Wednesday, 3 July 2019

Important Techniques for Credit Score and Loan Approvals

If you need a loan from a bank or even a non-banking financial institution, then you should know about the process for the same, especially the role of credit score. In case you don’t already, then you have come to the right place.
What is Credit Score?
Credit score is a score of your creditworthiness and represents how “worthy you are of receiving credit”. It’s calculated by credit rating agencies that consider various factors like your repayment history, length of credit history, history of loan defaults, etc.
Cibil is the biggest credit rating agency in India and follows a cibil score range of 300-900. So, the highest score you can get is 900 and the lowest is 300. Most banks consider a score that’s above 700 to be a good score.
Why is it Important for Loans?
When banks review loan applications, then they have to consider a variety of factors to minimize the risk of NPAs i.e. non-performing assets which includes loans that the borrowers refuse to or are unable to repay. Your credit score is one of the most important factors that they consider. This is because it gives them a good idea about your financial habits, income, and debt.
Your cibil score sums up your entire financial situation. Although the banks usually check the credit report too which provides detailed information including your personal details, existing debt, income status, contact information, etc. they can get an overview with the score itself.
If you want a personal loan or home loan, etc. easily and enjoy good interest rates as well, then it’s important that your score is above 700. If it’s not, then you should try the following techniques to increase cibil score:
1. Check Report for Discrepancies
Did you know that mistakes or typos in your credit report can lead to a poor score? It happens more often than you think which is why it’s possible that you are a victim of the same and don’t even know it.
Sometimes, when a bank sends the details of your repayment history i.e. payment of credit card bills, loan EMIs, etc. then they may accidentally send wrong information. Let’s say that you paid all your bills on time, but they may send wrong information that says that you were late with a few payments. This can give CIBIL wrong information and it may deduct your score accordingly.
If you don’t want undeserving penalties on your score, then it’s important that you check your report frequently and have the discrepancies removed as soon as possible.
2. Develop Good Repayment Habits
If you want to increase cibil score as quickly as possible, then the most important thing you need to do for that is start paying your EMIs and credit card bills on time. This is because repayment history has the biggest impact on credit rating and even a single late payment can cause a lot of damage.
3. Improve Credit Variety
The more variety you can show in your credit report, the higher is the score that you can achieve. This is because when your credit history is extensive, then you come off as an experienced individual who can handle all kinds of debt. However, the variety should also come with good payment history. It won’t help to use multiple credit cards and have experience with a personal loan as well when there are instances of late payments.
4. Lower Debt-to-Income Ratio
It’s not easy to get a loan when you already have a massive debt on your shoulders. The banks won’t risk increasing this debt as they know you could default. So, when you are about to apply for a loan, then make sure that you clear your existing debt first.
So, there you have it- some of the most important techniques that you need to remember when you want to boost your cibil score. You can also become more credit-responsible by checking your report every now and then and studying the various sections covered in the same. You can also get your report for free if you didn’t get it in the current year as per the latest RBI norms.

Wednesday, 26 June 2019

How to Evaluate Your Credit History and Creditworthiness

If you want a personal loan, home loan, or any other kind of loan, you have to consider a number of factors. For instance, your income should be high enough to accommodate your household expenses and the EMIs you will have to pay for the loan. You also need to check your credit history and creditworthiness to ensure that your loan applications are approved without you having to make several attempts which, by the way, is detrimental towards your credit rating. The question is how do you check the credit history and creditworthiness in the first place?
What is Credit History and Creditworthiness?
Your credit history comprises the EMIs of loans and credit card bills that you have paid in the past. It also consists of instances of loan defaults, late payments, etc. Creditworthiness is a term used for defining how “worthy” you are of receiving credit from a lender. It’s an ambiguous term but the banks are able to assess the same in a tangible form by checking your cibil report that provides the cibil score.
Cibil score is a credit score based on various factors and it shows your creditworthiness. It ranges from 300 to 900, and the range 750-900 is considered “good”. In other words, if your score belongs to this range, then it means that you can expect to get a personal loan, business loan, or credit card easily.
Credit score is calculated on the basis of various factors which are:
  • Repayment history: This comprises the payments made towards various loans and credit cards. Late payments are extremely bad for Cibil score and must be avoided at all costs
  • Length of credit history: The longer is the history, the better it’s for your score. This is because it’s easier to trust someone who has years of experience with debt against someone who started using credit cards only a few months ago
  • Credit variety: If you have experience with various forms of credit like credit cards, personal loans, etc. then you can enjoy a high score. On the other hand, if the variety is limited, then so is the score
  • Loan defaults: If you have ever failed to pay a loan at all and settled the account for a lesser amount, then you are considered a defaulter. This works really bad for your credit rating
How to Check Credit Score?
When someone applies for a loan, then the lenders check their creditworthiness by applying for their credit report at the top agencies like Cibil and Experian. However, you can also apply for the report to evaluate your current standing. If you want, you can fetch your Cibil report by taking the following steps:
  • Enter a few basic details about yourself including email address, PAN, date of birth, etc. This will allow cibil to locate you in the database and fetch additional details
  • The form will auto-populate with the details obtained by Cibil and you can now just accept the information
  • Your Cibil score is then sent to you through SMS to the registered mobile number. You also receive login details of your account for the website via an email
  • You can login with the provided credentials and check other details of your credit history
Note: You may also be required to answer a few questions about your credit history like the payments made for a personal loan, or the credit cards you use. This is to authenticate your ID by Cibil
Significance of Creditworthiness
Your creditworthiness i.e. credit rating will come into play at various points in your life. Whether it’s about taking a personal loan on an urgent basis or increase the limit on your credit card, your score will be checked time and again. If you have a low score, then you may also face a lot of stress if your loan applications are rejected multiple times. So, it’s important that you take your creditworthiness seriously and take measures to improvement if required. If needed, you can also take help from credit experts who can guide you depending on your current situation.

Saturday, 22 June 2019

Procedure to Increase Low CIBIL Score to High CIBIL Score

There is no denying that you need a good CIBIL score to get loans and credit cards easily, and that also at good interest rates. However, what are you to do when yours isn’t up to the mark? Well, if you want to increase your credit score, then you have come to the right place.
The following are the steps you need to take to boost your score to 750 or above:
1. Checking the Credit Report
The first thing you need to do is check your credit report as that allows you to understand where you stand today. It contains all the important details including your personal details like your name, address, contact number, etc. and your bank account details, your past loans details which include whether or not you have been punctual with the payments.
If you haven’t checked your credit report in the current year even once, then you can avail free CIBIL score and report. This is because the Reserve Bank of India (RBI) has made it mandatory for all the credit rating agencies including CIBIL to provide one free credit report to all the users. You just need to visit the official website of CIBIL, verify your ID, and download the report!
2. Make Payments on Time
The most important factor you need to pay attention to when you want to improve CIBIL score, is payment history. It comprises the payments you make for your loans i.e. EMIs, and credit card bills.
When you are late with a payment, then banks usually give you up to 30 days to clear the same before they decide to report the event to a credit rating agency like CIBIL. However, not all banks are like that, and some may take even a single late EMI or credit card payment seriously. So, you shouldn’t take any chances and make sure that you never miss a single payment deadline.
3. Lower Credit Utilization
Credit utilization is a value used to determine your spending habits. Technically speaking, it’s the ratio of your average monthly spending with credit cards and the combined limit on the cards. So, if you are spending around Rs. 40,000 per month and you have two credit cards with a limit of Rs. 50,000 on each, then the ratio can be calculated as:
Credit utilization ratio = 40,000/(50,000+50,000) = 40%
40% credit utilization ratio is considered higher than the recommended value. Ideally, the ratio should not be higher than 35%.
If your credit utilization ratio is too high, then you can take the following steps:
  • You can control your expenses by creating a household budget and identifying expenses that can be removed. You can also use a budget or expense app on your phone to track your income and expenditure
  • If your expenses can’t be lowered, then you can also increase the credit limit on the cards itself. In this way, you can lower the credit utilization ratio automatically
4. Improve Credit Variety
Credit variety is another factor that plays an important role when you want to improve CIBIL score. This is because credit can be of various kinds- credit cards, personal loans, home loans, etc. The more variety you can show in your credit report, the higher is the score you can expect.
If your credit history is based on just one form of credit, then you can add another one to give your score a boost. For instance, if your history is based on credit card payments alone, then you can take a small personal loan. In the same way, if the history is based on a loan, then you can apply for a credit card.
So, there you have it- some of the things that you can do to improve your free CIBIL score. These are basically some routine habits that you need to develop to become a more financially responsible individual and make your future safe. If you can’t get the desired results from these alone, then you can also take help from a professional like CreditSudhaar. Remember- you can manage personal finance if you want, but guidance can also help in many ways. Good luck!

Saturday, 15 June 2019

Credit Solutions for Those Without any Credit Score History

In this age of social media and smartphones which allow you to learn about some of the most important things that matter in your life, you must have already heard about the importance of credit score. It’s true- you need it to get loans easily at attractive interest rates, high credit limits on your credit cards, etc. In fact, those who have a poor score can have a really hard time getting a loan in the first place. But what about having no score at all? Wouldn’t that be the worst?
The Truth About Credit History
Your credit history allows the banks to assess your credit profile. For instance, if your history involves a personal loan and credit card, then the bank can check if you have paid your bills on time in the past. If you have, then they know that you are likely to pay the bills and EMIs for the new loans and credit cards that you will take from them. However, when you don’t have any history, then there is nothing they can draw an idea from. Believe it or not, this isn’t as bad as it sounds.
Not every individual can be expected to have a credit history. For instance, if you are a student, then you may have never taken a loan or even a credit card. Similarly, if you come from an affluent family, then maybe you never had to take a loan. In both cases, it’s understandable why there is an absence of credit history. The good news is that the banks understand that. In fact, it’s better to have no credit history rather than bad history that involves your name as a loan defaulter, or late payments of bills time and again.
If the lack of credit history can be easily explained in your case, then you can get a loan without any major problem. Otherwise, you can also offer collateral to get the loan. That said, it’s wise to build a credit history in any case as you will need it in the future for sure, if not now.
Creating History
There are many things that you can do to build a credit history from scratch. These are:
1. Get a Credit Card
We are building a digital economy in which a large number of people pay with mobile wallets, Internet banking, and credit cards! In fact, cards make for a massive chunk of the revenue that the lenders generate today. This is why it’s quite easy to get a basic credit card today even when you don’t have a credit score. Even the experts recommend cards to those who want to build a credit score from nothing.
If you are facing problems getting a regular credit card, then you can also get a secured credit card in which you can deposit a security amount equal to the limit on the card. With appropriate security amount, it’s easier for a bank to issue credit cards.
2. Get a Small Personal Loan
Rather than applying for a personal loan of several lakhs, you can apply for a small personal loan, say for Rs. 30,000. It’s possible that your lender will be able to approve it considering the small amount and the small risk. You may face some problems due to the lack of credit history but if you are a loyal customer and have good relations with the bank, then it may work out in the end.
3. Get a Joint Loan
You can also take a joint loan with your spouse or sibling to build a credit history in case they have a good history themselves. This is because, in joint loans, lenders can overlook the lack of credit score of one applicant if the other applicant has a high credit score and has no history of being a loan defaulter or late payments.
So, there you have it- some of the best solutions for creating credit history when you don’t have any in the first place. Be sure to apply this information wisely, and you can get the results you want at some point. Good luck!

Saturday, 8 June 2019

What Magic Happens When You Timely Pay a Personal Loan?

It’s not uncommon for the people to take personal loans. They avail them for health expenses, higher education, starting a new business, etc. However, these loans come with responsibilities, and as long as you are under debt, you have to be careful and take measures to repay them as soon as possible.
The following are some of the good things that happen when you pay a personal loan on time:
Credit Building
Your credit score is calculated on the basis of a variety of factors which include the length of your credit history, credit utilization ratio, and also- repayment history. In fact, many rating agencies give more value to repayment history than anything else. So, if you pay your loan EMIs on time every time without fail, then you can look forward to building a 750+ score rather easily. You can also confirm this by applying for a free CIBIL score once every year, although you may want to get the report multiple times in a year.
Personal Finance Control
It doesn’t matter what kind of lifestyle you have- you will always have some expenses to take care of. However, the only way you can avoid getting trapped under debt is to manage your finance. Ideally, you should have a fixed budget you can follow to ensure that only up to a certain amount of money is spent in a month and there is a fixed amount of savings too.
One thing you need to accommodate in your budget is whatever loans and credit cards you have. For instance, if you have a personal loan, then you should make sure that you pay the EMIs on time. This is because a single delayed EMI can totally disrupt your budget and financial goals. On the other hand, if the installments are duly paid on time, then you have the assurance that you can control your expenses and secure your financial future.
Good Credit Habits
Paying loan EMIs on time is also good for developing good credit habits. You learn to care for your money, manage and control your expenses, pay attention to your credit report, etc. These habits can make your financial life easier and more secure.
How to Pay Loan EMIs on time?
Now that you know why paying personal loan EMIs on time is important, let’s take a look at some of the ways you can succeed in this endeavor:
Enable Auto-Debit Feature
You can ask your bank to automatically transfer the EMI amount from your bank account to theirs every month. By enabling this feature, you can ensure that every single EMI is paid on time without delay.
Set Reminders
If you don’t want the EMIs to be automatically deducted from your bank account, then you can try to be more punctual with the payments by setting reminders in your phone. There are even dedicated personal finance apps that you can use to keep tabs on your expenses and income and pay the EMIs on time.
Prioritize EMIs
There will be times in your life when you will have to make a choice between paying an EMI on time or paying for new furniture, repairing your car, etc. This is because certain expenses are unexpected and you can’t prevent them. However, what you can do is make sure that these expenses are always put on the back burner when you have personal loan EMIs to pay.
There is nothing wrong with taking loans from traditional banks or NBFCs. However, when you do get them, then you must be willing to bear the responsibility for their repayment. Many people think that one or two late payments can’t make a difference, but that’s simply a misconception. Rating agencies like CIBIL consider even a single late payment bad for your creditworthiness. So, it’s best if you can develop a habit of paying your loans on time. You can, of course, start by checking your free CIBIL score and analyzing the areas where you need improvement. If you have made late payments in the past, then you can also find them in the credit report if the lender has intimated the agency about the same.

Saturday, 1 June 2019

Tips for Credit Score Learning Center

Credit score is one of the most important pieces of information that affects your financial life and your personal life. It’s calculated on the basis of your past loans and credit card usage and determines the outcomes of your future loans. So, it’s only smart to learn how it works and why it’s so important.
What is Credit Score?
Credit score is the score of your creditworthiness. It shows how good of a borrower you are when it comes to credit. When you apply for loans, then the banks check this score to decide whether they should approve the loan or not, and if they do, then at what interest rate they should approve.
Credit score is created and updated by various credit rating agencies. The biggest one in the country is CIBIL which stands for Credit Information Bureau (India) Limited. It calculates the score following the range 300-900. The higher is the score, the higher is creditworthiness. However, we can divide this range into small sections:
  • 300-500: If your score falls under this range, then it will belong to the “poor” category and obtaining a loan will become next to impossible.
  • 500-750: This range belongs to “fair” scores. Having your score in this category won’t be as bad as the previous one, but you shouldn’t expect easy approvals or good interest rates on personal loans, home loans, etc.
  • 750-900: This is the best category of credit scores. If your score falls under the same, then you can expect easy loan approvals and attractive interest rates.
Did you know that you can check your credit score online at any point? In fact, as per new RBI regulations, all concerned agencies are required to provide one free credit score every year. So, you can visit the website of the agency, let’s say it’s CIBIL, and create an account. You can verify your credentials and receive your report on your email address or even your residential address.
How to Improve Credit Score?
Improving credit score isn’t as hard as it sounds. There are various steps that you can take to succeed in this endeavor. These include:
Timely Payments
The biggest impact on your credit rating is made by the timing of your payments. If you delay the payment of an EMI or a credit card bill, then it can have an adverse effect on your rating. Even though most banks would give you around 30 days before they update the rating agency about your late activities, there is no reason to take chances as even a single late payment can hurt your score to a huge extent.
Lowered Credit Utilization Ratio
If you use credit cards a lot, then it can also hurt your credit rating. The key factor here is credit utilization ratio which is the ratio of your average monthly spending with the credit cards and their combined limits. For instance, if you are spending Rs. 40,000 a month and each card has a limit of Rs. 50,000 each, then you can calculate the ratio as follows:
Credit Utilization Ratio= 40,000/(50,000+50,000)= 40%
Ideally, your credit utilization ratio should always be below 35% which is obviously not the case here. However, you can take different steps to bring it down. For instance, you can control your expenses so that you need to use your cards less frequently. Otherwise, if your expenses can’t be brought down, then you can also increase the limit on one of your cards or two. This will automatically lower your credit utilization ratio.
Checking Credit Report
If there are discrepancies in your paid or even free credit report, then it can also hurt your rating. So, it’s recommended that you check your credit report every once in a while and note down any mistakes that you find. These could be typos in your personal details, discrepancies in your past repayments, bank accounts, etc. By informing the ratings agency and/or your bank about the same and having them corrected, you can improve your score rather easily.
So, there you have it- some of the most important things that you need to know How to improve credit score. If you will apply the information in your own financial habits, then you can look forward to a better rating and more secure financial life.

Friday, 24 May 2019

Getting a business loan for small companies is not easy. Read why

As we have discussed earlier, loans have made many future plans workout today! It is not as difficult as it uses to be earlier but at the same time, the parallel fact is that it is not a cake walk too! Basic small amount of loans are though easier. But a huge amount of loans especially the unsecured once are difficult. There the lender not only checks the credit score and credit report but rest many criteria would be checked! While we would be talking about business loans, let us discuss what kind of business loans are available in the market. SME loans are something that is very popular. They are Small Medium Enterprise loan which is given for the budget of Rs. 1 lakh to Rs. 20 lakhs! Usually, the new startup companies opt for these loans as their initial investments are not that much. There there are little larger company loans than SME. They range from Rs. 20 Lakhs to Rs. 50 Lakhs. These are for big industrial setups or for the companies who want to expand! And then come to the bigger loans for huge organizations, infra projects, big setups and expansion plans which are 50Lakhs and plus. As business loans are unsecured loans, the approval rate is usually much lesser than another kind of loans and especially the once when the collateral is much lesser than the amount approved or is not present only!

When we talk about SME, they are usually start-up. In the current scenario, not all start-ups that starts continues to work. The stakes and risk both are much high for this level companies or enterprises. The chances of small businesses to be successful and work successfully has almost the ratio of 50:50. So, when the entrepreneurs apply for the business loan, there are various checks that are done. First, the business plan and the projection is viewed minutely. From the estimated cost upto the break-even point along with the overheads, profit margins, etc all are studied. Even though small businesses and it’s credits are not very high but still as spoken, the risk is much higher! With the usual ratio of the unsuccessful start-up, any financial lender would definitely not appreciate their money to be blocked or turn to default.

This kind of credits being so difficult to get, many people also opt for personal loans. Now may it be any loan, credit score plays an important role. So as we know CIBIl, Experian, Equifax and CRIF Highmark are the four credit bureaus that are established in India, the commonly known one is CIBIL as it was the first one that gave the score to people. Many people still would refer Personal Loan Without CIBIL Score than saying personal loan without a credit score. A credit score is made or established when a person takes any credit which is in the form of a credit card or a loan and then is repaid. But, a person cannot get a loan or credit if they don’t have a score. So, this becomes a catch 22 situation! So, there are private lenders or NBFCs who offer Personal Loans Without CIBIL score. The interest charged by them is a little higher than the banks, but Atleast you have access to the amount you require and you start building the score and the History.

And once that is done, it is easier to than get loans with banks. However, this always isn’t true! And always won’t work this way. There are normal cases as well where one can apply for a credit card or a personal loan of a minimum amount of say 50,000 Rs and start building the Credit history and then it becomes easier to get credits! But in whichever way, since first of all business loan being an unsecured kind of loan and small businesses are not always promising, the loan applications getting approval is not always possible! So one should always think the alternatives on how can they otherwise plan to start the business of basic business loan is not approved!