How home or car loan EMIs impact your credit score

It is aptly said that "if you think nobody cares that you are alive, then start missing one of your car or home loan EMI".

It sounds phoney for our life but very true for a healthy financial life. Our month-on-month loan-related EMI payments (home, personal, automobile loans and others), credit card or overdraft payments define our credit report. Let's try and understand what actually a credit score is and how it impacts our financial life.

WHAT IS A CREDIT SCORE

A credit score is a number that summarises the historical credit information on a credit report of an individual. It helps lenders decide how likely it is that they will extend a loan or credit to the individual. One's personal credit score is built based on their credit history. Mainly, the credit score could range from 300-900. While each bank will have its own credit scoring cut-off based on the credit sanctioning policies, it has been observed that most banks are lending to consumers with a credit score of 750 and above.

HOW CAN ONE BUILD A CREDIT SCORE

Some factors that may affect credit scores are: 

• Always keep in mind the number of late payments. Pay all your outstanding dues and EMIs.
• Pay your loan EMIs and credit card bills in full regularly.
• Review your credit history regularly to check the updated status of payments on your report.
• Do not apply for more loans or credit cards until your report improves.
• Monitor your co-signed, joint accounts monthly.
• Monitor the loan accounts for which you have stood as a 'guarantor'.

IMPORTANCE OF A GOOD CREDIT SCORE

A good credit score is important because it indicates that you are managing your loans and credit card relationships well.Some other factors are: 

• Access to credit facilities. A lending institution takes decision based on the credit wellbeing of the borrower. And since the score depicts the credit worthiness, a person may not be able to get approval on a loan application, in case, the score is low.
• Higher rate of interest. One with a low credit score may get the loan but he or she may be charged a higher rate of interest. This would directly translate into a higher EMI.
• Help lenders assess risk of lending. A credit score is used to determine whether you can get credit in the form of a credit card, a loan to finance your education, a home or car loan, or even to start a new business.

INSTITUTIONS TO CHECK YOUR CREDIT SCORE HISTORY

India has four credit bureaus. All these are approved by the Reserve Bank of India and extend credit reports and credit scores. 

• CIBIL
• Equifax
• Experian
• Crif Highmark

So, it is important to understand and evaluate these factors to be able to build one's credit score and lead a healthy financial life.

DO'S AND DON'TS 

• One must pay all dues on time.
• One should not be overleveraged. The person should take credit facilities only to the extent it is required.
• A credit facility should not be taken for regular expenses.
• Monitor your co-signed, joint accounts monthly.
• Review your credit history regularly in order to track your financial standing and be 'loan ready' always.
• Maintain a healthy mix of credit

Author: India Today

Reposted By: Credit 4 Loan

Now, big rush for wedding loans

Major banks and NBFCs like HDFC Bank, ICICI Bank, Tata Capital, State Bank of India, Axis Bank, Citibank, IDBI Bank, Punjab National Bank, Kotak Mahindra, Bank of Baroda, etc., have already started offering the wedding loans

• Minimum Age: 21 years (23 years for some banks)
• Net monthly income: Rs 15,000 and could go up Rs 25,000 depending on city where you live, age and other criteria
• Employment: Salaried or self-employed persons
• Status: Working for a total of at least 2 years prior to applying for a loan
• #CreditScore: A CIBIL score upwards of 700 is preferred, a maximum cap of 900

Hyderabad: With the range of personal loans getting stagnated, banks are now turning towards the newer offerings such as wedding loans to woo customers. The new product is slowly but steadily gaining popularity as wedding expenses are now skyrocketing.

Taking loan for marriage may be a symptom which explains the growing incidence of indebtedness, as observed by the economist Jayati Ghosh.

That means, weddings are expensive, no doubt, and what if you don’t have funds or have no sufficient savings, the banks say take a loan. 

Here is an opportunity from banks and financial institutions, including NBFCs, who are offering loan for parents to perform their children’s wedding or to the prospective brides, bridegrooms or both.

According to the retail banking professionals, the wedding loan market in Hyderabad alone is about Rs 500 crore during the peak of the wedding season, and in the united AP (Andhra and Telangana) it may even double. “Over 20 per cent of the personal loan portfolio is being targeted to marriages,” say a banking official. Though there is no authentic figures it can easily cross over Rs 1,000 crore in both the states together, he added.

It is unsecured personal loan, and one can raise the loan from a minimum of Rs 50,000 to a maximum of Rs 15 lakh depending on one’s need and repaying 

capacity. Personal loans assistant general manager Adiraju reveals that even the marriage loans are being taken by the pensioners who hold pension accounts in their banks. “In a month we sanction personal loans of about Rs 30 crore in the Hyderabad circle, and about 20 per cent to 30 per cent are being used for marriage of their children.”

For instance, the State Bank of India alone sanctions about Rs 2,000 crore per annum towards personal loans and a major portion goes to marriages, he pointed out. Major banks and NBFCs like HDFC Bank, ICICI Bank, Tata Capital, State Bank of India, Axis Bank, Citibank, IDBI Bank, Punjab National Bank, Kotak Mahindra, Bank of Baroda, etc. have already started offering the wedding loans. 

In fact, Tata Capital has recently crafted a new product that suits the ‘would be’ couples to make their wedding day a special. The bride or groom or both can take a loan up to Rs 15 lakh depending on the need and their credit score. Personal loans would benefit the customer as he need not provide a guarantor or any collateral and even they need not give any reason for the loan.

Only the banks will see the capacity to repay the loan by the borrower. However, the loan money should not be spent on stock markets, Adiraju pointed out. While interest rate is between 13.49 per cent and 34 per cent with a processing fee up to 2.5 per cent., the tenure of the loan can be 1 year to 5 years.

By:K V V V Charya

Author: The HANS India

Reposted By: Credit 4 Loan

Be credit worthy always

It is aptly said that 'If you think nobody cares that you are alive then start missing one of your car or home loan EMI'. It sounds phoney for our life but very true for our healthy financial life. Our month-on-month loan related EMI payments (home, personal, automobile loans and others), credit card or overdraft payments what define our credit report. Let's try and understand what actually a credit score is and how it impacts our financial life.

What is a credit score

A credit score is a number that summarises the historical credit information on a credit report of an individual. It helps lenders decide how likely it is that they will extend a loan or credit to the individual. One's personal credit score is built based on their credit history. Mainly, the credit score could range from 300-900. While each bank will have its own credit scoring cut-off based on the credit sanctioning policies, it has been observed that most banks are lending to consumers with a credit score of 750 and above.

How can one build a credit score

Some factors that may affect credit scores are:

• Always keep in mind the number of late payments. Pay all your outstanding dues and EMIs.
• Pay your loan EMIs and credit card bills in full regularly.
• Review your credit history regularly to check the updated status of payments on your report.
• Do not apply for more loans or credit cards until your report improves.
• Monitor your co-signed, joint accounts monthly.
• Monitor the loan accounts for which you have stood as a 'guarantor'.

Importance of a good credit score

A good credit score is important because it indicates that you are managing your loans and credit card relationships well. Some other factors are:

• Access to credit facilities A lending institution takes decision-based on the credit well-being of the borrower. And since the score depicts the credit worthiness, a person may not be able to get approval on a loan application in case the score is low.
• Higher rate of interest One with a low credit score may get the loan but he or she may be charged a higher rate of interest. This would directly translate into a higher EMI.
• Help lenders assess risk of lending A credit score is used to determine whether you can get credit in the form of a credit card, a loan to finance your education, a home or car loan, or even to start a new business.

Institutions to check your credit score history

India has four credit bureaus. All these are approved by the Reserve Bank of India and extend credit reports and credit scores.

• CIBIL
• Equifax
• Experian
• Crif Highmark

So, it is important to understand and evaluate these factors to be able to build one's credit score and lead a healthy financial life.

Dos and don'ts

• One must pay all dues on time.
• One should not be over-leveraged. The person should take credit facilities only to the extent it is required.
• A credit facility should not be taken for regular expenses.
• Monitor your co-signed, joint accounts monthly.
• Review your credit history regularly in order to track your financial standing and be 'loan ready' always.
• Maintain a healthy mix of credit

Author: India Today

Reposted By: Credit 4 Loan

Lenders prefer a credit score of 750 or more

Whenever an individual avails a loan or credit card, the lender reports the details, such as outstanding, interest rate, and equated monthly instalment, to credit bureaus.

The bureaus convert this information into a credit score which helps lenders to take informed decisions. 

The Cibil score is a three-digit number ranging from 300 to 900. This score helps lenders to understand the credit profile and repayment behaviour of the applicant and quickly process a loan.

Usually, financial institutions are comfortable lending to individuals with a credit score above 750, and most lenders recognise that such customers have a low probability of default.

Advantages of good score

Credit score plays a very important role in your financial journey. With a good score you are likely to have more financial options. A good credit history means banks are more likely to approve loans; you can get a lower interest rate; loan approvals are faster; documentation is simpler, and can also help to get a higher loan amount.

Building credit score

The Credit Information Bureau (India), or Cibil, was founded in August 2000 and is the oldest of the credit bureaus to be established in India. There are two other popular credit bureaus that are authorised by the RBI to issue credit reports in India - Equifax and Experian. While CIBIL has the largest amount of data, especially older, the other bureaus are catching up, with significant overlap especially with more recent data. 

When you approach a bank for a loan, it is your Cibil score that determines credit worthiness and loan-eligibility. If you have a low credit score, you can rebuild it by focusing on certain areas.

Payment track record: If you have missed or made any delayed payments in the past, your credit score will be negatively affected. Your repayment record forms a significant part of your credit score, so in order to increase your score, you need to make all your loan repayments on time and in full.

Credit utilisation ratio: Spending a high percentage of your total credit limit on your credit cards is a sign that you are in need of credit. Make sure that you do not exceed more than 50 per cent of your credit limit. This will have a positive effect on your credit score.

Excessive number of credit cards and loans: This is also a sign that the customer is hungry for credit. Make sure that you maintain a reasonable number of credit accounts (credit cards and loans) in keeping with your income and payment ability.

High percentage of unsecured credit: A secured loan is taken against a security such as a home or vehicle. An unsecured loan is taken without any collateral. A disproportionate amount of unsecured credit (regular credit cards or personal loans) has a negative effect on your credit score.

Length of credit history: Sometimes loan applications are rejected simply because the applicant does not have a sufficiently long credit history. Potential lenders are unable to evaluate the customer’s creditworthiness in the absence of enough data. The longer the age of your credit accounts and the longer a record of your credit behaviour, the better it is for your credit score.

Multiple credit applications in a short span of time: If you have applied for multiple loans/credit cards within a short period, it is an indicator that you are in need of credit. This has a negative impact on your credit score. Moreover, each loan/credit card rejection can lead to a further decrease in your credit score. Make sure that you only apply for credit where you have the best chance of being approved.

Number of ‘Settled’ or ‘Written-Off’ accounts: Any settled or written-off accounts have a negative effect on your credit score. You can convert a settled or written off account into a ‘closed’ account by making a mutually acceptable payment to the lender. Ensure that in future you avoid such a status by making all your loan repayments in full.

Improving credit score

Analyse: Obtain a copy of your credit report and identify the issues that are dragging down your credit score. Take immediate steps to address these problem areas.

Rectify: If there are any errors in your credit report, file a dispute with the credit bureau immediately so that these can be rectified. For example, a loan might be shown as outstanding when you have already paid it in full.

Author: Business Standard

Reposted By: Credit 4 Loan

We will have another credit score using social media data

Crif High Mark Credit Information Services’ Kalpana P. Pandey says of late, awareness about credit reports and credit scores for individuals has increased

Crif High Mark Credit Information Services Pvt. Ltd, one of the four credit bureaus in India, in November, launched its first customer- specific product—online credit report and credit score. These will come with risk indicators such as low, medium and high so that the customer can understand what the score means, said Kalpana P. Pandey, chief executive officer and managing director, of the company. The bureau offers two products—credit report at and credit report and score. Pandey spoke to Mint about the evolving landscape of credit bureaus in India, and the company’s plans to service small finance banks and payments banks.

Does the launch of a customer-centric product indicate a shift in the way you view your business model?

So far, our model was only business-to-business, where we worked with banks, non-bank financial companies and micro finance institutions. Almost all the institutions that are in the lending business are our customers. But of late, awareness about credit reports and credit scores for individuals has increased. We noticed that people now want to know their credit scores before applying for loans such as home loans, personal loans and even car loans. Since there is a strong demand from the market for individual credit report and score, we felt the need to enter the business to consumer space. So, we launched our credit report. We have also launched a consumer grievance cell to rectify any discrepancies in the reports. This means you can generate queries on specific portions of the report online whenever required.

If an individual has never taken a credit, can you still give her a credit score?

In case you have never taken credit from any financial institution, we as a bureau will not have any data to give you a score on. Hence, if we don’t have data, we will give you “no hit” as a comment.

In such cases, additional non-traditional data elements can come into play in the future—we will have another score with the use of additional data for the no-hit segment. By additional data I mean information such as (financial) behaviour on social media platforms such as Facebook, Twitter or LinkedIn, or how an individual is paying her utility bills or how she transacts on e-commerce sites. These would come into play, based on which we can take a decision. This can be possible because all these transactions leave a digital footprint. However, right now, this is in testing phase. Hence, the score that you get currently is without the use of non-traditional credit data.

Credit bureaus at present work closely with financial institutions, telecom companies and insurance companies. In future, do you see other sectors using the services of credit bureaus?

Currently, only credit institutions and specified users such as telecom service providers and insurance companies come under the credit bureau ambit.

Recently, a Reserve Bank of India committee was formed, which spoke about using utility bills to build credit score.

Initially, there was a big question mark on how to use electricity bill data as these come under the universal service obligation and so that service has to be provided anyway. However, another angle emerged. Today, most utility service providers take some kind of deposit from customers. Hence, there can probably be some kind of decision-basis to score a person. For instance, if a person has a good credit history, maybe the quantum of the deposit amount can change. Hence, a different use of credit report that may emerge.

But for this to happen, of course, regulations need to change. The Cicra Act [Credit Information Companies (Regulation) Act] needs to enable utility companies to also come under the credit bureau umbrella. This could take some time to become a reality.

Different types of banks are to be launched soon. Will you tie up with them as well?

Yes, we are in talks with payments banks as well as small finance banks. If you see, historically, as a credit bureau, we have been focused on micro finance industry. In 2010, the need of a credit bureau for the microfinance industry emerged and we were the first to launch credit report for microfinance companies. We have been working with them closely, and in the past five years, we have brought most of them under the credit bureau umbrella. If you look at small finance banks, their focus area, too, is the microfinance space. Eight out of the 10 entities granted the in-principle approval are microfinance institutions. Hence, small finance banks become our natural users. Currently, we are closely linked with them and are working with them on multiple requirements.

When it comes to payments banks, the way credit bureaus will be used is going to be different as they are not allowed to lend. Hence, their requirement from us would be around know-your-customer process, among others.

Author: Live Mint

Reposted By: Credit 4 Loan

Satish Pillai, new MD & CEO of CIBIL

Credit Information Bureau India Ltd (CIBIL), India’s leader in credit information, has appointed Satish Pillai as its new Managing Director and Chief Executive Officer on Thursday.

Pillai succeeds Arun Thukral who retires this year after a decade.

Satish Pillai has been serving CIBIL in the capacity of Chief Operating Officer for more than four years where he was responsible for product development and bureau operations. Earlier, Pillai led TransUnion’s operations in India overlooking the creation of the solutions team that supported generic and custom analytics and decisioning technologies, including the launch of the CIBIL TransUnion Score- India’s first generic scoring model, CIBIL said in a statement.

Pillai said, “A growing and thriving middle class is the key to a strong and vibrant economy for India. CIBIL’s commitment is to be the underlying credit infrastructure to this growth, enabling faster and cheaper access to credit by accelerating our investment in solutions across retail and commercial lending and partner in the national momentum of helping drive higher financial literacy, inclusion and protection. We are also working closely with the Reserve Bank of India and other Regulators to make the credit information infrastructure even more comprehensive and enhance our content to better serve the needs of our customers.”

CIBIL, India’s largest credit information bureau, maintains credit information on more than 406 million consumer accounts and 22 million business accounts and has a membership base of over 1400 banks and credit institutions.

Author: THe Hindu - Business Line

Reposted By: Credit 4 Loan

www.credit4loan.com, cibil, personal loan,credit 4 loan, credit card, home loan, civil

Banks to start cross-checking KYC scores, too

Apart from checking credit history, banks and financial institutions have also started checking identity score as part of Know Your Customer (KYC) procedure..

If you would filled in the wrong date of birth in a bank application form or not filled in the correct address then there is a chance that your loan application may be rejected or it will take longer to process. This is because now apart from checking your credit history banks and financial institutions have also started checking your identity score as a part of the Know Your Customer (KYC) procedure. 

Mohan Jayaraman, Managing Director, Experian says that now lenders are taking the help of credit bureaus to ascertain the identity parameters. In this apart from ascertaining the identity other factors such as location is also taking in to account. 

“As part of this we will check if the address that you have provided is correct or not. Apart from this suppose if in the same house there are other people who have defaulted onloans or don’t have a sound credit history then it can raise a red-alert for banks,” he explained. 

Also, if you change your house very often then even that may even ring a warning signal for lenders, explains Kalpana Pandey, CEO & MD, CRIF High Mark Credit Information Services. 

“The idea is to also verify the address stability. Suppose if you have a home loan in another address and for your personal loan you have given another address, then it may be a concern for banks. Or if there are times when in one form a customer has mentioned a different birth date than the actual one then even that can lower the KYC score,” she added. 

Experts explain that these scores and checks by credit bureaus can help in weeding out KYC or Anti Money Laundering Frauds. Recently, in April Reserve Bank of India slapped a penalty of Rs 1.5 crore each on three public sector banks - Bank of Maharashtra, Dena Bank and Oriental Bank of Commerce - for violating KYC-AML rules. Apart from this, the regulator had also asked eight other public sector banks - Bank of India, Punjab National Bank, State Bank of Bikaner & Jaipur, Union Bank of India, Central Bank of India, UCO Bank, Vijaya Bank and Punjab & Sindh Bank - to ensure strict compliance with KYC rules. 

RBI had pointed out that instances of banks opening fixed deposits and granting overdrafts without due diligence were detected. The credit bureaus say that such instances can be reduced by such identity scores. 

“We have a solution to authenticate the identity of the applicant which is now being used by banks and credit institutions. This is a unique solution that allows banks and credit institutions to authenticate a customer in real time by leveraging CIBIL’s vast credit information database, thereby helping drive process efficiency for faster and smoother on boarding of customers" – said Harshala Chandorkar, Sr. VP- Consumer Services and Communication, CIBIL. 

Jayaraman also said that part from identity check and location even the tenure of one’s previous loans will affect these background check scores. He explains that if the tenure of loan that a customer has been repaying from a particular address is longer then it will help in affirming the veracity of his address. 

Credit bureaus said that not only banks but even Non Banking Financial Companies, Insurance players and even telecom companies are using these background checks. However, considering that these services are limited the number of players using the score is still limited. 

"KYC procedure was always being followed by banks but now it is getting integrated with the credit score checks as well. Banks and other institutions are opting to go via credit bureaus like Equifax because it helps in solving logistical issues for the lenders and more over now credit bureaus are coming up as a one-stop shop to do credit and identity checks,” said Nimilita Chatterjee, Senior VP – Products, Analytics and Data Operations at Equifax.

Author: Business Standard

Reposted By: Credit 4 Loan

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