Wednesday, 16 August 2017

What does it take to have the best Credit Score?

If you need to borrow money, you need to first prove your creditworthiness and show that you can responsibly pay back the debt in time. A high credit score helps you to qualify for almost any line of credit be it credit cards, car loans, home loans or personal loan. It helps to get the best interest rates and terms that the lender can offer. A low interest rate can save you thousands of rupees over the debt term. Considering the impact the credit score has on your financial lives, it is good to strive for perfection and work hard to get the best credit score possible.
So what does it take to improve CIBIL score and get that perfect figure of 850. Well, it needs an understanding of what goes into the CIBIL score calculation, good financial habits, discipline and patience. Follow the strategies mentioned below. These will help you improve score and pave the way to perfection.
Pay on time, every time- Your payment history is the most important factor that is considered in the CIBIL score calculation. So always keep track of the deadlines and make sure that you never miss a payment. A single late or missed payment can bring a dip in your score and move you further apart from your goal. To eliminate any possibility of error you can automate the payments so that the card company can deduct the full outstanding balance from your account at the end of the billing cycle. Set up automatic payments for EMIs of instalment loans as well. Just make sure that there is enough cash in the account to cover the payments. This way you will be rest assured that you’ve taken care of the biggest component that affects the credit score calculation. Build up an emergency fund to cover for unexpected expenses, so that you never have to miss bill payments and incur a credit score damage.
Control your credit card spending- To improve CIBIL score one needs to be mindful of the credit utilization rates. The proportion of credit line that you use as compared to the aggregate credit available should not exceed 30%. If you max out your cards, it shows you in a bad light. The bureaus get an impression that you are overly dependent on debt. So manage your debt wisely and keep the outstanding balances low. Getting a credit line increase too will help in lowering the utilization levels.
Don’t take too much debt too often-Try to live within your means and borrow only when it is absolutely necessary.  Accruing too much debt sends a red signal to the lenders that you are a risky borrower. Every time you apply for loan a new hard enquiry hits your credit report and brings your score down by a few points. Though applying for new credit affects only 10% of CIBIL score calculation, too many enquiries within a short time frame will cause more damage. And when you are trying to improve CIBIL score, every point matters.
Have a variety of accounts- The no. and kind of accounts that you are managing also affects the CIBIL score calculation. Hence it is a good practice to have a mix of credit accounts in your report. Credit scoring algorithms give more weightage if you demonstrate that you can manage both revolving and instalment accounts responsibly.
Keep old accounts open- Length of the credit history is also factored in CIBIL score calculation. If you wish to improve CIBIL score, keep your old credit accounts (that are in good standing) open for a long period of time. Do not close your old credit cards even if you no longer use them. A long history of handling debt obligations responsibly gives a boost to your creditworthiness and helps in winning the trust of the lenders.
Monitor your credit- Once you adopt good financial habits, you need to track your progress. Monitor your credit report on a periodic basis to ensure that it is in good standing. Keep a check on errors and inaccuracies. If you find mistakes, report it to the bureau immediately and get them corrected.

By adopting the above healthy financial habits one can pave the way for the best credit score. Remember consistency is the key. You need to maintain these habits to ensure that your credit score stays on top once it reaches the heights.

Tuesday, 8 August 2017

People Who Check Their Scores Regularly Are Still Confused About Credit

Credit score is no longer an alien concept for the Indians. According to the latest survey conducted by TransUnion almost 74% of the respondents residing in urban areas check their credit score twice a year. People have become aware of the fact that credit score affects their financial life in many ways. Lenders use it as a way to determine the interest rates. Landlords, employers and even insurers base their decisions on the score. So people check their score regularly and make efforts to maintain an excellent score. But some people merely check their score before applying for a loan to see whether they would be eligible. They are confused about how scores really work. They do not understand the underlying factors that affect their score and hence do not know how to improve credit score.
To secure one’s financial life it is necessary to monitor credit health on a regular basis. Merely checking the scores will not be of any use unless one knows how to improve upon it. One should know about the factors that affect one’s credit score. One should know how to analyse the information in the credit report.
Though Indians have become more credit vigilant there are still large knowledge gaps when it comes to completely understanding the fundamental aspects of this three digit number. Here we attempt to clarify some myths surrounding the score that cause confusion to a lot of people.
Carrying balance to build credit
There is a widespread misconception that one needs to carry a small balance on the credit card to improve one’s score.
Reality : There is no need to carry a balance on the credit card and pay interest to build one’s CIBIL score. In fact paying off the balance in full each month will work in your favour. You just need to keep the card open and active. Use it regularly for small purchases and make payments on time to demonstrate responsible credit behaviour. Such healthy financial habits will help one to improve credit score.
Closing old cards
A lot of people mistakenly think that closing old cards that they no longer use is beneficial for their score.
Reality : The CIBIL score calculation takes into consideration the average age of your accounts. Longer the length of the credit history, better it is for your score. Your old credit cards increase the length of your credit history. They also increase your total available credit limit and therefore help in keeping utilization ratio low. Closing old cards will reduce your available credit limit and increase your utilization ratio. Credit utilization is an important factor used in CIBIL score calculation. So it makes sense to keep old cards open. Charge a small monthly bill to the card each month and automate the payment to prevent the account from closing due to inactivity.
Everyone has a single credit score
Many people believe that there is just one number that reflects their credit worthiness.
Reality : There are three credit bureaus who record the credit related information of the borrowers. Each of them uses its own proprietary scoring model to arrive at the score. An individual may have 3 scores if the lender is reporting the information to all 3 credit agencies. You may check your score from one of the bureaus before applying for loan. But it is not necessary that the lenders use the same score to evaluate your application. To play safe you must check your scores from all 3 bureaus and make sure that the information recorded by all of them is accurate and complete. If there is a significant variation in the scores it may be due to errors. You can file a dispute with the bureau and get the errors corrected.
Good credit score
Credit bureaus assign a score on the scale of 350 to 850. Now there is a lot of confusion about what one should consider as a good score. Many believe that if the score is above the cut-off point that lenders use to either accept or reject applications it is good enough.
Reality- Lenders use your score not just to accept or reject applications, but also to determine interest rate. Higher the score lower will be your interest rate. Hence one should aim to achieve a score of more than 700. Then lenders would want to do business with you. You will have an upper hand while negotiating the terms and conditions of the loan.
Factors affecting credit score
Many people think that salary, age and employment history of a person also contribute to one’s score.
Reality : These factors are not taken into consideration during the CIBIL score calculation. The factors that affect your credit score include your credit utilization ratio (ratio of the balance outstanding on your credit cards to the total available credit limit), payment history, variety of debts(mix of revolving and instalment accounts), and age of accounts.

So follow the simple rules of paying your bills on time, keeping credit card balances low and maintaining a diverse portfolio of accounts. Focusing your attention on these factors will help you improve credit score and achieve financial stability.

Thursday, 3 August 2017

5 Personal Loan Tips Which Everyone Must Follow

Gone are the days when loans and debts were considered as sins. These days the credit worth of a person is defined by his loan repaying capacity. Using credit is indeed a part of lifestyle today. Almost all the banks and financial institutions are ready to offer personal loans based on different credit requirement.
The loans are categorized in various ways and situation. One may avail personal loans to manage fund like marriage, education, medical expenses, and renovation of your home, to consolidate your debt and much more. The most exciting part is it does not require any collateral. However before you plan to avail personal loan, keep following 5 points in your mind:
Avail personal loan only for emergencies: Be very careful while taking a loan and restrict it to only as much needed. The lender considering your income and account balance might at times offer more to attract. Do not get carried out with the high amount as the weighty EMI might make your life miserable at the time of repayment of the loan.
1.       Have a detailed research on interest rates:
Being all purpose unsecured loans, the rate of interest on personal loans could be very high. However several factors such as your job, employer, salary package and credit history could play a significant role in securing a competitive personal loan interest rate. Other factors such as how many loans you have and your payment history would also play an important role. So, do a detailed research and take a wise decision after comparing the deal with the cheapest deals available in the market.
2.       Multiple attempts lead nowhere:
To meet an emergency, we generally tend to apply for loans in multiple banks at the same time. Keep in mind that every application for personal loan submitted will extract your credit report to know your CIBIL score and rating. By submitting a number of applications within a short period, lenders would suspect that you are creeping around for a loan. This will give them a ground to refuse your loan application.
So make sure while you search for loans, you do not apply to two lenders at the same time and refrain from any bank queries which points towards a credit hungry behaviour.
3.       Knowing about the procedure thoroughly is also important:
Choosing the right lender or rather the best bank for your personal loan is truly essential. There are various conditions and rules that are mentioned in the loan document. You should be careful to verify the clauses. It is the borrower’s responsibility to go through each point of the document carefully before taking the loan. In case of any clarifications do not take it as you understood. It is advised to speak with a representative about the terms and conditions clearly to avoid future compilations.

4.       Focus on the foreclosure clause.
Banks and financial institutions providing offering personal loans do not acknowledge partial repayment of the loan. Banks want the borrower to carry on paying their equated monthly instalment or EMI for the complete tenure. It is therefore essential to review your bank charges for prepayment particularly if you are planning to give back your loan in lump sum at some point in time in the future.

5.       Avail only for the amount you strictly need.
Do not take loans because banks are offering. Banks offer extra loans based on your repayment history. Additional loan means additional liability on your shoulders for larger period. Banks always promote add-ons on personal loans so make sure you utilize it if and only if required or it will add cost of loan.
Besides, collect all the pertinent information from the internet or your local area branch before you finalise the deal. It is suggested to the compare them at home to select the best loan. When you finally go out to approach for the loan, you should be well prepared for what all you seek.

Being well informed you can compare rates from various vetted lenders and find out your lowest eligible rate and grab the best deal with no waste of time. After choosing the best lender and the best deal you can enjoy peace of mind!

Cibil score

Thursday, 27 July 2017

Is your credit score high enough to get a Car loan?

Buying a car is an exhilarating experience irrespective of the car being the first or another count in the list. And regardless of it being purchased for convenience of moving around alone or with family or being bought just for the thrill of driving, owning a car is always stimulating. But one thing that one definitely need to own a car is availability of finance. Not only do cars are expensive item to own, it does make sense to invest your funds into a depreciating asset. It is not a mystery for anyone that the car loses its value within seconds of being rolled out from the dealership.
Now the big question that faces all is the car loan eligibility. How does the score impact your eligibility for a car loan? Will one with low credit score be able to fulfill the dream of driving an owned vehicle? Is there a benchmark of score below which the car loan will not get approved? Or is there a magical score figure that will guarantee approval of the loan? We at Credit Sudhaar, over last five years, have come across innumerable individuals who have asked such questions and who fear of getting a rejection letter for low credit score. Let us look at the reality.
How does credit score impact eligibility?
One’s credit score is reflective of one’s probability to default on a new loan. This numeric expression is an outcome of the data available on one’s credit report. Various parameters like the type of loans, the age of loans, the earliest loan and repayment among others impact the prediction represented in numerical expression on the credit report.
Is there any benchmark for car loan?
Like any other loan, a lender takes this data into consideration while underwriting. Some lender may keep a benchmark for the loan application request to even reach the underwriting stage. However, that may really not be the case with all lenders. While a score of 750 is considered to be a healthy score, people with lower score also get approved as per our observation.
Can you get a car loan with low credit score?
Let us first understand the definition of a low credit score. As mentioned above a score of 750 is presumed to be healthy, but it does not mean that a score of 749 or less is bad. Let us see following examples to understand this better.
Mr A : Has a score of 783 but got rejected
While the score was way above the benchmark of 750 that is supposedly a healthy score, he got rejected since there was a settlement reflecting on the report. Now the question is that how come a person who has had settlement can have a good credit score? This is because, the credit score is an outcome of dynamic algorithms that have various parameters impacting it. In case of Mr A, he has had one settlement two years back, but has been running three other trade lines viz. a home loan, a personal loan and a credit card without default. All the active trade lines were opened before the settlement and thus he was having a better score. But due to one settlement, his loan got rejected.
Mr B : Has a score of 702 but got approved
Despite having a score much lower than the benchmark of 750, car loan of Mr B got approved. This is because he has not had any default on any of the trade lines. He holds 2 credit cards for over 2 years and has also has successfully paid off 2 consumer loans.
Mr C : Did not have a score and got approved
In case of Mr C, he has recently started his professional life after completing education. He works for a MNC and has a healthy salary. Based on the overall profile, financials and the fact that the car loan is a secured loan where the lender possess the right over vehicle till the loan gets repaid completely, the loan got approved.
The result on the discussion

While this number on the credit report has a lot of value, but this may not be the deciding factor when one applies for a loan. The data captured on the report is what matters the most. And depending upon the overall profile of the borrower, the risk appetite of the lender and different terms like higher rate of interest, higher down payment etc. may help one to get the loan.

Friday, 14 July 2017

Hidden factors that you should be aware about Identity Theft

Identity theft is something that challenges modern banking on its face. While digitalization has added ease of business and money transactions, it has added risk of concealing your face every day. Have you ever realized that you carry a risk of virtual duping or this theft every day by using a plastic card in the restaurant, or making an online purchase? The rising number of Identity theft cases are not only alarming but it is also a cause of broken credit reports globally.
In both the cases, the consequences can leave you cash strapped and indebted for life for unknown draws. It is estimated that 1 in 5 persons are denied credit cards because of bad credit caused due to this. There could be varied levels of cyber crime involving your identity breach. Thus, you need to be aware of certain hidden factors about the identity thefts.
What does Identity theft mean?
Using the personal information of the other person such as name, Aadhar card number, driving license number, credit card number or other identifying information to take on the identity of the person in order to deceive someone or commit other crimes can be termed as Identity theft.
In today's world of hyper connectivity, a large portion of people give careful consideration to every element to protect their financial details as it is not easy to find a bad credit fix. 
These can undeniably affect your CIBIL score. It is important to keep yourself well versed about the effects on your CIBIL score due to identity theft.
Financial impact of identity theft

Problems related to credit cards:
In the case of identity theft, the pretender may spend on your credit card and you get a bill for those expenses. At times you are not even aware about if someone is utilizing your credit card till the time the bank calls you to make you aware of this. You are intimated that you owe them a weighty exceptional amount. The impostor may even contact other credit card issuing organizations, submit an application for credit card with your documents and make use of it without you being aware of the same.
If someone has a decent CIBIL score, it is not difficult for the scammer to get an instant approval for cards. It is only when you get to your CIBIL report; you would discover that someone is using a new card in your name. The horrifying thing is, that regardless of the fact that you may have given your best to build your CIBIL score for a decent number of years, it might plunge in a matter of days even though you are not at fault. The undue use of credit card by the pretender won't just increase your amount but it will also take up your credit utilization manifold, and thus letting go off your CIBIL score. Likewise each time the fraud makes a request for another credit card or a loan product; your CIBIL score will continue plunging down.

Problems related to bank account: Nowadays, lenders are reinforcing their security against cyber crime by putting in many layers of insurance for the comfort of their clients. But if your character has been compromised by a cyber-criminal, it is certainly feasible for him to hack your account electronically and re-direct the funds to some other account and this may bring bad conditions for you. In case the funds are utilized for some other criminal movement, it is conceivable that the account might be traced to you and you might be ensnared for a wrongdoing you have not perpetrated. Contingent on the earnestness of the wrongdoing you may even face capture. You may even get arrested which will depend upon the gravity of the crime.
Precautions one must take
Secure the online information- Nowadays, online shopping is a trend. Many people do shopping and banking on the internet and share their account numbers and passwords which can easily be used by some other person. To prevent this, one should clear logins and passwords. One should make payment with their credit card when they do shopping online. As credit card has better guarantees than online payment services or debit card under federal law.  The person should always verify before entering personal data that they are on a known website with security controls.
Keep a regular check on your bank account and credit card statements: It is important to verify bank and credit card statements at regular intervals to ensure peace of mind.
Verification of mailing address with the post office and financial institutions- This will help to prevent you from such theft.
Keep track of your credit report
Outdated bank statements, credit card applications, bills must shredded on a regular basis.
As you get to know about the identity theft, immediately file a police complaint. This has to be done at the local police station. You should provide them with all the relevant records. They may ask about the details like server logs, bank account details, access information (who all had access to your bank account details and to what extent). Finding the proof for this can help you improve CIBIL score.

Report this to the lender and the CIBIL
Despite the mental anxiety and emotional trauma that you are experiencing you should tell the concerned experts and do your best to find the criminal. To improve the current scenario of identity theft, action needs to be taken. Otherwise no one can fix this.

Friday, 7 July 2017

Denied credit based on credit report? Here’s why.

Did you ever try to opt for a loan or a credit card and have been denied? Your credit history is recorded and filed as cibil report with credit bureaus. When you apply for a loan or a credit card the bank is likely to request for a credit record by the credit bureaus to understand if you have any default payments or unpaid debts. It also indicates whether you have filed for bankruptcy or arrested by to loan defaults. The reasons for denial of credit can be varied and different in every situation.
Here are some reasons why your credit can be denied:
High Debts
Any lender or creditor would like to see how you spend your earnings, if you have high debts or used maximum limit of your credit card could be a reason why your application can get rejected. Always try not to overspend from your credit card, many banks and organizations prefer people with people at least having 50% of limit available in their credit cards.
No credit history
A no credit history means you don’t have anything on your cibil report. This means you have never applied for any credit in your lifetime, which is a good thing. Many individuals prefer buying things in cash or without any line of credit which leads to a no credit history. In such cases many banks face hard time to sanction loans or credit cards without knowing the individual’s pattern of repayments. You can show your rent receipts if you are a tenant just to prove your reliability in making payments.
No credit activity 
When you have active accounts with banks it’s important to make small transactions with those accounts. If you have not made any transactions with such accounts it’s hard for a score to get generated. It’s suggested to make small payments or transactions to keep the scores activated and going.
Frequent credit report inquiries
If you have too many inquiries on your credit report and not many loans reflected on your report, the lender will come to a conclusion that you are trying for loans with multiple banks and organizations and there is something wrong with your current financial status.

Fraud cases
If you have done a fraud in terms of repayment, bad debts or you have been approached by an agency for money collection. This will severely damage your cibil report and will lead to a low cibil score. Always pay your debts on time and adhere to the EMIs so that you don’t face such circumstances. The collection agency approaches a customer if the credit balance has not been paid and its more than 6 months for the same.
If your application for a loan or a credit card is rejected, you may ask for the reasons why your application was rejected. If the information provided to you is inaccurate or false, you can file a dispute and the credit bureau has to correct the errors found.
It feels when you face such situations where you are denied for credit on the basis of a bad credit report but do not lose hopes, there is always a plan B. you will be able to find a lot of private lenders who will not consider you cibil rating. Start building your credit ratings from scratch and try maintaining a good score so that when time comes you can get easy access to loans. As we were told “small steps will lead to a bigger and better you”.   

Thursday, 29 June 2017

How much loan can one afford?

There are different loans in the market to offer by banks and Non-banking financial services suiting to your needs. If you want to buy a car there is auto loan or buying a house you can opt for a home loan but the question is how much loan can one afford? Due to a lot of options available in the market in terms of loans, loan discounts and offers one can easily avail a loan and fulfill their needs, whether it’s a luxury of buying a car or a need of a home to survive well it completely depends on your earning potential and your cibil report. When loans are easily available people tend to take more than what they need and that leads to bad repayment structure and bad cibil report.
There are some points one should consider before applying for a loan and save the hassle of over paying EMIs for something which you never needed on the first place:
One should always try to consider all the income and gains before applying for a loan, sanctions of different loan is directly related to your income(s). To calculate your eligibility you can check out various EMI calculators available online and check what EMI amount you can afford. There are different norms of calculations which banks follow for sanctions of loans.
For self-employed personals the loan amount is considered on the net profit and for salaried individuals it’s on the basis of gross salary.  Calculating the affordability can help you in a long run while you are opting for a home loan for let’s say ten to fifteen years.
There are different types of expenses in everyone’s life. For some it is all about luxury but for some it’s a matter of survival. While calculating the affordability always jot down your fixed expenses like grocery, electricity bills, utility and so on and also your luxury expenses like dinner in a restaurant, and so on. When calculating your affordability you need to understand that you will have to cut on your luxury expenses that that you opt for a maximum amount of loan always stick to what you need and try cutting down luxury expenses.
 Try not to opt for a credit card and if you have one try not to use it everywhere. Not many people understand using a credit card is like trapping yourself into a never ending loop of expenses you won’t be able to evade. We use credit cards for all our luxury expenses and what we don’t realize is we have overspent for what we don’t need understanding. We have a lot of credit limit to spare, but we will have to pay that amount after fifty days, so we try converting our transactions into EMIs which leads to more burden and are paying interests for what we never needed on the first place. So spare yourself with this nightmare and never opt for a credit card if you would be spending recklessly.

Cibil Report
As mentioned earlier your cibil report will play a vital role for you getting a loan. When you don’t pay your dues to the banks on time your cibil scores go for a toss. But why does this happen on the first place? lifestyle is something which everyone follows according to their own affordability. If your incomes are great, your lifestyle will be but if your incomes are not that good and you are looking forward to live a lifestyle which you hardly can afford; makes you take a lots of unnecessary loans which leads to pileups of EMIs which you can’t afford and bounced EMIs which will lead to bad cibil report. Also, you cannot avail a necessary loan when needed in future. There are some NBFCs who provide loans for low cibil scores as well, the criteria these firms follow are different from traditional banks but you will have to pay a slightly high rate of interest.
Take Home :

One can easily afford a good amount of loan if the individual is ready to adhere the integrity of paying bank dues on time and maintain a good cibil report, but don’t try cutting down the chances of getting a loan for temporary luxuries and feel sorry later.