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/

Rising NPAs, loan frauds drive banks to detectives' alley

NEW DELHI: Burgeoning cases of non-performing assets (NPAs) and piling loan frauds have led banks to private detectives for conducting 'undercover' operations to unearth hidden data against defaulters who have cheated them of crores of rupees before vanishing into thin air.
With these cases having gained prominence recently in the wake of some huge defaults like those by Kingfisher AirlinesBSE 3.03 % and its owner Vijay Mallya, banks have brought out advertisements and approached private detective agencies to mine information against fraudsters.
As per official records, a number of banks have sought empanelment of detective agencies with their assets recovery divisions to not only "locate the missing/absconding NPA defaulter" but also to "ascertain their present occupation, income streams among others".

"We have been helping the banks on these issues for quite a few years now but this time there is pressure on them to catch not only the small but also the big fish. Private detective agencies are working on thousands of such case across the country.

A large public sector bank recently sought help to tackle the NPA menace and wants private sleuths to "unearth uncharged properties of the defaulter for recovery action with the help of documentary evidences".

We have been helping the banks on these issues for quite a few years now but this time there is pressure on them to catch not only the small but also the big fish. Private detective agencies are working on thousands of such case across the country.

"In order to ensure that the banks get vital information on defaulters and absconders, our agents are conducting undercover operations as we cannot go and just knock on the doors to obtain such information in these cases," Chairman of the Association of Private Detectives of India (APDI) Kunwar Vikram Singh told PTI.

He said despite the job requiring special skills to conduct covert operations, the APDI's collective success rate in tracing bank defaulters has been as much as 90. He said absconders and fraudsters many a time exist "right under the nose" but under a changed identity.

Singh said his detective firm Lancers Private Limited is at present working with banks like SBI, Bank of India and Bank of Patiala on such cases many of which have come to it in the recent past.

"The banks are up against some of the smartest brains when it comes to non-payment of loans and huge defaults. There is not much staff with any of us to physically get information against such entities and hence private detectives hold the key to this problem.

"It is ensured that when we bring on board a detective agency we enter into a confidentiality agreement with them called the NDA (Non-Disclosure Agreement) which mandates that such snoop information about the defaulter will be protected from any public disclosure," he said.

As per a fee chart prepared by a leading bank, it will pay Rs 7,500 (in a single case) to the snoop agency for providing data about people connected to the defaulter like the borrower, guarantor or director of the firm.

In case the detectives get documentary proof of assets (not in records of the banks) of the defaulter which can be attached, an amount of Rs 20,000 for each such property located will be paid.

"We have collected property papers worth hundreds of crore against such defaulters in the past. This is a very specialised job and we have deployed some of our best agents for the task," Director of a Delhi-based snoop firm Hatfield Detectives Pvt Ltd Ajit Singh said.

Banks have also sought from these agencies, as per the scope of work agreement, some non-traditional sources of information against the defaulters which the bank "cannot access by utilising normal channels like CIBIL database, internet and local enquiries."

An agreement brought out by one of the banks states that private sleuths need to "locate the borrower, co-borrower, guarantor, mortgagor, including their legal heirs who are either untraceable or not available at the addresses given in bank's records."

Detectives also need to "ascertain latest information about their present address, occupation, businesses, income streams, details of all their assets, their location, whether in India or abroad, and value and ownership related information."

"Government investigative agencies like police, CBI, Income Tax department or the Enforcement Directorate have their limitations. Banks also have manpower issues in their special debt recovery units. Getting private detectives on board will surely get us the desired results as past experiences have not been bad in this domain," the banker said.

Author :- http://economictimes.indiatimes.com/

Reposted by: http://credit4loan.com/

IT dept to block PAN, LPG subsidy of defaulters

In order to cripple and check the activities of wilful tax defaulters, the Income Tax department has decided to "block" Permanent Account Number (PAN) of such entities, get their LPG subsidy cancelled and take measures to ensure that they are not sanctioned loans.

A number of such measures have been mooted by the tax department, to be undertaken this financial year, in order to curb the menace of large-scale tax avoidance and evasion.
As per a strategy paper prepared by the department, also accessed by PTI, the taxman will block PAN in such a way "that these defaulters are not sanctioned any loans or overdraft facility by public sector banks, as the same is bound to become non-performing assets".
Further, it said, "Ministry of Finance can be suggested to withdrawn facility like LPG subsidy which is directly credited in to the bank accounts of the said defaulters." This step, the strategy paper said, will act to "disincentive" the defaulters.
The taxman also proposes that the identities of such blocked PANs be circulated to the Registrar of Properties "with a request for not allowing any registration of immovable properties where such PANs are involved." Such defaulters' information has also been recommended to be circulated across tax offices so that their activities loans or government subsidy can be plugged country-wide.
The department has also decided to subscribe to the Credit Information Bureau Limited (CIBIL) data, on a possible payment basis, to check out the financial activities of defaulters and undertake action against them for recovery and freezing of assets.
CIBIL is an agency to collect and maintain records of an entities' payments pertaining to loans and credit cards.
The department, beginning last year, has also started to 'name and shame' large tax defaulters (over Rs 20 crore default) by publishing their names and other credentials in leading national dailies and on its official web portal.
Till now, 67 such entities have been put in public domain by the department.
The IT department, beginning this financial year, has also decided to publicly name all category of taxpayers who have a default of Rs one crore and above.
"Tax default is a major menace that the department is grappling with.These new measures are aimed to curb these instances in the right earnest," a senior IT official said.


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

How to build your credit score & protect it

Finance is the fundamental requirement for individuals and enterprises to grow. Today we have the freedom and opportunities to access finance for our goals and economic development in the form of loans and credit cards. Banks and lending institutions are willing to provide loans to individuals to fund their education, buy a house, car or even a holiday overseas.

A vibrant lending culture is gradually bringing more and more people under the umbrella of banking and credit operations. Both the government and the private sector are working towards making credit opportunities available to one and all, so that access to finance becomes easier by the day.

While the focus on credit penetration has increased, credit institutions are diligently assessing borrowers’ credit worthiness so that the quality of credit doesn’t suffer. Thus, the need to have a clean credit history is of utmost importance for any credit aspirant, as without one, there is possibility of being denied fresh lines of credit.

A good CIBIL report and score are important for the following:

• Home loans, education loans, credit card and personal loans may not get approved if the financial institution feels your CIBIL report and score are not up to the mark

• You may have to borrow at a higher rate of interest from other financial institutions

As a borrower these are some of the cardinal duties you need to follow to maintain a sound credit health:

• Make payments on time

This is the first step in maintaining a healthy CIBIL report and score. Whatever you owe in the form of loans or credit cards, if you continue to pay on time, there is a high possibility of maintaining a good report and score. If you cannot pay the entire sum at one go, make the minimum monthly payment that the credit card bill mentions below the total outstanding in a monthly statement. If you have a payment issue on your home loan or credit card payment, contact the financial institution for a solution. It is prudent to keep your creditors informed about any payment issue you might face so that they can help you by offering easier terms and options for repayment.

• Monitor loans you have guaranteed, co-borrowed or co-applied

In case you have guaranteed a loan taken by a relative or spouse, you must monitor if the principal borrower has been repaying on time. Though the loan is not on your name, technically by being a guarantor you have signed for paying up the dues in case there is a default. So any delay or non-payment will affect your CIBIL report and score. At the same time, if you are a co-borrower, you must monitor your partner’s payment behaviour. Though you pay on time, if the other person doesn’t pay, it will still affect your credit report and score directly as you are one of the borrowers.

• Review your credit history time to time

To be able to access credit without any hindrance or delay, you must check your CIBIL report and score at regular intervals, like once in six months at least. It is better to take corrective actions in case the CIBIL report shows any deviations.
If one follows the above-mentioned as a rule of thumb, he/she in all likelihood will have a good CIBIL report and score.

Checking CIBIL report and score should be treated as a credit health management exercise, and not only as one undertaken when you need loans.

As a customer you must understand your rights too and exercise them if required-

• Raise a dispute if you find incorrect information on your CIBIL report

If you find any incorrect information or discrepancy on your CIBIL Report you must raise the same with CIBIL. You can go online and raise the issue by filling the online dispute form. It is very important that you take corrective actions before it is too late and your credit worthiness is affected.

• You deserve a clear explanation on why your loan was rejected

If a lender rejects your loan, it is well within your right to seek an explanation. This will help you understand what the core reason for rejection is and make course corrections accordingly. If the lender cites your CIBIL report and score as the reason for loan rejection then you can request them to provide a copy of your report and score. This exercise will help you prepare better for future loan approvals.

Seeking information and guidance on improving your credit score and report is your right. A healthy CIBIL Report and Score is your key to accessing finance when you most need it.


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

The secret of a good credit score

There are more ways to build a good credit score than just paying your dues on time. A simple yet effective way is to make sure that you do not use the full credit limit available to you. A credit score is a three digit number that is an indication of the creditworthiness of an individual.
Lower utilisation of credit limits is the second most important factor when assessing credit scores. "The total unsecured credit usually also has a bearing on the credit score of the customer. The full utilisation of limits may impact the scores,'' says Mohan Jayaraman, managing director, Experian Credit Bureau, India.
Thus, if you have a credit card, make sure you do not max out the card. For instance, if you have a credit limit of Rs 2 lakh on your card, make sure you do not use the full Rs 2 lakh credit limit. Use the card in moderation.
The idea is that you should not appear as desperate for money. "If a customer maxes the credit card limit, the customer is seen to be in need of credit (may be financial stress) and perhaps may not be able to pay it back in full,'' says Kalpana Pandey, CEO & MD, CRIF HighMark Credit Information Services.
Of course, the best bet for earning a good credit score is to pay your credit card dues, bills and loans on the due dates. "Typically, a credit bureau assigns the highest weight to an individual's past payment record; credit exposure is a close second,'' says Manish Sinha, India country leader, Equifax.
Credit bureaus take into account various factors to assess a customer's borrowing behaviour. The actual weightages differ across the bureaus. "Typically the following rough weightages are considered in making up a bureau credit score: (a) Payment History -- 35% (b) Total credit - 30% (c) Length of credit history - 15% (d) New credit - 10% (e) Demographics - 10%,'' according to Jayaraman.
Other factors that impact the credit score are repayments over last 36 months as also any write-offs or forced settlements. "Credit mix in terms of secured versus unsecured loans, how long customer has been on the credit bureau, and how credit hungry the person is, also influence the credit scores,'' says Pandey.
Thus, even your credit enquiries matter. So don't go shopping for a loan if you not really interested. "Limit your enquiries for loans or credit cards. Searching for new loans/credit cards indicates a greater chance of increased levels of debt burden, thereby increasing the possibility of a default in repayment,'' says Sinha.
It is advisable to use credit cards smartly to one's advantage. For instance, if you don't have a credit history, then it is advisable to take a credit card and use it smartly to build a credit history and to get a score.
But unused cards do not add any value to your scores. Remember, to close any unused credit cards. "Unused cards are viewed as existing possible debt,'' advises Sinha, Equifax.
In case, you have a bad score in the past due to a default or an overdue, you can still change your score. "A credit score is a point of time information and will change if your credit report changes. If the customer settles the overdue loan, then the score should begin improving over time,'' says Pandey.
Your credit score could also be impacted by the borrowings of your friends and relatives if you have signed up as a guarantor.
In India, the Reserve Bank has prescribed the score to range between 300 (lowest) and 900 (highest). ``While the scores themselves may differ across the bureaus, typically a good credit score would be above 700,'' says Jayaraman.


Author : http://www.dnaindia.com/
Reposted By : http://www.credit4loan.com/

RBI to review bank's MCLR: Borrowers may get some relief

While borrowers hoping for another rate cut in today's monetary policy announcement were disappointed but RBI's promise to review how banks have implemented the Marginal Cost Lending Rate (MCLR) framework may bring some cheer for them.

As per RBI's announcement today more monetary transmission to support the revival of growth continues to be critical. "The government's reform measures on small savings rates combined with the Reserve Bank's refinements in the liquidity management framework should help the transmission of past policy rate reductions into lending rates of banks. The Reserve Bank will shortly review the implementation of the Marginal Cost Lending Rate framework by banks."

Many borrowers have felt that their banks have passed on very little of the previous interest rate cuts and their EMIs have not really reduced very much. The review by RBI of how banks have implemented MCLR may put some pressure on banks to pass on the previous rate cuts more fully. One of the aims of introducing MCLR was to try to make banks pass on policy rate cut benefits to borrowers. The new methodology has become effective 1 April 2016.

In its last credit policy review in April this year, the RBI cut the repo rate by 0.25 per cent to 6.5 per cent. The repo rate is the rate at which RBI lends to banks. A cut in the repo rate means lower cost of funds for the banks. Prior to this, the RBI had cut the repo rate by 1.5 per cent over an 18-month period.

The 0.25 per cent cut in repo rate in April taken together with reduction in small savings rate and the introduction of MCLR-linked lending was expected to push banks to cut lending rates. However, despite all this most borrowers feel that they have not received the full benefit of these rate cuts from their lenders - banks.

Author :http://economictimes.indiatimes.com/
Reposted By : http://credit4loan.com/

Points to keep in mind when lending to friends and family

When 32-year-old Sourabh Thanekar's friend desperately sought money from him for a medical emergency in the family , the Ahmednagar-based finance executive did not think twice about parting with Rs 40,000 immediately. Two days later, a shocked Thanekar realised his friend had lied and had taken the money only to buy the latest model of a high-end smartphone.
While Thanekar was unfortunate enough to have been conned by someone he considered a friend, lending money to friends and relatives is common practice in our country. From small hand loans given to meet real and imagined emergencies to large sums meant for setting up business ventures, money changes hands with little or no paperwork and an often misplaced sense of trust.

The open-ended nature of the agreement usually ends in defaults, with money lost and a relationship broken in the process. While it is difficult to say no to requests for money from loved ones, here's how you can handle the situation without burning any bridges.

Before you lend money, ask yourself if you can afford it. Remember that you are unlikely to getthe money back for a long time to come, if at all. Figure out if you can deal with an emergency with whatever you have left. If you are working towards a financial goal such as buying a house or saving for your child's education , consider to wha extent your generosity can set your plans back.

Manoj Kalwar, 31
Lent Rs 40,000 to a friend who claimed a medical emergency and instead blew the money on partying.
"Today, I cross-check with common friends and relatives before giving anything to anyone."
Says Tarun Birani, Founder and CEO, TBNG Capital Advisors: "Keep 5% of your savings in liquid funds to help dear ones in the event of a financial emergency." Allocating a fixed portion of your money to cater to such situations won't affect your other goals. Even if you know the borrower well, do a due diligence. Don't accept their reasons for needing the money at face value, like Thanekar did. Mumbai-based IT engineer Manoj Kalwar found himself in a similar situation.

Hounded by a friend who wanted money for a family member's medical treatment, Kalwar lent him Rs 40,000 over three months in 2014. Later he learnt that his friend had taken Rs 1 lakh on the same pretext for some others as well. Only, no one ill in his family was ill. He had blown the money on luxuries.

Not the one to give up, Kalwar pursued his friend for six months and recovered the amount. "I keep my emotions aside while lending money now. I also cross-check with common friends and relatives before I lend," Kalwar says.

Hounded by a friend who wanted money for a family member's medical treatment, Kalwar lent him Rs 40,000 over three months in 2014. Later he learnt that his friend had taken Rs 1 lakh on the same pretext for some others as well. Only, no one ill in his family was ill. He had blown the money on luxuries. Not the one to give up, Kalwar pursued his friend for six months and recovered the amount. "I keep my emotions aside while lending money now. I also cross-check with common friends and relatives before I lend," Kalwar says.

Shounak Potdar, 31
Gave Rs 50,000 to a friend as downpayment for a car.
"I now discuss the repayment schedule so that the borrower understands that I need the money in future."

According to Viral Bhatt, Founder and Advisor, Money Mantra, compulsive borrowers are to be avoided. "Learn to turn down requests after lending money a couple of times. Also, politely ask them to first repay the outstanding amount when they approach you for new loans," he says.
Another factor to consider is how close you are to the person seeking the loan . Sapna Tiwari, Chief Financial Planner, Rupeewiz, says, "Ask yourself how long you have known the person and how often you interact. It will help you decide whether the person is really a close friend or an acquaintance."
The reasons for borrowing can appear pressing sometimes. IT professional Koyel Ghosh found herself helping her friend, who had lost a job, pay off an education loan EMI of Rs 25,000. She never got the money back. "Check the financial status of the borrower before you lend," she says today.

Koyel Ghosh, 30
Ended up paying an EMI of Rs 25,000 for a friend who did not have a job. She never got the money back.
"It's important to check the financial status of the borrower before you lend."

A common problem faced by most lenders is the inability to ask for their money back. Pune-based engineer Shaunak Potdar lent a friend Rs 50,000 as down-payment for a car. He never saw the money again. When the transaction is among friends and family, the borrower rarely feels a sense of urgency to repay the loan. As there is no deadline, repayment becomes last priority. There is no late payment fee, no stiff interest rates or penalties. The borrower has no motivation to take the repayment seriously. "When I lend today, I politely discuss the repayment schedule so that the borrower understands that I need the money in future," says Potdar.
When you are approached for money, don't part with it immediately. Buy time to verify the need. During that time, the borrower could approach others for help and get it, bringing down the quantum of loan he needs from you. Even then, do not give the entire amount sought. Rohit Shah, CEO of financial advisory firm Getting You Rich, says "Give 30% to 40% of the requested amount. That way, in case the borrower fails to repay, you will not be left with a massive bad debt."
Sometimes a lender unwittingly plays into the hands of compulsive borrowers. For instance, pleas for loans from distant relatives and acquaintances. Ankur Kapur, Founder, Ankur Kapur Advisory, explains, "The reason why the borrower is knocking on your door could be your lavish lifestyle and habit of discussing your financial status in social gatherings." Word spreads quickly and unscrupulous elements try to cash in.

Rohan Dhulla, 35
Loaned Rs 2.5 lakh to a friend to start a new business.
"Now I study the feasibility of a business plan before lending money for new ventures."

When distant relatives or colleagues seek financial help, try to resolve the issue for them rather than helping them to take an easy way out with a loan from you. "Advise them to take loans against fixed deposits or gold at low interest rates from NBFCs. Also explain the importance of contingency funds," says Kapur. You can play mentor to a colleague who needs money. "Ask your colleague to approach HR for advance salary if the amount required is large," says Shah.

Adds Tiwari, "If there is no financial awareness among colleagues, arrange a workshop on financial planning for them." In this age of startups, seeking money from relatives to start a venture is common. This not only helps the borrower avoid high interest bank loans, but also serves as a safety net against harsh penalties, should the business fail, making repayment difficult.

In 2014, a friend of Mumbai-based entrepreneur Rohan Dhulla approached him for Rs 2.5 lakh to set up a business. Dhulla agreed to lend. An agreement was drawn up, whereby Dhulla got 15% stake in the company, and the loan had to be returned within two years with 10% interest. In the first five months, Dhulla got back Rs 55,000 before the venture sank. Now he is contemplating buying out his friend's share and getting the business back on track.

If a friend or relative asks you to be guarantor when they seek bank loans, don't agree unless you are sure about the borrower's ability to repay. If the borrower defaults, the bank will recover the amount from you.

If you must lend
1. Draw up a written agreement. Give the document legal sanction by getting it notarised.

2. Work out a repayment schedule. Mention a time frame within which you want the money back and how much needs to be returned monthly.

3. Remind the borrower politely if repayment schedule is not followed. If the problem is chronic, help borrower resolve money issues by guiding him.

4. Don't hesitate to charge interest. It would obviously be less than what is charged by banks and credit card companies.

5. If the relationship is really important, treat the loan as a gift. Lend only an amount you can write off.

Author : http://economictimes.indiatimes.com/

Reposted By : http://credit4loan.com/