Tuesday, 30 May 2017

Is the free credit score in India really free?

Indians are fan of the word “free”.  We can see number of buyers increasing at the outlets when on promotions like buy one get one free. The marketers keep using the psychological impact of the word through free trial, join free etc to attract the buyers. But what is getting missed out at the front of free credit score is something which is noteworthy. 
In its latest diktat to the credit bureaus, the Reserve Bank of India has mandated extension of a credit report to all consumers free of cost. It means that any individual can approach CIBIL or any of the other three bureaus viz. Equifax, Experian or Crif Highmark and obtain free credit report. While obtaining free credit score can be a great tool for consumers to understand their credit profile, it actually is not as freely available as the paid report being extended by the bureaus.
How does obtaining a free credit score help?
Let us first understand how obtaining free CIBIL score would actually help the consumers. A credit score is three digit expression of the credit profile of an individual. It is indicative of the associated risk on lending to that individual. Meaning how likely is it for the individual to default over a period of time. This numerical expression is an outcome of various parameters and these parameters are based on the data available on the report.
Obtaining the report and score will help the individual to understand the status and more importantly, check on inconsistencies or errors that can jeopardize the credit profile and take corrective action.
Since one of four reports in India is feared to have errors, it becomes so much more important for one to keep checking report regularly and a free credit report will help in meeting this objective.
How free is a free credit score in India?
While the bureaus have implemented the mandate, the free report is not as easily available as the paid report.
CIBIL provides with a completely automated process where the individual can obtain the report in just a few clicks. All that is required from one is keying in correct data on personal information and authentication queries.
Obtaining a free report from Equifax would entail downloading the application on your mobile. There after not only will you be required to carry out an Adhaar based authentication but would also be required to validate on authentication. Once the authentication is successful, you will receive the report in 24 hours on your mobile.
Experian follows a completely different process where one is required to fill up the mandatory details like name, email id, identification number etc. Upon successful submission of the form, Experian will send the voucher code for free credit report in 48 hours on the registered email id. On receipt of the voucher code, one is required to authenticate himself. Upon successful authentication, the report shall be mailed on the registered email id.
Obtaining a free credit report from Crif Highmark again is at least a two day process. One first needs to fill in the basic form. Post verification of details Highmark would send out a mail to the individual within 48 hours that would require one to click on the link and authenticate himself with by answering a few verification questions based on the credit history. Once the authentication is successful the free report will be received via email.

The process on obtaining free report is so complex, that one may just give up or end up paying with an intention to speed up the receipt of the report. It is for the Reserve Bank of India to ensure that the free credit report and free credit score is available freely. 

Friday, 26 May 2017

Do not let your credit score to become unforgiving

The nightmare of a borrower is the inability to access credit when it is most needed. As easy as it may seem to access credit these days, your credit score plays a key role in determining whether you are eligible for credit. A poor CIBIL score may become unforgiving and may keep you from getting quick and easy financial help. At times like these, personal loan for low CIBIL score may come to your aid. Further a personal loan for low CIBIL score can help you rebuild your credit score.
Often people who use credit regularly tend to forget the basic rules of credit usage. As a result, they find themselves in a debt trap that is stressful and unmanageable. However, following basic discipline while using credit can make your life easier and keep your CIBIL score intact. Here are some basic things you can do to prevent a situation where your credit score comes in the way of your accessing credit.
Make timely repayments
This is of-course a crucial factor to bear in mind to keep your CIBIL score intact. Your repayment history constitutes the major part of your credit record and thus is the key determinant of your CIBIL score. The first thing to do whenever you access any type of credit therefore is to ensure that you make timely repayments. It is prudent to automate your payments or use the facilities of lending institutions to provide reminders to make repayments on time.
Keep credit utilisation low
This is another important factor that goes into the constitution of your CIBIL score. Your credit utilisation is nothing but the amount of credit you use as against the total amount made available to you. Ideally, you should not let your credit utilisation exceed 30%. Often, credit cards are culprits in bringing down the credit score of an individual, as people often use credit recklessly thus exceeding credit utilisation limit. But it is not the card issuer but the credit card user who is at fault.
Control your credit card spend
To prevent a credit card debacle, pay your entire outstanding amount before the completion of each billing cycle. The first rule of credit card usage is using your credit card to pay the amount that you are confident of repaying within your billing cycle. If you do not purchase anything on your credit card that you cannot afford to repay with the money you earn within the next billing cycle, you should not be purchasing it at all. If you can follow this simple and basic rule of credit card usage, there is a slim chance of you falling into a debt trap or facing issues due to a poor CIBIL score at a later stage. In fact, if you can use your credit card judiciously, you can build and maintain an excellent credit score. This in turn will ensure that you can access timely credit always.
How to salvage your CIBIL score with a personal loan for a low CIBIL score
Just in case you are in a situation where your credit card debt has already gotten out of hand and you find yourself in a position where you cannot access any further credit because of a low CIBIL score, fret not! for it is not the end of the world. Firstly, if your credit score is below the satisfactory level of 750 (out of 900) do not waste time approaching a traditional lender if you are in urgent need of funds.
A non-traditional lender such as a peer to peer (P2P) lender is a better option at a time like this to access a personal loan for a low CIBIL score. This is because, P2P lenders take into consideration other a typical factor (other than CIBIL score) to decide your credit worthiness. For instance, your social media footprint and your future income capability based on your current position are some of the factors that are considered by such lenders.
Once you have taken a loan for a low credit score, you are on the right path to rebuilding your credit record. By making timely repayments for this loan, you can once rebuild your repayment record bit by bit and thus salvage your credit score. Finally, a loan for a low score, may also be considered a debt consolidation loan if your credit card debt specifically has gotten out of hand. With a debt consolidation loan, you can repay your outstanding credit card debt at once, thus mending your CIBIL score at one shot.

Thus, as you can see, your CIBIL score has a very important role to play in your ability to access credit. You must therefore make a constant attempt to improve your CIBIL score. However, for some reason if your debt obligation has gotten out of hand, consider a personal loan for a low CIBIL score to salvage the situation.   

Thursday, 18 May 2017

Why People Struggle to get Loan with low CIBIL Score?

Earlier loans were taken and given based purely on personal relationships and/or based on a guarantee given by somebody who was well known or had a relationship with the lender. With more organized banking and the growing incidences of defaults banks had to relook at the way the lent. The advent of credit rating made a huge impact on the way lending and borrowing was done. Since CIBIL was the first rating agency in India, a CIBIL Score is almost synonymous for credit rating even today. Almost all lenders look at the CIR of the applicant to assess the creditworthiness of the applicant. Thus a loan for low CIBIL Score is a challenge if not impossible.
Why is CIBIL Score Important?
As per CIBIL website 79% of the loans are approved for people who have a score of 750 and above. Well this statistics clearly defines the importance of the score in getting the loan approved. However it is important to keep in mind that the score will not be the only parameter that will be used by the lender, there are other parameters too but a look at your Credit Information Report is the first step when you apply for a loan, if the score is as per the requirements of the lender then the lender will go on to the next step like getting the required documents and checking for the eligibility criteria. Thus a low score will get your application rejected at the first stage.
Lenders want security of the amount they lend, hence they have a set of guidelines to which the applicant has to adhere before he/she can be sanctioned a loan. A score sums up a person’s credit history and provides a statistical tool by which the credit worthiness of an individual can be judged. There are various parameters that are included when calculating the credit score. These include the payment history, credit utilization ratio, loan tenure, debt mix and credit inquiries. Basically the credit score in a nutshell reveals the way a person has handled his/her debt in the past and also indicates his/her ability to service future debt.
Repayment history reveals how responsible a person has been in repaying his dues in the past, while one or two misses will not impact the credit rating greatly if overall the payments are regular but frequent delays surely will.  Being on a loan defaulter list is not a good indication for future too so the lender is not likely to trust such a person. The credit mix reveals how risky it is to lend to the applicant; higher proportion of unsecured loans are a bad sign. Loans that are served till their full term are better for the rating. Similarly too many credit enquiries indicated credit hungry behavior and a high utilization ratio indicates too much dependence on credit.
From the perspective of the lender a low CIBIL Score could indicate one or all for the applicant; irresponsible credit behavior, lack of integrity, too much debt which reduces the ability to service more debt and high credit dependence. Thus a person with a low CIBIL score will find it challenging to get a loan from the mainstream banks.
Options for those with a Low CIBIL Score:
Is it a dead end for those who want a loan and have low credit score or are their options that can be explored? Getting a personal loan could be more challenging then getting a car loan for CIBIL Score as the car loan is secured but for those with low credit rating borrowing options are limited but not zero.
The first and the most obvious thing a person with low score could do it to identify the cause of the low score and try and fix it. Depending on the nature of the problem improving the credit score could take a while, this might not be always possible due to lack of time but is generally the best option.
Another option is to look for lenders like co-operative banks or private lenders who may be willing to offer loans and low scores or without considering the score at all. However it is important to mention here that these lenders offer loan at higher interest rates thus this option should be considered after careful evaluation.
The other option is to look for alternative sources of funds. This could be borrowing money from friends relatives or taking some advance from the organization you work for. One could also consider borrowing against deposits, equity or gold. Borrowing against the house one is living in and insurance policy is avoidable. 


Thursday, 4 May 2017

Things that low Credit Score can Hamper

Awareness about credit score and its importance is still restricted in India. Though people are beginning to get conscious about the relevance of credit rating, there is still a long way to go. As per a survey conducted almost 70% of the sample surveyed were not aware about credit rating and 80% did not what are consequences of a low CIBIL score. Thus if you were to ask somebody what can a low credit score hamper, few might know that it can reduce your chances of getting a loan but very rarely will anybody be aware of the role credit score plays when trying to get a job. So read on to find out more about what are the things that a low score could hamper.
Why is Credit Rating Important?
Credit rating is a statistical tool that lets one assess the credit worthiness and trustworthiness of an individual. Obviously any human quality cannot be measured in numbers or scores so this is not something that can be said to be cast on stone. However the basis of the CIBIL Rating model is that based on the past behavior of an individual on certain parameters we can estimate what his/her future behavior is likely to be based on the assumption that people are likely to act in the same way over a period of time. So how does it measure creditworthiness and trustworthiness? If a person has been responsible in repaying his/her dues on time, is not overtly dependant on credit, does not show credit hungry behavior and so on then that person displays integrity, good planning and can be trusted.
Again as we said it is not something that is fool proof, a person who has an impeccable credit history may default in the future while somebody with high integrity may have defaulted due to a genuine reason that may be beyond his/her control. Thus the rating can only give an indication for the future behavior and allow the lender or the employer to take a calculated risk.
Low Credit Score Could Hamper the Following:
We discussed above the importance of a credit score; but what happens when you have a low credit score. Do certain things become beyond your reach, does it impact your life anyway negatively? Here are a few things that a low score can hamper.
Getting a Loan:
This is the most obvious result of poor credit rating; a low cibil score means that lenders are less likely to trust you with fresh credit. A look at your report will reveal that you have not been a responsible borrower in the past, or that you are overleveraged or you are credit hungry and so on. This means that they will not want to take the risk of default by accepting your loan application. Thus you might have to kiss your dream of a new car or a new home goodbye.
Buying Consumer Durables Online:
This is something that has been initiated recently but is hardly surprising. The growing demand for online shopping led to e-tailers offering lucrative options online, one of them being the option to buy on installments. This puts these e-commerce players at default risk like any other lender. Thus they have also tied up with rating agencies to access the credit rating of the buyer with his/her consent. This makes the process quicker and more efficient for both buyer and seller. The seller is less at risk and for the consumer the likelihood of getting his application rejected in case of a good credit history is unlikely. So if you have a low score you could find buying a consumer durable on installments online difficult.
Getting a New Job:
This is the least obvious yet the most potentially harmful result of a low score. This is also a new but a fast catching up trend in India. Employers are seeking a credit check of the potential employees just like they would seek health and background check. Sometime back SBI took the lead in this direction when they stated in their recruitment advertisement that looking for people with poor credit track records should refrain from applying for the job. By looking at the CIR the employer can be sure that they hire only trustworthy people who are financially stable and responsible. A debt ridden employee could be a ticking time bomb for a company as he could get into legal trouble. 

The stakes just got higher; maintaining a good credit score is important for reasons that go beyond just getting a loan or a credit card; so stay credit healthy!

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:
Identification
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.
Profile
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
Equifax has clearly displayed a link for the free credit report process on their homepage http://www.equifax.co.in/home/en_in. 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 www.crifhighmark.com. 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 www.cibil.com 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.