How to fight Credit card fraud?

Regulatory policy wonks in India are engaged in intense combat — this time, over whether the Reserve Bank of India (RBI) has gone overboard with seeking to secure online and offline credit card payments. The RBI has made it mandatory to validate offline credit card payments in India with a 'PIN' (personal identification number) and online Indian payments with an 'OTP' (one-time password) to be generated by SMS on the mobile phone.

Thanks to these measures, India has one of the most secure credit card and online payment systems in the world. Some have attacked the security measures as being retrograde. The main charge is that the two-stage validation process wastes time. The argument is that the benefits gained from the security measure do not out-weigh the cost of the additional time spent. Moreover, since the RBI does not regulate foreign payment gateways, it has exempted them from the security requirement — so, payments made even from India, through foreign payment gateways, do not have to comply with this security measure.

What this means for the consumer is that purchase of a book on Amazon.com would not require an OTP while purchase of the same book on Amazon.in would require it. Both sites enable storing your credit card information (if you are willing to trust their servers with your data). On Amazon.in, you need to enter your CVV/CSC number ("card verification value" or "card security code") — a number physically pre-printed on your card. Once your transaction is authenticated, you also have to get your OTP by sending a text message to your credit card issuer. An OTP gets sent to your phone within seconds of the SMS request and is valid for a single use, to be made within 30 minutes.

On Amazon.com, since the security feature is not mandatory, if your credit card data is stored on its server, you can complete your purchase with a single click (popularly branded as "1-Click Ordering"). Therefore, does it take longer to shop on an Indian site? Yes. Is that an unbearable time burden? No. And, does it make India a more secure place for electronic payments? Indeed.

According to The Nilson Report, a payments industry trade journal, the United States, accounts for nearly 47 per cent of the global credit card fraud even while contributing to just 23 per cent of the volume of global credit card payments. On the other hand, media reports quote Visa International as stating that India has the lowest online card fraud incidence. Yet, the size of credit card frauds is growing worldwide, and does pose a threat to confidence in the electronic payments system.

As India brings more of her people into the banking and electronic payment system, the scope for fraud too would increase. There is also the culture of general laxity with security that needs to be contended with. For example, after the RBI introduced the mandatory requirement to enter your PIN into the card reader in the store to effect an offline credit card payment, many restaurants did not deploy wireless card readers. Waiters would simply ask the guest for the PIN and many, lazy to get up from their tables, would gladly oblige. This is pretty much how most passwords are compromised — simply by asking.

Against this backdrop, the benefit of better security in online and offline credit card payments can outweigh the cost of spending a few more seconds getting an OTP on sms, or entering the PIN into a card reader. In a nation that has poor banking penetration and a propensity to stack currency notes under the mattress for safe-keeping, one blaring slanging match in a prime-time television debate can be enough to destroy confidence in the banking system.

On the other hand, India, home to 16 per cent of the global population, would do well to innovate and lead the change in how payments are made secure worldwide. After all, one should remember that even while shares of Chinese online retailer Alibaba.com got a fancy valuation for listing shares in the United States, Indian online retail companies such as Flipkart and Snapdeal snapped up spectacular valuations and attracted serious investments despite the payment security measures.

To know more about Identity Theft visit: www.cibilconsultants.com

Source: Secondary

Better Lending Rates if you have better credit score !

As per The Economic Times report more and more prospective loan borrowers are seeking their credit report from authorized agencies. The sentiment has prevailed as consumers are understanding the fact that a better credit history enables them to negotiate better loan rates with the lending institution. Also, the interest in getting the credit score on part of the prospective customer is said to have a direct co-relation with the penetration of banking in a partial area. Confirming the stance MD of Experian Credit Information of India was quoted in The Economic Times report saying "Consumer interest in going for credit scores is directly co-related to banking penetration in a particular geography."

Institutions rendering credit history report come up with the report and hence the creditworthiness of individuals with no prior borrowing record by analyzing and evaluating credit card transactions. Of late, such institutions suggested an increase in applicants from Tier-II cities who were keen on getting their credit score. Senior Vice-President Consumer Relations of CIBIL was quoted in one of the media reports saying " We have seen a significant increase in consumers reaching out for scores and reports in metros as well as tier-II and tier-III cities."

The product unveiled by Credit Information Bureau of India Ltd. (CIBIL) that assesses the credit history enables loan borrowers to negotiate lending rates with financial institutions. With improved financial awareness and levels of financial literacy in tier-II cities at par with the metros (as adjudged by the consumer eductaion programme of CIBIL) consumers are increasingly comprehending the importance of good credit history and related credit score in realizing better interest rates. And further augmentation of such awareness level is likely to beneficial for both the consumers and financial services industry in the near future as more and more prospective loan borrowers will work towards maintaining good credit history.

How does good credit history allows you to realize competitive lending rates?

As per the RBI, differential pricing mode should be opted by the bank and for it some financial institutions are giving due weightage to the credit score parameter for taking loan disbursal decisions. So, until late while for a good credit score you were provided with some of the Benefits such as waiver on processing charges, banks now allow you to negotiate on interest rates depending on your credit record.

So, good credit history and credit score fetches competitive interest rate for the loan borrower based on the negotiation capability of the borrower. Further, the extent of rebate could be 25 basis points that can enable an individual to save considerably over the years.

source-secondary

Punching card PIN at shops may prove to be risky

As per the guidelines of the Reserve Bank of India (RBI), effective from December 1. The debit card holders will have to punch in their personal identification number (PIN) every time at Point-of-Sales (PoS) at merchant outlets to minimize frauds.

But many bankers as well as merchants in the city pointed out that this is far from fool-proof and the system has an alleged drawback of lack of privacy.

First, the debit card holders will have to enter the PIN of their ATM cards in the swipe machine and then sign on the transaction slip, for any purchase at any shop.

This may prove to be risky, as thieves may misuse the system by keeping an eye during the swipe, memorize the PIN, clone the card to easily withdraw large sums of cash from any nearby ATM .

But it has been found that none of the merchant outlets in the city have made arrangement for privacy of the customers while punching the ATM PIN while purchasing goods.

Glenn Serrao, the son of a hotel owner in sector 17, Vashi, said, "Debit and credit cards are accepted only on the first floor of our restaurant premises. Around 80% of our regular customers do not mind revealing their PIN to the waiters, who in turn, swipe the cards to pay the bill and issue the payment slip for the customer's signature. If any customer demands privacy to punch their PIN, then we will surely provide that service."

Pradeep Kumar, the manager of IDBI bank, Vashi branch said, "Logically, due to lack of privacy at shops, there is a possibility of misuse of the system. Now, to resolve this alleged lacunae in the customer service, our bank will suggest to our product team that the shops need to provide a secluded place for the ATM card swipe machine which should offer adequate privacy for the customer while punching his/her PIN." The product team will then forward the suggestion to the RBI authorities for corrective measures in the guidelines.

"Anyone who thinks that this system can be misused by miscreants, should come forward with their suggestions on the RBI's website, as well," added Kumar.

Susaant Patnaaik (41), an LIC consultant said, "The need for privacy to use one's debit or even credit card is a must. The swipe machine should be kept separately near the establishment manager's counter and be hidden by a partition to prevent onlookers from reading the secret digits being punched by the customer. "

Patnaaik also said that the banks have warned their ATM debit card holders not to read out or enter their PIN when someone is standing behind them.

"One must never swipe in front of any onlookers to ensure the safety of their card," he added.

Learn more about identity theft at www.cibilconsultants.com

Source: Secondary

"Need to create awareness among consumers regarding credit score", says RBI

The Reserve Bank(RBI) of India has urged credit information companies (CICs) to create awareness among consumers about credit behavior and credit scores to manage their finances better.

 

Delivering the keynote address at the fourth annual CIBIL Credit Information Conference here on Tuesday, J. Sadakkadulla, Regional Director (Chennai), RBI, said: “The key deliverable for CICs in the coming days would be to facilitate a smoother credit decision-making process and, thereby, bring down the cost of financial transactions and credit inter mediation in the financial system for the benefit of the masses.”

 

Observing that credit information has enabled faster access to credit from financial institutions, he said, “India stands at a decent 28th rank amongst 189 countries on the ease of getting credit and has the best ranking amongst the BRICS economies — China is at 73, both Russia and Brazil are at rank 109.

 

However, he pointed out that though India has a large workforce with rising disposable incomes, the extent of credit penetration is still quite low compared to global standards. One of the reasons for this is the information asymmetry between the lender and the borrower. Emphasizing the need for a genuine database, he urged scheduled commercial banks, non-banking finance companies and housing finance companies to submit accurate data on regular basis. “The use of CIC inputs during the credit appraisal process at lending institutions can only be effective if the data is up-to-date,” Sadakkadulla said.

Source: Secondary

How banks can goof-up with your credit report?

The prudent see danger and take refuge, but the simple keep going and pay the penalty, goes an axiom. This applies to everything in your life, but more so in your money life because here you should learn from others’ mistakes.

For example, take the goof-ups banks make on your credit cards, bank lockers, ESC and the like. If you are wise, you would learn from others’ experiences and ensure that you don’t face a similar situation. Tracking your finances, especially loans regularly is imperative, especially since nowadays credit reports and credit score matter more than ever before. So, what can go wrong between a loan and a credit report? To know more read on.

Picture this: Suppose you have a loan with bank A. You repay regularly until it is completely paid off. A few years later, you approach bank B for another loan. But to your shock, you are denied one on the basis of your credit report that shows your earlier loan is still outstanding. If you thought this is just an imagination, it is not.

According to an RBI document, the customer in question investigated further and found out that even though he had repaid his loan to Bank A, the bank had not cleared his credit report for several years. Hence, he was unable to get a better deal with the new bank. He then requested bank A to update his CIBIL credit report. However, the bank said it had already done the needful. After several requests, he still saw that his credit report did not show the latest update. Finally, he approached the banking ombudsman’s office of the RBI.

The banking ombudsman found that the bank had failed to get the CIBIL database updated for the customer even after four years after the complainant had repaid the loan. “When the bank finally got his CIBIL credit report rectified it did so without compensating the customer. The banking ombudsman observed that by not updating CIBIL database in time, the bank had violated RBI/Banking Codes and Standards Board of India guidelines and therefore passed an award directing the bank to pay an amount of  Rs 5,000 as token compensation towards cost of pursuing the complaint,” said the RBI document.
What we can learn: There are a few things we can learn from this example. For one, do not think that your bank will automatically update your CIBIL credit score, though technical they have too, above example shows, they might just miss doing so. Ensure that you review your credit report a few months after you close the loan to check if the bank has updated the latest information about your loan account to the credit bureau or not.

Another important thing to keep in mind is that the loan is not closed with just paying your last EMI. You need to tie a few loose ends to close the loan properly, for example get a no-dues-pending letter once the loan is paid off. Tracking your credit report once a year, is a good idea.

Track your credit score and obtain credit report from www.cibilconsultants.com

Source: Secondary

Obsessed with credit score ?

"Recently, I received my credit score from Credit Information Bureau India Limited (CIBIL). Despite paying all my loans and credit card dues on time, my score was only 805. My friend, who has a similar history, has a credit score of 820. I want to know how to increase my credit score."

The number of such queries on our website has increased significantly, especially after CIBIL ran a series of television advertisements, highlighting the importance of the CIBIL score with the tagline, "Aage badhne ke liye naam nahi, number zaroori hai."

Thanks to the increasing awareness and television advertisements, most people are aware about credit scores provided by CIBIL, based on its analysis of the repayment information from lenders. It uses the information to arrive at a score between 300 and 900. The score is an indication for banks - the higher the score, the lower the chances of a default on a credit facility (loan or credit card). In a number of developed economies, including the US, every 10-point increase in the credit score might lead to significant variation in the interest rate.

As such, if the person querying the score was in the US, his concern about a 15-point difference between his credit score and that of his friend's would have been justified, as it might have meant a 0.25 per cent difference in a 30-year home loan annually. In India, however, we have seen credit scores are essentially used to eliminate applicants, rather than provide them preferential terms. So, you should worry if your score is below 750, as you might not get a loan in this case. But this doesn't mean if the score is more than 750, you would surely get a loan; a lender would look at several other factors. Believe me, your score of 805 and your friend's score of 820 wouldn't be considered different, as long as other things are the same.

In its circular on zero per cent loan schemes, the Reserve Bank of India had acknowledged the return on investment was generally flat and indifferent to customers' risk profiles.

As far as an answer to the anguished query at the beginning of the article is concerned, the calculation of credit scores by CIBIL is a secret, as are the code to the US nuclear weapons or the original Coke formula. But the good news is you need not try to crack this.

Broadly speaking, if you pay your debts and bills on time and have a reasonable amount of debt, in line with your income, the situation is fine. You are already doing well, as proved by your rather high score of 805. Now, stop obsessing about the score; it doesn't matter as long as you don't take too many loans or default on a loan or a credit card bill. Since, you already know your existing credit score, which is good, you could keep asking for your credit report once a year, for monitoring. You are already in good financial shape, as far as your ability to borrow is concerned!

And, you should petition the regulator for access to your credit report free of cost once a year, as is the norm in many developed economies.

Access your credit report and know your score along with its improvement and maintenance by just booking an appointment at www.cibilconsultants.com

Source: Secondary

No credit to credit in easy steps !

Has your loan application been rejected because you don't have any credit history? So how do you build your credit history? Well, yes, it's a cycle of credit and credit again!

As per two recent notifications by the Reserve Bank of India, all banks and other lenders need to take into account credit information reports or CIRs from one or more agencies in all lending decisions and account opening. However, a loan application should not be rejected just because the applicant has no credit history. So, let us get going and look at the 3 ways that will help you build your credit history.

1. Apply for a secured credit card 

A secured credit card is backed by a savings account or by a deposit used as collateral on the credit available for the card. As you keep paying your outstanding dues on time, your good credit behavior will be reported to the credit bureaus. And this good credit behavior will help build your credit history.

2. Become an authorized user

Become an authorized user of a family member's or spouse's credit card - it should be one of his/her oldest credit card accounts. But do make sure this 'someone' repays outstanding dues on time. After you become an authorized user, you will have access to some form of credit. Once you have that, make sure you make 100% payment of all your dues on time and don't spend beyond what you can repay.

3. Check your credit score

Do check your credit report for your latest score. For an individual with no credit history or who does not have enough credit history, the score generated is NA or NH (CIBIL score). Typically, conservative lenders could view NH negatively as per their credit policies of not lending to an individual who has no track record. But an aggressive lender with a higher risk appetite may approve your credit application. Hence, look for lenders where you may have a better chance.

We hope you will be able to build a good credit history with time. Just make sure that you do not apply randomly for credit facilities as this indicates a credit-hungry behavior. Also, too many inquiries are viewed negatively by lending institutions.
visit www.cibilconsultants.com to check your credit score !

Source: Secondary

How The Credit Information System Can Be Made More Efficient?

An efficient credit information system in any country is not about identifying the defaulter– though that is definitely a value add– the main purpose is to recognize good behavior by a borrower and ultimately reward through a reduced risk versus reward play.

It has a positive influence on productive investment spending, induces positive credit discipline, creates awareness about the benefits of having a healthy credit life and the importance of proper management of liabilities.

It has been almost 10 years since the concept of credit information, credit bureaus and scores was introduced in the Indian financial sector. Credit Information Bureau (India) Ltd, or Cibil, started its operations in 2004.

The Reserve Bank of India (RBI) constituted a committee in March 2013 under the chairmanship of Aditya Puri, managing director of HDFC Bank, to examine reporting formats used by CICs and related issues.

The committee, comprising representatives from various stakeholders including the CICs, public and private sector banks, foreign banks, has presented its report to the RBI.

Its recommendations, if accepted, would have huge impact on stakeholders involved -- CICs, credit institutions and the consumer.

Some of the recommendations will require changes in the law (The Credit Information Companies [Regulation] Act, 2005) that governs this domain (points 1, 3 and 4 of the table) and some will require technology changes by the CIC/lender (points 5 and 6 of the table).

This will take time, effort and costs and the RBI should ensure that all recommendations it accepts are implemented immediately.

Some of the recommendations, which will make the Indian credit information industry more robust and complete, are:

Inclusion of information related to commercial paper & derivatives in the CICs data format

Linking consumer & commercial reports

Providing alerts to credit institutions to avoid multiple/fraudulent financing

Adding new fields in the reporting format

However, the RBI and the committee missed out on a few key areas, which include.

Reduction in the costs for a report and score, accessed by an individual, currently in the Rs 400+ range.

Treatment to be given if a credit institution sells its portfolio to a non-credit institution and an individual thereafter repays any outstanding, that transaction is not reported to any credit bureau, resulting in punishing an individual for no fault of hers.

Recognition by the credit bureaus of credit counsellors as credit advisors to individuals and their role as facilitators to improve credit life cycles of consumers (widespread in developed countries).

Recommendation to increase the range of data being taken in by the credit bureaus to include telecom, insurance and non regulated bodies, thus making credit bureau data more complete.
For getting credit scores and credit report, book an appointment now only at www.cibilconsultants.com

Source: Secondary

Myths about CIBIL score

There are various articles on the internet about the importance of maintaining a good CIBIL score to speed up your chances of getting a loan approval. But, more often than not this information may get confusing for the public. As a result, many of these people may go on about their works as usual, unaware that this indifference might cause a negative impact on their credit scores.

Nowadays it is extremely important to have a good CIBIL score. RBI has made it compulsory for all lenders to take into consideration the CIBIL report before making their credit approval decisions.

As we mentioned above,there is a lot of wrong information on the internet about maintaining the perfect score therefore we attempt to bust some common myths about the credit score below.

Higher income is the reason for higher Credit score:

CIBIL credit score gets affected by your credit behaviour, not your income. Irresponsible credit behaviour can be shown by high income groups which could lead to low credit scores.It is the length of credit history which helps in strengthening your credit score.

Checking your CIBIL score will have a negative impact on it:

It is said that enquiring about your CIBIL report or CIBIL score may get you a negative marking so many people avoid checking the score.This is quite opposite to what the truth is. infect checking your CIBIL report at least once a year is good financial practice.
Checking your own CIBIL score is considered as ‘soft enquiry’ and won’t have an impact on your score but if credit card issuers or lenders ask CIBIL to give access to your CIBIL report, it will be considered as ‘hard enquiry’ as it will get recorded in the enquiry section of your report.
Loan applications given to many banks at a point of time may lead to enquiries in quick succession which will be tagged as ‘credit hungry behavior’ which will have a negative impact on your score. However checking out your CIBIL report once a year, is like getting a health check.It won’t hurt you score at all.

No credit equals to a good CIBIL score:

Many Indians have grown up with the belief that it is a bad thing to live on credit. There are many of such people who avoid loans and credit cards like the plague and assume their credit score would be perfect because they are not using credit. These people are more in the line of fire than those who hurt their score by over-leveraging themselves.
The people who don’t borrow don’t have a credit history and thus, they cannot be assigned a credit score by any of the credit bureaus. These people would then find it hard to get a loan. Therefore ,it is better to use credit responsibly than have no credit history at all.
Having a credit or taking loans is a good thing as long as you keep making timely repayments.This helps you in maintaining a good CIBIL score and is considered as good financial behaviour.

Conclusion

Responsible use of credit and low credit utilization rate have a good effect on your CIBIL score. If you are doing this then you don’t have to worry when you are in need for credit.
For more details visit www.cibilconsultants.com

Source: Secondary