Thursday, 28 December 2017

Can the Approval of a Credit Card Improve CIBIL Score?

A credit card can be used for a lot of things. From making utility bill payments to booking plane tickets, and from purchasing expensive goods on EMI basis to meeting urgent money requirements, it can be helpful in many ways. However, there is another thing that it can be used for, which is credit score improvement.
Credit Card and CIBIL Score
A lot of times, when people apply for a personal loan, education loan, etc. they come to know that they don’t have a credit score at all. This usually happens because you need to have a history of credit repayment, which again doesn’t exist because it’s your first loan application ever. So, it’s a textbook catch 22 situation.
Banks are often reluctant to approve a loan when the applicant has no credit score. This is where credit cards can be an ideal solution as they can be easily obtained even when you don’t have a credit report.
So, you can use a credit card for creating a good repayment history and a good score easily.
Even If you have a low CIBIL score, a credit card can help you bring it to a good level.
Is Credit Card a Sure-shot Method for Score Improvement?
A credit card can be of great help when you need to improve your score, but is it a foolproof solution? Not really.
A card will get the desired results only when used properly. In fact, if you are not careful, it can actually damage your score further.
The following are some of the most important things to keep in mind when using credit cards if you want to avoid credit score damage and seek improvement:
1. Repayment of Bills
Give utmost attention to how you pay your card bills. This is because the repayment history alone will be one of the most important contributing factors to your score.
So, if you will pay your bills on time, then you can easily observe some improvement. On the other hand, if you miss even a single payment, then it can lead to adverse results.
Repayment history is also important because it shows the banks how good you are with money management and whether you are responsible or not.
2. Credit Utilization Ratio
Many people think that the more frequently they use their credit cards, the faster they can improve CIBIL score. This is not true and may, in fact, do more harm than good.
In every kind of credit score calculation, the credit utilization ratio, which is the ratio of your card limit to the amount of your average monthly spending, plays a big role.
If it’s higher than a certain limit, then it can lead to a poor score. So, you may want to use your card for a limited number of expenses only.
3. Credit Card Debt
Did you know that if you pay only minimum payments against your card bills, then the balance gets transferred to the next month and is collected as debt?
Minimum payments should only be opted for when you are simply not able to pay the full bill. This is because although these save you from fines and other charges, they lead to debt accumulation which is harmful to your credit score.
4. Age of Account
When you start using a card, at one point or another you are likely to get another card option that offers more benefits.
While may feel inclined to replace your old card with the new one, that’s actually where you could go wrong.
Your oldest accounts have a huge impact on your score. This is because they contribute to your credit history, which is directly proportional to your score. So, you must never close the old accounts.
If you really want a new card, then you can get it but without closing the old one. At the same time, you might want to recalculate the credit utilization ratio.

Credit cards can be quite useful when you want to build a credit score. However, it’s important to be cautious still.

Monday, 18 December 2017

A Basic Guide for taking a Business Loan

Just like the dream of buying your own house or seeking higher education can be fulfilled with the help of a loan, a business can be expanded or set up with the right kind of loan. Business loans can be sought for setting up a new business venture, for fulfilling short term or long term capital requirements or for business expansion. The applicant can choose to take a business loan from one of the many financial institutions or banks depending on his/her requirements and the terms and conditions set by the lender.
Purpose of Business Loans:
As we said business loans can be taken for various purposes depending on the needs of the borrower. Here are a few purposes for which a business loan could be utilized:
Ø  Expansion Plans: Any business would like to expand their operations if they are already doing well. If they find themselves unable to do so due to lack of funds then business loans offer the perfect solution.
Ø  Working Capital Requirements: These loans can also be of great use for fulfilling your requirements for day to day funds or the funds you may require for a longer period to run the business operations.
Ø  Buying/Maintaining/Upgrading Machinery or Equipment: Depending on the nature of business there may be a need to buy machinery or equipment, upgrade it or repair and maintain it. Not doing so could hamper the business operations; this is where business loans step in and can be used to keep your business running smoothly.
Ø  Infrastructure Requirements: Proper infrastructure is a basic requirement for any business entity and business loans can be used to get the right type of infrastructure in place.
Eligibility Criteria:
All lenders have eligibility criteria in place for giving out any loan in order to ensure that they choose the right candidates who will pay on time and will not default on the loans. Here a few pointers about the eligibility criteria that the borrower should keep in mind:
Ø  Check the eligibility criteria before applying for a loan as the application may be rejected if one does not meet the criteria that is laid down by the lender.
Ø  It is important that one checks their CIBIL Score before applying for a loan as a low credit rating could lead to the loan application being rejected.
Ø  The eligibility criteria may differ from lender to lender and may also vary as per the business that is seeking the loan.
Ø  For business loans apart from the usual documents like address and identity proof (KYC documents) the lenders will also ask for financial statements like the Profit and Loss Account, Balance Sheet and proof for existence of business, business plans for current and future deployment of funds.
Interest Rate is Important:
When deciding where to borrow from, an aspect that most borrowers focus on is the interest rate. The interest at which a business loan is procured will directly impact the profitability of the venture. Thus if the rate is too high, rather than contributing to the growth it may cause your overall cost to go up and thereby lower the profit or make it even negative.
Thus it is important not only to compare between business loans offered by various lenders but to also consider alternatives sources of finance. Here it is important to keep in mind if one has a good credit health it could help them get a loan at a competitive interest rates; getting a loan for low CIBIL Score could prove to be detrimental for overall business profitability.
If the credit health is not good or business loans are available at very steep rates then one should consider getting a loan against deposits/property/gold should be considered depending on how much the borrower requires and how favorable the terms and conditions for these loans are. 
Apart from the interest rate, the applicant must also focus on the processing fee and other costs before choosing the lender or type of loan as they also contribute to the cost of borrowing.

So use the power of business loans to expand your venture or set up a new one!

Friday, 15 December 2017

Which is the fastest way to Fix a credit report error

A credit report is a summary of your financial behaviour and the manner in which you deal with your loan obligations. These reports are maintained by three credit bureaus based on the information reported to them by the lending institutions. Because of the sheer volume of data being handled errors in the report are quite common. These errors can be a reason for a low CIBIL score. The onus is on each individual to check the report on a regular basis and ensure that the information recorded in these reports is accurate. Suppose you are about to apply for home loan, and you check your CIBIL report and score to make sure that your financial records are in order. What would you do if you found mistakes on your credit report that resulted in a low CIBIL score? Of course, you will need to act fast and rectify the mistakes so as to improve CIBIL score. After all, your CIBIL score affects your house loan approval as well as the rate of interest on that loan which will have a long term effect on your finances.
So let’s find out what is the fastest way of fixing errors on the credit report.
If you find a mistake on your credit report, you have the right to dispute this false information with the bureau. You can do so via mail or telephone but you will get the fastest results if you initiate a dispute online. You may either fill the online dispute resolution form provided on the bureau’s website or send a dispute letter via email. Provide the basic details like your name, address and contact information and then specify the items that you find erroneous. It is better to attach a copy of the credit report and highlight the items that you wish to dispute. Provide the factual data in a clear and concise manner and attach necessary documents that can verify your claim. Legitimate proof of documents that support your claim can expedite the process. If you do not provide all the key information needed to verify the mistake in one go, the bureau will have to contact you for additional information and clarification. This will delay the whole process.
Get a formal confirmation that your request is received and keep this information for future reference. Keep copies of every correspondence that you send to the bureau including follow up mails and the response you get. These records will come in handy if you do not get timely resolution and you wish to escalate the dispute.
 Another way you can work towards a faster resolution is to contact the organization that reported the erroneous information to the bureau directly. Include copies of documents to explain why you are disputing the information recorded in the credit report. If the documents submitted with the complaint are enough to verify and complete the investigation then the lender will just notify the changes in your account information to the credit bureau. The bureau will update the reports accordingly.

 If you have filed the dispute with the credit bureau, it will review the documents to verify the details. If the mistakes relate to personal information or enquiries, it rectifies the mistake itself. Otherwise, the bureau contacts the furnisher of the information to investigate the dispute and report back the findings. The entire investigation process should be completed within 30 days. In most cases, the disputes are resolved within a span of 2 weeks. But if you do not get a response within a month’s time then you need to follow up with the bureau. Escalate the complaint if necessary. Be persistent and make sure you get those errors off the report. If you had a low CIBIL score due to the errors in the report, then rectification of these mistakes will help improve CIBIL score.

Thursday, 7 December 2017

Should one go for Personal Loans without paper?

The world is fast moving to paperless options wherever possible, emails have replaced letters, digital statements have replaced the physical statements, e-books provide an alternative to paperbacks and so on; the list is long. Keeping in line with move towards a paperless world, financial institutions are now offering paperless personal loans. Here we give you a low down on what these loans are and if they are as good as a normal loan and do they offer any additional benefits?
Paperless Personal Loans Explained:
So as the name indicates instead of following the usual route of filling out a physical form and submitting documents physically, in this option the applicant takes the digital route to getting a personal loan sanctioned.  The applicant will visit the website of the financial institution offering the paperless loan and will fill out the online application form for the loan. The form like a physical form requires usual information on personal, employment and financial aspects.
Even though you are applying for a paperless loan, it does not mean that you do not have fulfill the eligibility criteria or submit the required documents. These documents are submitted in the digital form; based on the documents being in order and the applicant fulfilling the eligibility criteria the loan application is approved. However do keep in mind that apart from checking the eligibility and the documents the financial institution will also check the credit score of the applicant to assess the candidates risk profile. If required one may take some time to improve CIBIL score before actually applying for it the personal loan online.  
Paperless Personal Loans: Worth the Hype.
Any loan whether personal or any other, paperless or in the physical form should be taken only when a person truly requires it. Personal loans are often the most expensive loans and must be opted for after careful consideration.
While paperless personal loans have a few advantages, the applicant cannot ignore the basic aspects when opting for it. Applying for a paperless loan does not mean one can ignore the fine print; even though you may not have a physical loan agreement with you it is still available in the online form. Go through the loan agreement in detail to get a fair idea about various terms and conditions like what are the penalties for late payment, pre-payment (if at all), also understand about the various costs whether hidden or explicit before deciding to opt for the loan.
Often banks advertise about getting a loan within 24 hours or 48 hours; while it may sound promising especially if you need the amount urgently, don’t be tempted! Take your time and research before applying, compare various options available in the market based on interest rates, hidden cost and other features before choosing one. Some lenders may offer a personal loan without CIBIL score; however do not be fooled by promises. Check if the interest rates or other costs are higher or there is some other catch for loans that are offered despite the candidate having a low credit score. 
Having said that, paperless loans do offer some advantages over the option of applying for a loan through the normal way. This process is much faster and also more convenient. One is not required to visit the branch physically, so if you are stuck someplace else and your family or you need money you can do so without having to physically visit any bank or branch. One is not restricted by time also and can apply for a loan anytime, for doing so physically one has to visit a branch with the banking hours which might not be possible in a few cases. Another advantage which may come in handy at the time of need is the turnaround time; the processing for these loans is faster than for loans in the normal case. This feature could be of great help for a person who is in need.

So just like any other loan, a paperless personal loan should also be taken after careful analysis of one’s requirements, repayment capacity and alternatives to taking a personal loan. Researching and comparing various available options or going through the fine print cannot be ignored before opting for any loan! These loans do offer some advantages which make them convenient for the borrower.