Monday, 31 August 2015

What is the ideal credit score to get loans

CIBIL, the first Credit Bureau in India, generates credit reports for all individuals who have been reported by lending institutions. The CIBIL score is computed in the range of 300-900, with 300 being lowest and 900 being highest. While the score is an outcome of various factors, it is highly important to have CIBIL disputes resolved which can be on account of a non payment of dues or an error on report.

Following is the broad demarcation of CIBIL score that is taken as good, bad of ugly by the banks and lenders.

> 750 : Good
650 – 749 : Average
< 600 : Bad

As per CIBIL, over 79% of loans are disbursed for people who have a score of greater than 750. This means that the chance of getting a loan with a score less than 750 is very low.

Hence, an ideal [recommended] credit score would be 750 and above; with this score, one can avoid being on the CIBIL defaulters list.

CIBIL as a bureau does not set any standard or benchmarks for credit score. Different lending institutions may have different score cut off for similar products. Also, apart from Credit Scores, there are several other criterion that banks and underwriters follow for approving loans. Suppose you have a 'good score' on your report. Despite that, your loan application could possible get rejected – this can be due to reasons besides credit points. Hence, while it is important to be watchful on your credit 'scores', it is equally important to be watchful about all your trade lines, credit and financial activities as well.

It is highly recommended, that before planning to apply for any loans one should check out his credit scores.

So technically, a score of 750 & above is considered a healthy, ideal & worthy credit score for a loan prospect.

Wednesday, 19 August 2015

Credit Sudhaar Review - ET now

Credit Sudhaar Services was reviewed by ET now. Our directors Mr. Arun Ramamurthy and Mr. Gaurav Wadhwani talked about the awareness of credit scores in India and why they feel 'credit score' is such an important term in an individual's financial life. Check out the full video here :

Monday, 17 August 2015

Avoid making multiple loan 'enquiries'

When the need for a loan arises, many a people enquire on various lending institutions. While shopping around is not a bad thing, it has been observed that a few people actually apply for loan with various lenders at the same time with an objective of faster turnaround on loan disbursal and getting the best rate of interest.

There have also been situations where a person gives his papers to an agent who in turn processes the loan through various lenders under the pretext of getting the best and fastest disbursement.

What such borrowers do not understand is that they are actually hurting their objective by applying through various banks at the same time. Multiple inquiries in short span shall only have a negative impact on the credit bureau score.

Let us have some clarity on how it hampers the credit bureau score.

Credit score is an outcome of various factors and an enquiry is one of those factors that impact it. Each time an enquiry is run it impacts the credit score. Thus multiple enquiries will have negative impact on score. This in turn shall impact the prospects of loan approval.

Also, from an underwriting perspective, a person with multiple enquiries on his credit bureau report shall be construed as credit hungry and may result in getting a decline letter.

Therefore one has to be very careful while applying for a loan and should completely avoid a situation where multiple enquiries are being made on his credit bureau report.

Monday, 3 August 2015

Credit Sudhaar reviews the credit situation in India

Credit Sudhaar, India’s first credit health management company had conducted a survey in 2013 on credit health awareness in India. The results showed that a large number of people were not aware of ‘credit bureaus’, let alone of their own ‘credit scores’. Credit score is a term every individual should be aware of, especially those who are going for any type of credit.Credit Sudhaar’s survey stated 85% of the respondents not being aware of ‘Credit Bureaus’ while a big 92% not knowing what a credit score is.

Their survey also found that 91% of the respondents didn’t know how non-payment of dues was having a negative effect on their credit score. By this survey Credit Sudhaar wanted to stress the importance on knowing your credit score as most people didn’t know that a bad credit score was being the cause of their loan/ credit card applications being rejected.

Being aware of your credit score also helps a person keep a track of the changes in their credit files. Being aware of the changes in your credit file can alert you of any suspicious activity in your account and save yourself from identity theft and other fraudulent activities.

Monday, 1 June 2015

Uncommon ways to raise credit score

When it comes to your credit score, you are known to the common routine to raise and maintain your good credit score; paying your bills on time, not closing old accounts, keeping the credit utilization ratio low etc. But other than these common rules about your credit score, most people are not known to some other uncommon ways which may increase or decrease your credit score.

Payments before due date:
The banks report your balances to CIBIL or other credit reporting agencies on the statement date, not necessarily on the due date. The balances can be reported before the due date too so you paying the balances on the due date may not make it to your credit report. This may increase your credit utilization ratio thereby affecting your credit score. Try to make all the payments before your due date and by the date of the statement, as that is most necessarily the date till when banks send reports to bureaus. You can also make multiple payments to periodically pay off your balances before the due date.

Collection agencies:
Sometimes our debts go for collections when we are not able to pay them off. Debts going into collections can affect your credit score negatively to a very great extent. You can talk to these collections agencies and many of these agencies will agree to remove the debt from your credit report if you pay it off your debt. But get it in writing before paying off such collection debts.

Deletion by ‘good-will’:
If you are a person who regularly serves his debt and is credit responsible but have 1-2 small things which are hampering your credit score, then  you can get these things sorted by the bank. If it is one of the rare instances when you have made a late payment, talk to your bank ; they might cut you some slack and you can get your credit score improved.

Wednesday, 18 March 2015

How credit score affects interest rates?

Repayment of a loan has two parts- the principle and the interest on the borrowed amount. And thus every person who is looking for a loan tries to find the lowest interest rates possible. A low interest rate makes it easier for the borrower to repay it back as there is less interest added to your monthly payment.

Bank interest rates are not set generally but they are set up on the basis of your credit score. Banks check your CIBIL score to measure your credit worthiness i.e. the ability to repay back the loan which is one of the main factors in deciding your interest rates.

The three major credit bureaus- CIBIL, Equifax and Experian collect data from lenders and banks about your credit history and payments and they compile this data into your credit report. Banks use these reports to determine your credit worth. The better your credit score, the better interest rates you get and the lower your credit score, the higher will be your interest rate. Higher credit scores show the lender that you've handled credits well in the past and pay your dues on time and thus lower interest rates while in lower credit score, the banks see you as a high risk customer and are sceptical about you paying off your dues.

The higher risk you pose as a borrower, the higher interest rates the banks set up for you and vice versa. The range of a credit score generally is 300 to 900. A credit score higher than 750 is most likely to get lower interest rates and anything below 600 gets you higher interest rates.

Monday, 16 March 2015

Debt management tips

It’s become really hard dealing with credit in the present economic conditions. Your loan application is scrutinized more thoroughly now by lenders and banks. Your credit report is what is used to evaluate your loan application and debt forms a big factor of your report. But managing debt is different for every individual as your debt could be because of different circumstances like job loss, medical etc. You can just follow these basic tips to manage your debt:

Prioritize your payments; Think of paying off which debt would be beneficial to you. Decide if you want to pay off a smaller debt first or high interest debt first.

Negotiate with your bank or creditor to lower your interest. Talking to your banks helps you as they cooperate with you for your debt payments.

Debt Consolidation:
If negotiating doesn't work, you could look at consolidating your debt. Debt consolidation is taking one big debt with a lower interest rate or zero interest to pay off all your debts. It helps you as you don’t have to paying off multiple debts but only one debt instalment a month.

Credit Counsellors:
If sometimes you can’t help yourself, credit counsellors can. They help you draw your budget, reduce your spending, negotiate with your banks for lower interest rates. Research well before going to a credit counselling agency, so that you get the best services at the best price.

Settlement/ Bankruptcy:
If you have no other resort left, settlement can be the last option. In cash settlement with your credit or bank, the bank gives you a big discount for paying off your debt by a certain date in cash. If you don’t have cash for a cash settlement, then you may have to declare bankruptcy.

Settlement and Bankruptcy both negatively affect your CIBILscore and stay on your credit report for a long time, so try to follow the above steps and try to never reach the last resort.