verify whether the personal information recorded by them is accurate or not. Verify each and every transaction, and note down the places where you find discrepancies. Do you find any accounts that you did not open? Any hard enquires that you do not recognize? Transactions on the credit card that you did not make?  Report the errors to the bureau by filing a dispute online. You can use your identity theft report to get fraudulent information removed from your reports.
Notify the creditor or bank
Scan all your account statements and look for any unusual charges that you do not recognize. Call the financial institution and immediately alert them about the problem. Request them to get the account locked.  Working with the card company or bank as early as possible will help prevent future damage. Notify them in writing that you have been a victim of identity theft and request them to stop reporting the information on such accounts to the bureau.
Put a fraud alert
Contact the credit reporting agencies and request for a fraud alert to be placed on your account. Usually you need to call any one of the three bureaus to create the alert. This bureau then reports it to the other 2 bureaus. Initially the alert is placed for 90 days. If you provide a proof that you have been a victim of identity theft, the alert can be extended for seven years. After this alert is placed, any institutions that requests for the credit report will be notified that your identity may be compromised. This way, they will take extra precaution to verify the identity before opening an account. But this extra scrutiny before extending credit isn’t a fool proof method as the fraudster may know the workaround to get away with it.
Credit freeze
Under credit freeze no one would be allowed to access your credit report. You need to contact each of the three bureaus directly to get this extra layer of protection. Without any access to credit reports lenders would not open any new account in your name. Though it is a good way of ensuring that the fraudsters don’t open accounts in your name, it may also make it difficult for you to get approvals for any loans or credit cards that you may require. You will need to contact the bureau to unfreeze your account. Sometimes a nominal fees is charged each time you freeze or unfreeze your account when you wish to apply for credit.
Going forward, take some extra precaution with your personal data. Create strong passwords and change them regularly. Shred documents containing personal information before disposing them. Lastly, remain vigilant by regularly checking your credit report.

Thursday, 26 April 2018

Credit Score and Credit Report. Know it all!

In this credit revolving world, its important know the basics. Credit score and credit report are two main aspects you need to understand. It’s also the difference you need to understand about both. They are definitely integrated. But not same.

Credit score

            A credit score is a three digit number between 300-900. A credit score is a number of the result of how well you maintain the credit you have borrowed. There are 2 things which come with the credit. Loans you have taken and the credit card you possess. How responsibly you repay these would determine your credit.
Its also important know the range. If your score between 300-500 is considered bad. 500-750 is an average score. Anything above 750 is considered good. The score below 750 is the red zone. If your score is in that range, it becomes difficult for you to get any credit. Even if you get, you have to go through a lengthy process of various verifications, personal discussions, reasons of why you have this score if you have made any defaults and they were willful or with some genuine financial crunch. With that score, you also have to pay more amount of rate of interest on the loans you take compared to if you have a score which is 750+. In such case, work on your credits and try improving it. Else if you want to take a loan, you have to take a loan with bad cibil score which will shade few more cash from your pocket.
            If you have not taken any loans till date or you do not have any credit cards, you are considered a no history customer. Try building the score by taking a credit card or a small loan. In case you do not get an unsecured loan which is a  personal loan or a business loan or normal credit card, try getting secured credit which consists of home loan, gold loan, loan against property or a secured credit card.
            Your credit score is determined by following 5 things.
1.      Payment History
2.      Amount owed
3.      Types of credits
4.      Length of credit history
5.      New credit
There are 4 bureaus who gives the credit score. Transunioun CIBIL, Experian, Equifax and CRIF Highmark are the four different bureaus in India which offers score. The different bureau has different weightage on determining your score. But it is made from these factors only. There can be 50 points difference in the different bureau’s scores.
Try patiently on all these factors and your score will never dip. It is not rocket science to understand these factors.

Credit Report

Credit Report is the detailed information of your personal information’s. It consists of your credit score, details of how your repayment records, your name, phone number, PAN number, inquiries you have made.
It also consists of how you replay. The installment details, all the credits you have taken till date. When have you made the payments, which all banks you have applied for the loans at? Just like the report card or score card you get after giving exams. It is advisable to check your credit report twice a year in order to stay updated. It will give an understanding if there is any requirement to work on any aspect which might go wrong. Also, if it is reflecting any transaction you have not made. Make sure you clear all the factors which might affect your score and take it down.

            Be a responsible payer, try not to overdo anything. Like not use credit card upto its maximum limit, miss a payment or make numerous inquiries in short span. You can stay credit healthy and know the places which need improvement. Work on them. A better credit score will result in better credit report and will make it easier for you to acquire any loan on lesser interest rate!

Thursday, 19 April 2018

8 Things Everyone Should Know about Credit report

While taking a loan, these days everyone I.e. all the lenders check your credit score and credit report. Why is it become so necessary to check the credit score or report before approving any lending of credit? Credit implies credit card and any kind of loan. Credit report and credit score is the reflection of how responsible you have been in past in repaying the credits you have. It also gives an idea to the lender that you would be a risk to them or not. This then becomes the major factor for them to take forward your application of credit or not.
Supposing you are planning to take a home loan and you check the Home Loan Eligibility depending on your age, income, area, current salary etc., the basic factor would be the credit report which would be looked upon. It also is important to know the difference between the score and report. These two are different entities. Even though connected, please note that credit score is a part of your report and not vice versa. A score is a three-digit number ranging from 300-900, 900 being highest.
1. Payment History
2. Amount Owed
3. Length of Credit History
4. Credit Mix
5. New Credit
While the report will consist of your score, your
1. Personal Information: your Name, Address, Pan Number.
2. Trade Lines: the credits you had taken, and their repayment details.
3. Credit enquiries: enquiries you must have made for taking new credits.
4. Collection report: your late payments, missed payments, bankruptcy and suits filed.
5. Credit score: Of course, the main part of it.
So, this will clear the basic misconception one might have of being credit score and credit report. Now, let's get to the topic, that which are the most important eight things one would know about the report.

1.     Credit Report and Credit Score are 2 different things
As explained earlier, it's clear that credit report has all the information of an individual whereas the credit score is just a number.

2.     One can get the score or the report for free
RBI has passed a rule, according to wish all the credit bureaus have to give 1 free credit report/score each year. As the knowledge one already has, there are 4 bureaus: CIBIL, Experian, Equifax, CRIF Highmark. So, if suppose you want to check your CIBIL Rating Online, all you need to do is go to their website and fill a form. And you would be provided with the free score/report each year. Similar will go with other 3 bureaus.

3.     Reports are generated by bureaus
Your report is generated by the credit bureau. The criteria of each bureau are different of how they calculate the score. The 5 factors remain the same, but, the % may vary. Hence, there may be a difference of 50 points in all the bureau reports.

4.    Check the Report, it's healthy.
It is advisable to check the credit score and view the report twice every year. This will assure that you are on the right track and nothing is going wrong.

5.    Raise dispute
Suppose, while checking the report you feel that the information contained in the report are with errors or they are not true at all, you can raise the dispute and get it resolved.

6.    Things won't stay on report forever
It's true that the things which are reported on credit report stay for long, but not forever. The longest thing to be seen  is the bankruptcy. Which is 10 years. Post that it is removed from the report. But that does not mean that one would start taking it lightly and do not repay the credits responsibly.

7.    Joint accounts and their report

When you have joint accounts, the effect on the report if either of the parties or both of them do not repay the credit, but it is reported individually in respective reports and would change the score according to that.

8.    A credit report is not the only thing that lender would check to give you credit

A report is definitely the major thing which lender's see while approving the credit to you, but they also check the intents on why the credit is required or if the need is genuine or not etc.

                  By now, you would have got the idea on the major things you should know about the credit report. Make sure all the decision you take would help you in staying credit healthy!

Thursday, 12 April 2018

Do Too Many Credit Scores Confuse us?

What does a young blood want? With a lot of zeal and fire to achieve, youth is the new Shaping India. With more than 40% of the population in India, is Youth. It’s a saying that youth has the power to change the whole way of how a country is running. When we talk about the youth of 18-30 years, there are the shapers of revolution. New innovations, new thinking and new discoveries is shaping tremendously these days.

            Education loan has made it easy for so many students to study more and deeper to make researches and do something of what they love. When we talk about the loans, the major factor comes is the credit score. To crack the best deal of any kind of loan it’s important to know about the score. What does your score comprise of? Which are the bureaus who give the score? What factors are important to keep the score intact? Let’s go through each factor.

What does your score comprise of?

Five factors make your score.
1. Payment History: How you make the payment of the credits you have taken determines the behavior of how responsible you are. This is the major factor of how score is calculated. It also gives the idea if you are matured enough to take the charge of your finances. One should never take this for granted.

2. Amount owed: the total amount you have owed in reference with the credit card utilization and the loans you have taken. After the payment history, this is the second major thing which comprises of you.

3. length of credit history: The overall span from when you started the credit and the on-going one, is the length of the credit history. The longer is the credit history, more is the score provided the accounts are maintained well. But id in case they are not, do not close, try resolving them and make sure it adds to your score grow up.

4. Types of credit: the mix of revolving credit and fixed type of credit is the type of credit we are talking about which comprises of score. A good mix of both is healthy for your credit.

5. New Credit: The new types of credit you apply for, is the new credit. This also contributes to your score.

So, these are the 5 factors which make your score. And the bureaus pick this to make the score. Which leads to the 2nd question.

Which are the bureaus which give the score?
There are 4 bureaus in India who gives the credit score. CIBIL TransUnion, Experian, Equifax and CRIF HighMark. Over the period from the year 2000, at different intervals, these credit bureaus came into existence. They all are linked with RBI to create your credit report with the credit score made up of the 5 factors mentioned above. Now, all these bureaus have different % weight-age of how they calculate your score. All of them have different algorithms of how they calculate the score. So, the score you get while you apply for with any of the bureau differs in the number. It is okay If there is 50 points difference in the different score you get from any other bureau. There nothing to get confused about the score you must have received and differed from another you got from any other bureau.

Now the 3rd thing one might have is
What factors are important to keep the score intact?
            The question which generally arrives is which factor of the credit score one must take care of more in order to have a good score? Let’s understand that the good mix all the 5 points taken care of will result to your good score. No factor is more important or less important. The weight-age given to different points would be different but nothing can be neglected if its given less % than other. If all the factors are taken care of, your score will always be great and you need not worry. But if any of it is not taken care, the goof-ups will start resulting in a dip.

            If taken care of, the credit score concept is very easy. All you need to do is take care of the responsibility of the repayments of the credits you take. There is nothing to be confused about or not understand anything. Be credit healthy and stay vigilant.

Thursday, 5 April 2018

Does Shopping Has Anything To Do With Credit Score?

Credit score has increasingly gained importance in today’s times. People make conscious efforts to ensure that they have a high score. They make their loan payments on time and display responsible credit habits. But have you ever wondered whether shopping has any effect on score? Well, if you make cash payments while you shop, your shopping behaviour will have no effect, whatsoever, on credit score?  But if you change your expenses to the credit card, then these transactions get reported to the bureau. Your credit report reflects the debt that you carry on the card and directly affects your score.

Today credit cards have become an inevitable part of people’s lives. They not only provide the ease of shopping without carrying cash but also protect against unauthorized purchases. These days credit cards are also widely being used while making online purchases. So be careful while you shop using your card.

Your credit report does not show an itemized detail of the things you buy using card. It doesn’t bother about what you buy, it is only concerned with the amount of debt that you carry and your payment behaviour. Let’s look at it in detail.

Credit score is determined based on a number of parameters Out of those the 2 major factors include credit utilization ratio and payment history.

Credit utilization ratio is the amount of debt that you carry on the card in relation to the approved credit limit. Though you can utilize 100% of the credit limit, it isn’t a good practice to do so as it hurts your score. Maxing out your credit cards is seen as a warning sign that you may have trouble managing your finances. People who use more than 50% of the credit limit may see a dip in their score. As a thumb rule, always try to keep this utilization ratio below 30%.

Another factor that directly impacts your score is the payment history. So whenever you shop using card, be sure of its affordability. Preferably buy only those things, for which you can make the payment at the end of the billing cycle. On time payments helps boost your score. Though you can get away by paying just a minimum amount when the bill arrives, carrying balances at such a high rate of interest usually leads to a debt trap. The debt amount will become so huge that you may fail to pay even the minimum balances. When payments are more than 90 days overdue, your name may enter loan defaulters list, that badly impacts the score. Apart from your credit card debt, the loans that you take also form a part of your credit report. Payment patterns on House Loan, Car loan, Personal loans, student loan --all form a part of your credit rating.

So your report doesn’t record the individual purchases. It is not concerned with how the credit line is used. Which stores you buy from and what you buy doesn’t influence your score. Your report just has a complete summary of the card debts and the payment made against them. What really matters for your score is how responsibly you use your credit line. Potential lenders just want to see that you service your debts diligently on time.

If you use your card for most of your expenses, or if you charge a large purchase to the card, then make payments twice a month. This way the balance that appears on the bill at the end of the billing cycle (which is usually used to calculate the credit utilization ratio) will not be too high. Secondly make your payments on time each month. Set payment reminders if required. If you follow these two advices, you won’t have to worry about your credit scores while shopping with your credit cards.

Friday, 30 March 2018

Major Indians Do Not Even Know About Credit Score

A survey conducted by CreditSudhaar across eight cities in the year 2016, threw up some startling information, some of which we share here.
*      Only 47% of the surveyed were aware about credit scores and credit bureaus which indicates that the majority which amounts 53% were unaware of the same.
*      The awareness though low was a considerable improvement over 2013 when it was just 14%.
*      Only 15% of the respondents knew their credit score.
*      11% of the sample size had ever obtained their credit report.
*      However 70% knew that a good credit score could help them in getting a loan.
*      41% of the surveyed knew that a good score could help in reducing the cost of a loan.
So as is evident from the results of the survey that though awareness about credit scores is on  the rise and a large chunk do know about their importance for getting a loan, still there is a huge knowledge gap when it comes to the actual importance of a CIBIL score for an individual and how it is calculated.
Free Scores By Credit Bureaus: A Step in the Right Direction:
As per a directive issued by RBI in January 2017, all credit rating agencies have to provide a free credit report to anyone who asks for it; this is to be provided annually. To clarify, the agencies are not obligated to do so on their own and will provide the free report only when an individual asks for it. There are four credit bureaus in India so you can get four free credit reports in a year which means you can get one report quarterly.
Earlier all bureaus required an individual to pay a fixed amount (which varied from one agency to another) if they wished to access their credit report. This could have acted as a deterrent but with reports now available without any cost, more people are likely to access it. This will not only raise awareness about what is included in the report but will also prompt them to take action in case the score is low.
Why is Credit Score Awareness Important?
While 70% of those surveyed knew that a good score was required for a loan only 41% knew that a healthy score could actually help save them save loan cost. The most obvious reason for being credit healthy is that it helps in getting a loan sanctioned. A good score can give you bargaining power and also more choice so you can approach a lender who offers loan at good rates and can also seek concession in the offered rates. A higher score is an indicator of low risk and the lender may be willing to offer a loan at a lower rate.
Credit reports also reveal comprehensive information about one’s debt position. So there may be times when you may be surprised by what your reports reveal. Neeta had an Axis Bank personal loan which she had paid fully about a year back. However, when she checked her credit report she could still see the loan listed in the accounts section. This was due to the fact that she had not taken a NOC from the bank after paying all the dues.
Credit history of an individual may also be sought in some instances when he/she applies for a job; this is specially so for jobs in the financial sector or for candidates who apply for higher management positions. Credit reports also aid in financial planning and are an indicator one’s financial health.  To sum it up credit scores are important because:
*      A healthy score aids in getting a loan approved.
*      Credit rating can influence the loan interests too.
*      They are an indicator of one’s financial health and creditworthiness.
*      May be used by some organizations for selecting the right candidate for a job.
*      A tool for effective financial planning.
As economy becomes more digitized and credit driven, awareness about credit scores, their importance and what contributes to credit score calculation also assumes more significance. Thus it is imperative that all stake holders strive for better credit awareness amongst Indians.