You don’t need a stellar credit score to qualify for a mortgage

When lenders say their doors are open to home buyers who don’t have the best credit profiles, should you believe them? If you’re a first-time buyer, qualified on income and other key criteria, but you happen to have a FICO credit score in the mid-to-upper 600s, do you really have a shot at getting a mortgage?
The answer is probably yes. But the latest statistics on credit scores and mortgages overall are sobering. Not only are average scores on new loans closed by lenders continuing to rise, there’s also growing evidence that large numbers of people with middling credit scores are simply not applying for mortgages. It’s not that they’re getting turned down; rather, they’re self-selecting themselves out of the mortgage market, possibly because they assume their credit scores will get them rejected wherever they apply. In the process, they may be needlessly missing a chance to nail down 30-year fixed-interest rates in the mid-3-percent range to buy a home.

●FICO scores on mortgages closed in May were up in all loan categories. The average score on conventional loans — those eligible for sale to giant investors Fannie Mae and Freddie Mac — was 754, according to Ellie Mae, a software firm that tracks the field. That’s high by historical norms and is up two points since February. FICO scores run from 300 to 850. The higher the score, the lower the perceived risk of default.
●Scores on Federal Housing Administration and Veterans Affairs mortgages also have risen, but they are significantly below those at Fannie and Freddie. The average score at FHA last month on loans to purchase homes was 686. At VA, it was 707. The average American has a credit score around 695, according to FICO.
●New research from the analytics firm CoreLogic found that dramatically fewer people with FICO scores in the mid-600s are applying for loans compared with earlier decades. In 2005, roughly 25 percent of applicants had FICO scores of 640 or less, but by 2015 that had dropped to just 5 percent. Rejection rates for these applicants have not risen significantly — lenders “are matching the market” with loan approvals, according to CoreLogic deputy chief economist Sam Khater. The problem is “that people with lower credit have not come back” in the same numbers as before the financial crisis, he said in an interview.
What’s going on? Have home mortgages become the exclusive preserve of the credit elite? Or have potential buyers with middling credit scores somehow gotten this message from banks and other lenders: “We don’t make mortgages to folks with scores like yours anymore, so don’t bother to apply”?
John Taylor, president and chief executive of the National Community Reinvestment Coalition, an umbrella group representing hundreds of local community organizations, thinks it’s definitely the latter. “The spigot’s been turned off for working-class people” who want to buy houses, he told me. “People are being turned down, and they don’t believe the banks are going to make loans to them.”
Mike Fratantoni, chief economist for the Mortgage Bankers Association, disagrees. He thinks the mortgage market overall is strong, rejection rates have not increased and the high credit-score averages on Fannie-Freddie loans reflect an important shift that is underway. Premium reductions at FHA, coupled with premium increases by private mortgage insurers, have driven more sub-700 FICO buyers to FHA and away from Fannie and Freddie, he suggests. Nearly 40 percent of new-purchase loans at FHA last month had scores between 650 and 699, and 20 percent were between 600 and 649.

Bob Walters, chief economist for Quicken Loans, one of the highest-volume mortgage lenders, says “there’s a misperception,” especially among millennials, “that you need 20 percent down and great credit” to qualify for a mortgage in 2016. Yet with FHA loans requiring just 3.5 percent down, generous underwriting rules on debt-to-income ratios and other application factors, that’s just not the case.
Bottom line here: There’s no reason to be a no-show in the home-purchase market if you know where to target your application. If your FICO score is well below 700, you can pretty much forget about Fannie and Freddie. Apply to lenders that specialize in FHA-backed mortgages, where your odds of success are much better. Lenders insist that they want your business and are not looking to turn you down, as long as you’re qualified. So call their bluff: Give it a shot.

Author: https://www.washingtonpost.com/
Reposted By : http://www.credit4loan.com/

Social Worth: New metric to assess creditworthiness takes shape

"You are being watched."

No. This statement doesn’t refer to a warning that a fictional television show starts with. A new metric to track a person’s financial credibility — social worth — is taking shape. At the helm of utilising this metric is EarlySalary.com — a non-banking finance company (NBFC) — which doles out loans of up to Rs 1 lakh to salaried professionals, especially first-time applicants who find it hard to find lenders willing to disburse quick loans or even issue a credit card.
What is Social Worth?
EarlySalary homes in on a loan amount to be disbursed to a borrower on the basis of his activity on Facebook and LinkedIn. The NBFC has deployed an algorithm that takes in to account about 4,000 data variables from the applicant’s social media profiles. The variables include details like which schools and colleges the applicant attended, the organisation that the applicant is employed with and her location.
Co-founder and Chief Executive Akshay Mehrotra stresses that EarlySalary’s loan disbursal process happens with minimum human interference and in a speedy manner. “First-time borrowers can avail loans in less than an hour on EarlySalary platform. The idea was to help those faced with mid-month and month-end cash crunch,” he says.
The algorithm also tracks the social circle — friends, peers and colleagues — to establish the applicant’s credibility and creditworthiness, Mehrotra says. “It is not easy to lie about particulars like education and workplace on social media.”
Rajiv Raj, co-founder of CreditVidya, a portal that educates customers on managing finances and provides credit counseling, echoes Mehrotra’s views. “Going forward digital banking will make greater inroads in India. In Big Data, you have so many data variables that help you profile a customer. Hence, the probability of fudging data on social networks or other digital mediums becomes hard,” Raj says.
Calculation of a person’s social worth also factors in other variables like geo-positioning — data on how many people have taken loans in the area the application was made in and the repayment capacity of the group which has secured loans can enhance or lower the amount of loans.
When people transact online — bill payments, utility payments, transferring funds, etc. — several data profiles are created. “These data profiles help estimate the life style index of a person in a given area,” says Raj. Features on mobile phones like geo-tagging also help track a person’s activity which also plays a part in assessing the creditworthiness of a person, he adds.
It is Legit
By the dint of being an RBI-registered NBFC, EarlySalary loanees get a CIBIL score once they transact on the platform. A good credit score can then boost borrowers’ chances of getting other loans or credit card, says Mehrotra
EarlySalary is operational in Pune, Chennai and Bengaluru and plans to expand to other cities going forward. Within 90 days of being operational the platform has disbursed over 1,000 loans, says Mehrotra. “Average ticket size (for loans disbursed so far) is Rs 22,000, while the tenure is 22 days and the average age of borrowers is 26 years,” he says.
“The penalty in case of delay is Rs 500 on an average. Currently, all customers have paid within the repayment window to our delight,” he adds.
Also, applicants need to be salaried professionals drawing a take-home pay of Rs 30,000 to avail loans from EarlySalary. The platform charges an interest of less than Rs 9 per Rs 10000 a day. For example: A 10-day loan worth Rs 10,000 would fetch an interest of Rs 82.


Author :- http://www.moneycontrol.com/
Reposted By :- http://www.credit4loan.com/

Hospitals want patients to be rated on CIBIL lines

Private hospitals in the city wish to maintain "credit score" of patients and their families on the lines of CIBIL as a deterrent to refusal to pay up any bill.

It is one of the proposals that the Association of Hospitals, which represents over 50 private hospitals in the city, plans to submit to the government-appointed committee appointed by the Bombay High Court to look at workable solutions in case of non-payment of bill. Association officials met on Friday to discuss the issue.

The issue of non-payment came into focus in 2014 after a petition was filed in High Court by 25-yearold Sanjay Prajapati who alleged that his brother was detained by Seven Hills Hospital for not paying his bills. The court made scathing remarks against hospitals terming their practices as "inhuman" and "commercialisation of health". It then said that there needs to be guidelines spelt out by a government committee in which hospitals' representatives too can come up with suggestions to find a solution.

Other solutions include getting patients and relatives to sign an undertaking on stamp paper so that in case of non-compliance, civic or criminal action can be initiated. The association has also suggested having a quick-redressal board to settle such matters speedily outside the courts.

Activists say that such clashes take place because of the lack of transparency on the part of private hospitals in the billing process.

"It was a preliminary meeting where we discussed a few possible options. We have to suggest these solutions to the government committee that has been appointed to resolve the ongoing petition between a patient and a hospital that has snowballed into a big debate," said Dr PM Bhujang, president of Association of Hospitals.

Other solutions include getting patients and relatives to sign an undertaking on stamp paper so that in case of non-compliance, civic or criminal action can be initiated. The association has also suggested having a quick-redressal board to settle such matters speedily outside the courts.

A doctor who attended the meeting on condition of anonymity said, "We have at least three such cases where patients/relatives refuse to pay up after treatment. The patients know that the doctor cannot do anything. Legal recourse can drag on for years. So doctors and hospitals are left in the lurch," he said citing a case of a woman who came for a C-section and chose the best room in a hospital. "They had paid Rs 20,000 deposit. The total bill went up to Rs 45,000 but the relatives simply refused to pay up saying that they were overcharged," he said.



Author :- http://www.mumbaimirror.com/
Reposted By :- http://www.credit4loan.com/

Top 5 Ways to Improve Your Credit Score

If you're planning to finance a car, there’s one number you can’t be without. You guessed it. It's your credit score, and it allows lenders to gauge your level of financing risk.
The most common credit scoring method used by major lenders is the FICO score, which assigns borrowers a score of between 300 and 850. The higher the score, the better the financing terms. If your score isn’t up to par, it’s not the end of the world. Here are five top tips on how you can improve it.
Check Your Score
Some of the best credit advice comes with the score itself. When you check your FICO score through a credit bureau, such as Experian, you’ll receive a list of specific factors that have influenced the score, for example “no missed payments” or perhaps “short credit history.” These tips can be invaluable for understanding how to improve your credit situation.
Checking your score periodically can also tip you off to harmful reporting errors, and even fraud.
Establish a Good Payment History
It’s no secret. Getting a great score means paying your bills on time, every time. Delinquent payments and collection accounts have a significant negative impact on score, and these can linger on your report for up to seven years. Here’s the good news. As you continue to pay on time, older credit blemishes will affect your score less and less.
Need help? Sign up for payment reminders, if available.
Manage Credit Cards and Pay Off Debt
Using credit cards can fast-track credit score recovery, but only if you manage them responsibly. It’s best to keep card balances low and pay them off in full each month, rather than carry them over. Cardholders should also aim for a “credit utilization rate” of 30 percent or below. This means you use 30 percent or less of the credit that’s offered to you. To find this rate, divide your total balances by total credit card limits.
For this reason, closing an unused card that’s in good standing can actually hurt your score, because it reduces your credit limits without changing the amount owed.
Don’t Take On Unnecessary Credit
Credit scoring evaluates your “credit mix,” which includes accounts like credit cards, auto loans, and mortgages. Using different types of credit can improve your score, but that doesn’t mean you should open unneeded accounts just to broaden this mix. A flurry of credit applications give lenders the wrong idea and adding multiple new accounts lowers your average account age—another important scoring factor.
Instead, think quality over quantity. Manage what you have, and scoring will reward you for older, responsibly paid accounts.
Correct Errors
Mistakes happen. If you find an error on your credit report, such as an account that isn’t yours or an inaccurate missed payment, you can dispute the error with the information provider and respective credit bureau. The dispute process takes time, but when resolved it can yield a significant change in your score.

Author :- http://www.kbb.com/
Reposted By :- http://credit4loan.com/

Credit card against fixed deposit offers a slew of advantages

Credit cards are convenient to use, provide the benefit of moving around cashless and give you the opportunity to build a great CIBIL score if you use it judiciously. However, credit cards being unsecured are a risky proposition for banks and card users can land themselves in a debt trap if they get carried away with their credit card usage. In order to somewhat address these problem, and make life easier for credit card users as well as themselves, banks have in the recent past started offering credit cards against fixed deposits.

How does it work?

This opens up a whole new world of opportunity to people who would not otherwise be eligible for a credit card such as an individual with an annual income of Rs 2-5 lakh, a homemaker, a new employee in an organisation and the likes. If any of these individuals have a fixed deposit in any of the leading banks of the nation they are now eligible for a credit card against such fixed deposits. The deposit amount can be anything between Rs 25,000 to Rs 25 lakh and should be fixed for a minimum of 180 days. The credit card that is issued against such deposits bear a card limit of 80-85% of the deposit amount. This way banks ensure that there is a margin of safety even while offering you an attractive deal.

Even when you opt for a credit card against your fixed deposit you continue to earn interest on it, just like you would normally. However, if you happen to default on the repayment of your credit card, the amount you to owe your lender will be adjusted against your fixed deposit.

Benefits of a card against fixed deposit:

No minimum requirement of an income- Anybody and everybody who has a fixed deposit in his or her name can avail of this facility. Therefore, those who wish to have a card but do not have regular income, such as homemakers, students or the elderly can avail of this facility, so long as they maintain a fixed deposit with the lender. Earning members of the family can gift such cards to their children or parents if they wish to. Such cards provide easy liquidity and are useful to cardholders in case of an emergency.

Easy documentation and no income statement or credit history check required- The documentation unlike a regular credit card is minimal, if at all, in such cards because the customer already has a fixed deposit running with a bank. Besides, a person with no credit history or an income such as a student or a person who has just started working, or a home maker who does not have any credit lines open yet can also easily apply for such a credit card as a credit card against a fixed deposit does not require an individual to furnish an income statement. Also the banks need not run a credit check.

A longer grace period- As compared to regular credit cards that offer a grace period of 21 days to repay one’s outstanding amount free of interest, a credit card against a fixed deposit offers a significantly higher grace period of 48-55 days to repay the borrowed credit interest free.

No harassment to the card user in case of non-payment of dues- Usually banks are very strict with unsecured credit usage such as credit cards. Therefore, when a person fails to repay his dues on time, the bank might give repeated reminders to the card user or even hire the services of a recovery agent if the card user remains unreachable. In case of a credit card against a fixed deposit, there are no chances of such things happening, as the bank will simply adjust the outstanding dues against the fixed deposit. However, the card user must bear in mind that a situation like this must be avoided at all costs.

A word of caution

While credit cards against fixed deposits seem to be a win-win proposition for both the lender and the card user, those opt for such cards must still exercise caution with the usage of such cards. The thumb rule of credit card usage is spending in small amounts and repaying the outstanding amount in full in each billing cycle. There is no exception to this in the case of cards issued against fixed deposit. If you go overboard with your spending and are unable to repay your debt on time, your fixed deposit account will be impacted, thus having a direct bearing on your savings. Therefore, do remember to use your card judiciously and enjoy the benefits on offer!


Author :- http://www.moneycontrol.com/

Reposted By :- http://credit4loan.com/

A little financial planning will help you to study abroad

With the dollar remaining strong, studying in a reputed foreign institution seems to be a distant dream. While most banks are willing to offer education loans for higher studies, but is it enough for us to just sign the documents without any planning?

We list down a few tips for a better financial planning before you go overseas for your higher education.

Scout for the best loan option

It is a tedious job but it is extremely important for anyone to go through and compare the various loan options available to you. And once, you zero in on the offer that you feel suits you, you can negotiate the terms and conditions.

Remember fluctuating rupee

It is important to remember that fluctuation in rupee value will impact your loan. One must remember that the loan will be rupee denominated and hence on conversion into your desired foreign currency, the amount will be lower.

"A student has to be prepared to bear this foreign exchange risk. For example, a student applies for an education loan of Rs 20 lakh. However, if the rupee weakens further due to exchange rate fluctuations, there would be an increase in the cost of education from the rupee perspective," said Harshala Chandorkar, senior vice president, Consumer Services at CIBIL.

Plan your course of action

In most cases, parents often sign up as a guarantor for the loan availed by you. So, its better to plan your course of action beforehand because if you delay the EMIs or default on them, it will adversely impact their CIBIL report as well.

"Rupee depreciation also adds to the woes of many parents who fund their children's education from their savings as they have to shell out more money. As a guarantor on your education loan your father / mother is liable for its repayment in case you fail to pay the EMIs. His / her credit report will show the details of this education loan and defaults will also show if you do not repay the EMIs on the loan. Thus, your repayment behavior will also impact your parents' credit score," she added.

Spend carefully

While you are overseas, pursuing your higher studies, it is important to do budgeting and know how much can you spend. Becoming a spend thrift can put additional burden on your financials, thus forcing you to delay or default on your loan repayments, negatively affecting your CIBIL report. In case, you cannot avoid certain expenses, consider taking up a job to meet your additional expenses.

"If you have taken a loan to study abroad, timely repayment should be the top most priority. Like any other loans and credit cards, education loans are also reported to the CIBIL and get reflected in the borrower's CIBIL Report. Transactions related to repayment of your education loan will also get reflected in your CIBIL Report and impact your CIBIL Transunion Score. Irregular or non-repayment of EMIs on your education loan will lead to an unhealthy CIBIL Report which can hamper your chances of availing any other loan or credit card in the future," said Chandorkar.


Author :- http://www.businessinsider.in/
Reposted By :- http://credit4loan.com/