NO CREDIT HISTORY = NO LOANS !!

Afraid of owing a credit card after you heard of frauds taking place ?Fear of paying interest on borrowings is not letting you go for a loan ?

If yes, then it may be time to rethink. The next time you go knocking at the bank's door for a quick processing of loan, you may face a rejection or a delay. Banks and non-banking finance institutions are not too keen on lending to individuals whose payment track record remains a mystery.

Let's understand how. If you haven't taken a loan or a credit card in the past, then there is no credit history that is established and your credit score is in the negative (-1). Banks deals with caution, indulging in higher due diligence and hence would take a longer time to clear your loan application.

Bankers say that they prefer bulky credit records as opposed to "No Bureau Hit" cases. So a person having a 0 credit score would have a history of less than six months, while one without any loan records would have a score of -1.

If you are foreseeing a need for a home, car, education or a personal loan in future, it is time you start the preparation with a credit card. About two to three years of repayment track record, gives banks higher confidence in lending than a blank record.

for more details contact us at www.cibilconsultants.com

KNOW YOUR CREDIT CARD BETTER WITH SIMPLIFIED TERMS !!

It feels great to buy things with just a swipe but if you do not understand the credit card terminology, your troubles will begin as soon as your credit card statement arrives, as you get loaded with a number of terms that may sound alien to you!
No need to worry as we can help u understand these terms so that you can handle your credit responsibly and it will help you to maintain good cibil score.
Here is the description of various terms :-

Credit limit:

The credit limit is the maximum amount of money that you can swipe/borrow on your credit card. This is a prestipulated amount that is fixed by the card issuer. How much of the credit limit you utilise also has a large bearing on your Cibil score. Ideally the utilisation rate on your card should not exceed 30% of the total limit that has been allotted to you. If you display good credit behaviour your credit limit may be enhanced by the lender, but do not use it as an excuse to become reckless on your spend. Reckless spending may lead you to penalties and as has been noted in some cases, even account suspension by the bank.

Cash Limit:

The cash limit on your credit card should not be confused with the credit limit. The cash limit is the maximum amount of cash that you can withdraw from the ATM using your credit card. Issuers of credit cards often allow cardholders to obtain a maximum amount of cash with their cards where the cash limit is usually a percent of the overall credit limit. This feature makes credit cards similar to bank debit cards. However, the striking difference between debit and credit cards cash withdrawal is that in the case of debit cards the cash belongs to you and is  at your disposal whereas  in case of credit cards, a very high rate of interest is applicable from the day the cash is withdrawn to the day it is repaid.Therefore, cash withdrawal through credit cards should be made only in emergency situations.

Annual percentage rate (APR):

The annual percentage rate (APR) is the interest rate charged on outstanding credit card balances outside the due date. APR is expressed in percent per annum. A common misunderstanding about credit cards is that interest is charged on everything you swipe/borrow through your card. However, the truth is you will be charged for keeping an outstanding balance on your account over the interest-free grace period, which is usually 30-45 days from the payment due date (differs from bank to bank).So effectively if you pay the entire outstanding amount within the billing cycle,  you will never have to pay interest on the money you use on credit.

Billing cycle:

The billing cycle is the time between the credit card bill statements. The billing cycle and credit card statement dates are confirmed to you at the time of the issue of your card by the card issuer. The due date remains the same each month.  Since you already know the due date, it gives you the headroom  to plan your credit in a smarter way and avoid making late payments.

Minimum Amount Due:

This is usually a small percent (usually 2-5%) of your total amount outstanding. This is the minimum amount a cardholder should pay within the pay-by date to keep the account from going into default.

Due date:

The due date is the date by which you must atleast pay the 'minimum amount due' in the case where you are not able to pay your bill in full. Paying outside the due date will cost you late fee charges as well as get reported on your Cibil report as a negative mark. Some card issuers allow you to set your convenient date for card payment and others set a standard due date. For payments whose due dates fall on weekends or holidays, the due date would be the next business day.

Charge-back:

Sometimes during online transactions, purchases may not go through for various reasons - including the transaction being non-compliant with the merchant account rules or a dispute by cardholders. In such cases, the amount charged previously on the credit card is credited back to the card holder through a reverse (credit) entry. This is called a charge-back.

Late payment fee:

A late payment fee is charged when you miss paying the minimum amount due by the payment due date. Late payments may affect your Cibil score negatively even if your entire outstanding balance is paid in full at a later date.

Balance transfer:

It is the process of moving outstanding credit card balance from one card issuer to another, usually from a high APR issuer to a low APR issuer in order to reduce the interest charges for the cardholder. However, balance transfer also involves payment of fees to the low APR issuer.

Cash back:

It refers to rewards program on your card that return to you (by crediting your card account) a percentage of the total amount spent on your credit card over a specific period of time. This feature can be beneficial only if you use your credit card regularly and pay the entire outstanding amount on your bills every month.

CVV (Card Verification Value):

It is a 3 digit number printed on the back of the card. It stands for "card verification value" code and helps verify the legitimacy of a credit card. The CVV number is essential while making payments online. Since this is sensitive information you must never reveal this number to anyone including your Financial Planner to  the customer care executive at the bank.

Chip-and-PIN cards:

These cards use computer chips to store and process information instead of, or in addition to a magnetic stripe. A personal identification number (PIN) is required at the point of sale for the card payment to go through.Similar to CVV, this is also classified information that you should not share with anyone.

source-secondary

EXCLUSIONS FROM CREDIT REPORT !!

Credit report is a detailed report of a person's credit history. Credit reporting agencies collect information from credit providers who subscribe to their services some of the details which are not shown in your credit report are :

1. Credit past of spouse

Your spouse's credit history is not mentioned in your Cibil report. Even though banks offer you the option of taking a joint loan to increase eligibility, your spouse's credit behaviour is not considered in your Cibil report.

2. utility bills payments

Utility bills would means bills including electric bills, water, society charges, telephone bills etc. Your Cibil report does not track your record in payment of any of these bills.

3. Your income

While the Income Tax officers are certainly interested in all your sources of income, the Cibil report assessment companies like CIBIL, Experian etc do not have the slightest inclination too pursue this information. Hence your income has no mention in the Cibil report. It is concerned about your borrowing and repayments.

4. Expenditure data

Expenditure on luxury car or a large charitable donation, the Cibil report does not distinguish amongst your spending. It is not taking a judgement call on your expenditure as long as your repayments on loan and credit cards are made on time.

5. Interest rate 

Your Cibil report does not have data about the interest rate that you pay on your loans or credit card. Infact it is the information in your Cibil report that affects your the interest rate at which the bank will be willing to lend to you.

MYTH VS TRUTH…CIBIL

Playing a critical role in India’s financial system, Credit Information Bureau (India) Limited or CIBIL is a Credit Information Company (CIC) founded in August 2000. Whether it is to help loan providers manage their business or help consumers secure credit faster and at better terms, the use of CIBIL’s products have led to a massive change in the way credit life cycle is managed by both loan providers and consumers.

MYTH- Having my name with CIBIL means that I am a defaulter.

FACT – Every bank or financial institution, which provides credit facility, submits a detailed report of all individuals on a monthly basis. Thus if you have taken a loan, the CIBIL will have your repayment data with it. Repaying your previous loans on time will be taken as a good sign and will instil loan providers to sanction further loans quickly.

MYTH- My assets, income, investments; all have an impact on my credit score.

FACT – The CIR (Credit Information Report) contains details related to your loan and credit card. It shows how good or bad you are when it comes to repayment. Your bank account status, investment in equity or other financial tools, details of real estate or other assets has nothing to do with CIBIL.

CIBIL only evaluates the loan history and provides a score based on it. At a later stage it is the bank which may enquire about your income proofs or assets for collateral security.

MYTH- CIBIL helps banks & credit institutions only.

FACT – It helps banks and credit institutions in making financially sound lending decision. Customers too are benefited because of:

Faster loan approvals

Better terms on their loans

It helps in maintaining financial discipline

In a nutshell, CIBIL will help you understand how a lender evaluates your loan application so that you can apply only when your chances of an approval are high and hence, avoid the unnecessary embarrassment of a loan rejection.

MYTH- Using cash is always better than credit cards or loans.

FACT – Making purchases using a credit card and clearing them off by due date gives you free credit time. Carrying too much cash to the market is a risky preposition. However, it is advisable to use cash if you have a tendency to overspend on your credit card.

Alternatively, if you have good financial discipline, credit cards help you build credit history and allow you to take advantage of reward programmes such as fuel cash back, air miles and a host of other giveaways.

It is better to use credit (loan or credit card) than cash when you have never availed any credit till date and want to build a credit history. Having a credit history enables a lender to assess your credit-repayment capabilities by determining whether you have managed your credit responsibly. Your credit history enables the bank to assess your ability to service any additional debt that you may require. If you don’t have any loan or credit card and solely rely on cash or a debit card then the bank does not have any reference to check your payment track record and will solely rely on other factors such as income and demographics to evaluate your loan application. Having a good credit history will help in faster loan disbursals and may be even better terms.

MYTH- A low score means I will never get a loan or credit card.

FACT – Not necessarily, every financial institution has its own lending score bandwidth.  You may get a loan but the interest rates and charges may be higher as the perceived risk associated with a low credit score is higher.

MYTH- Repeated checking of own credit report will bring the credit score down.

FACT – Whenever your credit report is accessed by banks, this reflects as an “Enquiry” on your credit report. An enquiry indicates that you are seeking new credit. However, when you check your own credit report directly for CIBIL this “Enquiry” will not reflect in the credit report and has absolutely no impact on your credit score. It is a good practice to review your credit report periodically.

MYTH- CIBIL has the authority to make corrections in my credit report directly.

FACT – CIBIL is not authorised to make any changes in your report directly. Any change that needs to be carried out has to be initiated/approved by the respective bank & credit institution and only then can CIBIL make any changes to your CIR. However, CIBIL helps facilitate this process.

Source:Secondary

source your credit score. However, if you have missed an EMI or credit card payment (because of the bounced cheque) it will have an impact on your credit score.

CREDIT SCORE – NECESSARY FOR LOANS !!

Get Your own Credit Report without lowering Your Cibil Score

If you apply for a loan these days, your credit score is one of the first things to be checked by the bank. This credit score is a ‘snapshot’ view of how credit worthy you are as an individual, i.e. do you pay your credit card bills and EMIs, if any on time; do you max out your cards; in essence how financially well-disciplined you are.

Your credit score thus becomes very important as it indicates to the bank to which you have applied for a loan, how safe is it to give you one.

So how does one ensure that their credit score is a good number?

• First of all, you must have a credit history, which will happen only if you have a credit card and have taken some loan or the other in the past. So if you have never taken a loan before and don’t use your card much, your credit score will not reflect anything.
• Make your loan repayments on time; always pay your EMIs on time.
• Pay your credit card bill well in time.
• Minimum balance due is a trap – don’t fall for it. You only avoid late fees by making such a payment. Interest is still charged and heftily at that.
• Having more than 2 or 3 cards is detrimental to your credit score. While this may give you a higher credit limit, it shows a dependence on credit and you may not get new loans easily.
• Don’t MAX out your cards. You should not use your cards more than 25 to 30% of the card limit. And use all your cards equally.
• If there is an issue with a credit card/bank about some outstanding loan or balances that you couldn’t pay, don’t go for ‘settlement’ by paying only part of the amount, as this will reflect badly on your credit score upto even 7 years. It is better to make a payment in full for all such dues.

• Any number of secured loans like a car loan or a home loan is fine but more the number of unsecured loans like personal and credit card loans, lower will be your credit score.

CHECK SCORE BEFORE YOU APPLY FOR LOAN !!

Can your credit report hamper your chances of landing a job?

Make that loan or card payment on time as defaults could hamper your chances of getting a job. A financial credibility check is just one component of the background screening report that employers could ask for.

Can your credit report hamper your chances of landing a job? The answer is yes for many companies, especially those in the financial and insurance sectors who are hiring candidates only after conducting a thorough financial health check of employees they want to hire. The credit scores of individuals are an indicator of their personal integrity and honesty.

Many firms share high-risk information about stocks and shares etc with their employees and therefore wish to get a fair idea about the risks associated with the person they intend hiring.

A financial credibility check is just one component of the background screening report that employers could ask for. It is part of the multiple checks conducted by companies such as address verification, educational background, criminal record etc.

According to Navin Chugh, senior vice president and managing director, First Advantage, India, a background screening company, “more and more companies are using credit reports as a screening tool to evaluate candidates.”

With a drastic rise in white collar crimes and growing financial fraud in India, from cash and information theft, money laundering, and the sale of private and valuable customer credit card data, it is becoming imperative for firms to mitigate financial and employee flight risks. Many multinational and domestic banks are adding credit health checks to the standard scope of pre-employment checks.

The First Advantage report is based on the credit report from the Credit Information Bureau India Limited (CIBIL) report. The financial check report it is not just based on the credit score; it’s an in-depth analysis of the information embedded in the score, and hence gives a holistic view of the candidate’s financial background. It takes into consideration the behavioural indicators based on the recent credit history, for an individual or a firm, and provides valuable insights into financial risk, credit risk and credibility risk.

So, how is the information shared? Employers cannot access an applicant’s credit report directly from CIBIL. “The Credit Information Companies (Regulations) Act 2005 permits us to share information only with credit institutions, specified users and with individual consumers on their request. Individuals are accessing their own credit report and score from CIBIL. If companies ask prospective employees to submit their own credit report, then they will have to access it from CIBIL and submit the same to the company,” says Harshala Chandorkar, senior vice president- consumer relations, communication & CIC Compliance, CIBIL.

“When hiring at the CEO and leadership level, from a sourcing channel (not from a known network) or through references, you need to be sure of the financial credibility of the individual, as their jobs would involve taking daily financial decisions. Financial credibility checks provide critical inputs on the individual’s self-discipline, his/her attention to detail besides on the integrity of an individual,” adds Raj Reddy, SVP, chief HR officer, CSS Corp.

All about credit checks

For whom are credit checks conducted?

These checks are conducted for banks and financial institutions, telecom, utility companies, BPOs and for companies that have a large network of vendors and service partners.

Why are they conducted?

They are conducted to assess an employee’s credibility and financial history and risks thereof, to assess his likely future behaviour through his or her repayment history.

How are these checks conducted?

The applicant provides a credit report (if asked) or verification companies procure the report, in this case the CIBIL report of the candidate they intend hiring. The credit rating is then analysed and the report sent to the company.

Don’t Ignore your cibil score….Talk to us once..

LOANS AND THEIR REJECTION

LOANS

As per financial meaning, loan is a debt provided by one entity (Banks, NBFC, FI's, other organizations or individual) to another entity at an interest rate Usually, there is a predetermined time for repaying a loan, and generally the lender has to bear the risk that the borrower may not repay a loan. There are various types of loans and they can be classified as secured, unsecured, demand, subsidized and  concessional. Loans can be personal (eg. car loan, mortgage loan, credit cards etc) or commercial (commercial mortgages and corporate bonds).

WHY ARE LOANS REJECTED ??

Reasons for loan rejection can be many because when you apply for a loan, banks judge your ability to repay the loan. They consider various factors such as age, income, job stability etc. but major impact is bought through your credit report, which shows your creditworthiness and thus loan turns down if your CIBIL report is not good. Some of the major reasons can be as follows :

1. Defaulter's list contains your residential address: If you live at a same address as someone who has defaulted on a loan payment or credit card dues and hence been reported to CIBIL, banks probably will have the address stored in their defaulters' database. In such a case, the probability of your loan application to be rejected becomes high.The reason being your residential address will automatically match with the one on the defaulters' list.
2. Accumulated dues of credit card or loan repayments: You have been accumulating credit card dues over the years resulting in a huge pending payment or it could be that you have missed up on a few EMIs.Due to this your name would have been reported to CIBIL. Banks can reject your loan application due to poor track record of repayments.
3. More loans less income: If you are indulged in too many loans already, then your income minus the ongoing credit repayments will be considered as your actual earning. If banks will not be satisfied with your capability to repay another loan, then your loan will be rejected.
4. Loan guarantee: When you become someone's loan guarantor, you must assure the applicant for whom you are taking up the guarantee. Whether he has the ability to repay the loan without any strain ? Be cautious because if they fail to repay for any reason you will be accountable to repay the loan on their behalf. In such circumstances, if you have been unable to repay their loan, your name will be posted in defaulter's list of CIBIL and hence resulting in bad credit score for you.
5. Co-applicant has a poor CIBIL record: It is important for all the loan applicants to have a good credit repayment record. If you have a clean record but your co-applicant has some bad track record, then your loan application may be rejected.
6. Instability in job: job stability is considered as a benchmark for income generation and thus depicts the borrowers repayment ability. where a reputed company's future appears unstable, the bank can deny the loan.
7. joint loan: Usually joint loan is not preferred by banks when brother sister or friend wants to be co-applicants. However, you can choose to opt for your parents as co-applicants for the loan.
8. Prior rejection of loan application: Once a loan application is rejected, it gets recorded with CIBIL and thus can turn up as an evidence for a bad record ans banks can again reject your loan application.

Inaccuracies that can occur on a CIR/CIBIL Report…

Inaccuracies that can occur on a CIR/CIBIL Report…

It is important for individuals to understand the various types of mistakes that can occur on a CIR because unnoticed inaccuracies can often result in reduced chances of a loan approval. Some of these are:

• Inaccurate current balance or amount overdue Credit Institutions generally submit data to CIBIL within a span of 30-45 days and if you happen to purchase your CIR within 45 days of your last payment of dues, it may not be updated. This leads to reflection of inaccurate current balance or amount overdue in your CIR. However, if the ‘Date Reported’ (date on which data is submitted by that lender) associated with that account is older than 2 months, and the payment made is still not reflecting then you can raise a dispute by clicking here.
• Incorrect personal details Credit Institutions submit details of your credit account along with your personal information such as name, address, date of birth, PAN etc. CIBIL then creates your complete credit profile on the basis of these details. Hence it is important to update your Credit Institution everytime there is a change in your personal information as incorrect personal details may lead to a wrong CIR being generated.
• Ownership If either some of the personal details or one or more accounts / inquiries on your CIR does not belong to you.

Click here to initiate the dispute resolution process

Hello World

This is a blog site from CIBILConsultants. 

Our motto of starting this blog site is to share maximum knowledge about financial market, Industries and how it impacts your life….. This blog site would contain various articles from primary & secondary sources…

Hope you would like our posts… and share your comments………….

Now here goes our first Post…

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IMPORTANCE OF CIBIL REPORT AND WAYS TO CHECK IT

The loan market has changed a lot in the past 5 years. It is now extremely important for a borrower to keep tabs on the credit report issued by a widely accepted credit reporting agency like CIBIL (Credit Information Bureau (India) Ltd) to get a loan. It is now mandatory to maintain a good credit score for getting all types of borrowings from banks, whether it is a home loan, car loan, personal loan or business loan.

What is a Credit Score by CIBIL?

A CIBIL credit score can be explained as a 3 digit numeric outline of your credit history. The score is calculated by taking into account your complete borrowing details, history, repayment pattern and default instances (if any) etc. It is scaled in a range of 300 to 900 points. The higher the points i.e. close to 900, better will be the chances to get the loan from a lender. A good score is important to get a loan with ease. Lower score (close to 300) indicates a discrepancy for borrowings in the past.

Why CIBIL credit report is important?
A CIBIL credit report contains all the details pertaining to your borrowing history and its repayment discipline.It contains your past and present credit history.Banks and FI’s allow loan to a borrower on the basis of CIBIL credit report. A good credit score helps borrowers to get loans easily from banks.You can inculcate financial discipline by analyzing the credit report.

Now a days in order to increase financial discipline, govt is also promoting cibil a lot. Cibil report has become an important tool to assess your credibility. Apart from banks, these days it is extensively used by telephone companies, NBFC, HFC etc to assess your financial intention

How to analyse Credit Score?
CIBIL’s credit score ranges from 300 to 900 points. A higher score close to 900 reflects good credit history i.e. lesser defaults in payment, no over leverage and disciplined repayment. A lower score close to 300 reflects bad credit history. Banks prefer lending to borrowers with high scores and 750 to 800+ points is considered as a good score.

A lower Credit Score always lead to denial of your applications whether its a bank /your prospective employer.

What affects the Credit score?

Following are some points that can affect your credit score:-
1)Cheque bounce in the past
2)Irregularity in Loan repayment
3)Default in repayment of Credit card bill
4)Many unsecured loans such as personal loan.
5)Multiple applications for an unsecured loan can also be negative for credit score
6)Default as a guarantor

Is CIBIL Repairable???

Ans is yes…But its just like your health… As you cannot improve your health in one day ….it also take some time ….depending upon severity of financial health issues. But yes by following a disciplined  financial health regime.
Finally

Your loan account may have dues of partial amount only, but it can threat your plan to raise bigger loans. A bad credit report is not acceptable to any of the lending institution while you apply for a loan. It is a very tedious and time taking process to improve the credit score once it is distressed. CIBIL is expected to launch a real time update of credit score through an SMS alert in coming days, it would further help you to keep a check on your credit profile. It is very important to say “no” to products like credit cards and personal loans, unless you really need them.