How cost of borrowing is related to credit score?

If you want to qualify for the most competitive loan and credit card rates then you need a good credit score. What’s more, you need it to stay that way. 

• How lenders decide whether to lend to you?

Banks and credit card companies use a variety of different information to give you a credit score, which determines whether they will lend to you and at what interest rate.

Credit scoring works by awarding points based on the information:
You provide on your application form ,the lender may already have about you, based on previous accounts you have with them, and on your credit report, which is held by agency called CIBIL.
              

• You’ll also get a better credit score if you:

own your own home and/or have lived at the same address for at least a year ,have a good credit history by repaying other credit agreements on time, for example your credit card, auto loan, gold loan, personal loan , overdraft , Cash credit facility, Consumer loan  or Housing  loan.Have evidence of stability – for example you are employed rather than self-employed, you’ve lived at the same address, worked for the same company and had the same bank account for a long time are not connected financially, through your mortgage or joint bank account, to people with a bad credit score.

• How a poor credit score affects your ability to borrow .............

A poor credit score can mean you’re  rejected with any credit facility or loan or  charged higher interest rates, given a smaller credit limit.

A lenders or banks or NBFC doesn’t have to give you the interest rate they are advertising or that you see in best buy tables on comparison websites.  You may be offered an interest rate that’s higher – this is what’s called your personal APR. 

Source: Secondary

Insight of your Credit Report!

Your credit report is one of the first places you need to go to check in on your financial health. Why? Not only is your credit report the place of record that outlines your entire credit history, but this report can provide you important information if something seems “off” on your credit score or if you’ve recently been denied credit.

Yet despite your credit report being so important, it’s a very difficult thing for the average person to read. Your credit report is multiple pages in length, there is a ton of information and numbers to sift through and it’s hard to know what to look for if you are looking for any sort of error or unknown account in your credit history.

                             

Just what exactly is in your credit report and how do you read it? Here is a breakdown of some of the basic information found in your credit report and what each section means:

Report Number and Index: This section is all about navigating your credit report if you view it online or if you need to talk to someone about your report on the phone and you need your report/reference number.

Potentially Negative Items: Your credit report will show you if you have any potentially negative items. These include accounts that are unpaid or accounts that were paid past the due date. Negative items on your credit report may stay there for up to 7 years.

Status and Payment History: Your status and payment history shows if you have any on-time and late payment of your debts or credit items.

Accounts in Good Standing: Accounts that have a positive status and are considered in “good standing” are viewed by creditors as a good thing on your account.

Accounts Types: This tells you the type of loan and whether it is revolving (like a credit card) or an installment loan (like a car loan or student loan).

Soft and Hard Inquiries (Requests for your credit history): Your credit report will show how often someone has checked your credit history, also known as inquiries. A soft inquiry is when someone checks on your credit as a background check; this does not affect your credit score. A hard inquiry is when someone checks on your credit history because they are going to make a lending decision; this does affect your credit score. Hard inquiries can remain on your credit report for up to two years.

Personal Information: Your personal information is an obvious piece but a very important one. This includes things like your name, social security number, address and phone number. If it’s not accurate, your information (and therefore your credit history) could be mixed up with another person’s.

Personal Statement: Did you know that you can add a statement to your report? Sometimes you may want to add a personal statement if you have disputed an item on your credit report and it has not been resolved or to explain the situation behind an account in collections. You can do this by contacting the credit bureau.

Visit: www.cibilconsultants.com

Source: Secondary

Can balance transfers hurt your credit score?

Many credit card companies offer free credit card balance transfers in order to entice consumers to choose their service over a competitor. In addition, credit card companies may offer a grace period in which no interest is charged on the outstanding balance. With proper diligence, a savvy consumer can take advantage of these incentives and avoid high interest rates while paying down the principal. But be sure to read the fine print, as many credit transfers involve hidden charges, such as one-time fees on the balance transfer. Undergo various aspects of balance transfers that can either help your credit or hurt it:

• Every time you apply for credit, a hard inquiry is made on your credit report. Each hard inquiry has the potential to lower your score. If you apply for five different cards, you could lower your credit score by several points. To keep the negative effect on your credit at minimum through the application process, do your research and only apply for one card. After transferring a balance to a new card, keep the old account open.
• Depending on the right circumstances, a balance transfer can be a good way to pay down credit card debt. By initially applying for several different cards with low introductory rates, you can negatively affect your credit. A few percent of your credit score is based on the length of time your credit accounts have been open. The longer you have your accounts, the better your score. By opening several new accounts, you bring down the average age of all your credit accounts, thereby hurting your credit.
• Closing a credit account can negatively affect your credit but by keeping existing accounts open, your average account age remains high. If possible, find a card with a credit limit much higher than the amount you need to transfer. Exhausting your credit limit brings your credit utilization ratio down. Finally for maintaining a good credit score, you will have to make payments without missing any deadlines.
• Source: Secondary

Revolving credit and its impact

The tide of the future seems likely to carry with it ever increasing waves of revolving credit in the sea of borrower credit extensions. Already revolving credit represents more than a ripple in that sea. The reasons are primarily economic. Think before you spend – if you don’t pay off your monthly bill, the amount can snowball into a pretty big figure as it revolves and gains interest. Here are snippets on the functioning of revolving credit and how it can make you fall into debt traps.
                 

A loan with a difference

Here, you get credit while you go spending or paying bills. You can use the credit limit to purchase anything you desire. Further, you don’t have to pay EMIs or an amount equivalent to that. All you need to pay, to keep your credit card alive, is a minimum amount, which is normally five per cent of the money spent plus interest. Do that and your loan keeps getting revolved in minimum monthly payment cycles.

Unsecured Credit

While an unsecured revolving line does not require collateral. One of the most common unsecured revolving credit lines is a business credit card. Obtaining a business credit card typically requires the business to have a positive credit history and high credit score but does not require an asset to obtain the credit. Another type of revolving credit for a business is an account with suppliers in which you have a set purchasing limit and the company invoices you for purchases. Once you pay the invoice, the amount is available for you to use again.

Understanding revolving credit account

Revolving credit is a type of credit in which the consumer’s balance and minimum monthly payment can fluctuate, and where the cardholder usually has the option of avoiding finance charges by paying the last statement balance within the established ‘grace period’. This type of credit account also has a predetermined credit limit. Credit cards are the most widely used type of revolving credit. Unlike a loan, a revolving account doesn’t automatically close when the account reaches a zero balance. It tends to remain open and available for use until the lender or the consumer chooses to close it.

How it Works

With revolving credit, a bank allows you to continuously borrow money up to a certain credit limit. Every time you buy something on credit, that amount is subtracted from your total credit limit. And every time you pay off your balance, your credit limit goes back up.

The interest rates on credit cards are much higher than that on other loans. At times they can be twice as much. This makes it impossible to repay the bills in minimum monthly pay-outs. A rough calculation suggests that of the minimum payment made every month; only around 1.5 to 2 per cent goes towards repaying the principal amount. The rest goes towards interest payments. So, keep a check on your credit card spending and avoid revolving your credit card balance.

Impact on your credit score

Maintaining a low revolving credit balance has a significant, positive impact on your credit score because your credit utilization ratio is a key factor in your rating. Revolving credit helps in cases where you need to borrow in unpredictable amounts for ongoing projects, education or other needs. The challenge with revolving credit, though, is the temptation to overspend because you have more credit available. Remember, your credit rating is important when you apply for new loans and want to get a good rate. The reason a low revolving balances are important is the perception of lenders. Typically, they assume that if you use a small portion of your available credit, you are in a safe debt position. This makes you seem like less of a risk if they choose to issue new credit to you. Paying down high balances not only helps your score, it puts you in a better position to manage your debt.

Find your credit score at www.cibilconsultants.com

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Hidden costs disclosed!

While availing the home loan, most of us forget to factor in the hidden costs involved. Customers normally notice these fees or charges once the deal is done and by then, it is too late. These costs can influence the total cost of the product. The benefit of knowing about hidden costs involved is that these vary from one financial entity in the market to another and some institutions may wave these completely, if you negotiate. Let’s take a sneak peek at some of the additional costs that is borne by the borrower but not mentioned to him clearly at the sanctioning of the loan.

Processing Fee: A valid amount of money is charged by all housing finance companies which comprises a processing fee and other administrative charges. The specific amount for this fee differs from one bank to another however, is less for public sector institutions in comparison to private lenders.

Legal Valuation Fee: Before sanctioning the home loan, all housing finance companies carry out a thorough legal verification of the property. The borrower has to bear the charges as legal fees of the lawyer undertaking this kind of verification.

Interest on term before EMI initiate: There lies a certain division between the disbursement of the first loan installment and start of the EMI. During this period, definite interest is imposed by a financier which is termed as the broken period interest.

Prepayment Penalty: If the borrower chooses to prepay the home loan before the tenure gets completed, the bank will charge a prepayment penalty from the borrower. Plus, a service tax is also imposed on the prepayment penalty. But, as per RBI, this clause has been abandoned for floating interest rate home loans

Rescheduling fee: When the interest rate gets altered by the bank or in case the borrower determines to prepay certain portion of the outstanding loan amount. The home loan tenure and EMI structure has to be rescheduled to match the prevailing conditions, the borrower has to borne a rescheduling charge assessed by the bank.

Conversion Charges: The bank charges a certain amount, when a borrower decides to convert the home loan from a fixed rate type to a floating rate type or vice versa. Additionally, a service tax is levied as applicable.

Miscellaneous Fees: The banks may charge the customer several types of miscellaneous fees that are not mentioned earlier. Such fees incorporate charges for obtaining a copy statement of account and copy of original documents that have been submitted by the borrower while availing the loan.

So, ask the financial institution to give you details on the fees and charges involved, read these carefully and then take your decision accordingly.

Visit www.cibilconsultants.com
Source- Secondary

Rectification of errors is a necessity

Don’t let inaccuracies in your Cibil credit report turn into costly mistakes. As your Credit Information Report (CIR) plays a crucial role in the loan application process. Hence, any discrepancy in your CIR may result in reduced chances of a loan approval. Therefore, it is mandatory that the information on your CIR is accurate and updated.

Your credit information is collected by every bank where you have a relation, be it a savings account, a current account, a credit card or a loan. The bank keeps track of the length of your account, its usage, your payment track record and other data.

Your CIBIL Transunion score is a 3-digit numeric value which summarizes your credit history and financial health. The CIBIL score you receive will range between 300 and 900. The higher the score the more creditworthy you are. Sometimes an error in your Credit Information Report (CIR) can result in problems securing a loan. Some of these errors in a CIR can be rectified easily. Only errors pertaining to basic information such as name, income tax ID, date of birth; account information and ownership of account, etc. can be rectified. You will need to provide information related to your name, date of birth, address and contact information in an online form. You will also need to furnish the reasons for disputing your CIR. The control number which is a unique 9-digit number written on the top right hand side of your CIR and the date of CIR will also have to be filled in order to complete the request for change. CIBIL then evaluates the case and if need be, takes it up with the relevant credit institution. This process can take up to 30 days from the date of filling the request. A service request number will be generated as soon as you complete the online procedure and you should note it down for future correspondence.

Here are some of the common inaccuracies that you must scrutinize for in your credit report.

• Account information
  Making duly payments on your current loans and credit cards will boost your credit score. Make sure that all your loan accounts are reflected in your CIBIL credit report as good accounts, if not reflected in credit report then it may bring down your credit score.
• Personal information
  Your credit report enclose the personal information like your name, address, date of Birth etc. While it may appear insignificant, but personal information being correct means your record cannot be mistaken for someone else.
• Records are not updated
  It is probable that you have paid off an outstanding loan over three months but your credit report records still show it as outstanding. This will have an adverse effect on your credit score.

Incorrect credit limits

It is viable that your credit card issuer has increased your credit limit and not informed the credit bureau. A lower credit limit would mean that your account will show a high credit utilisation ratio. A high credit utilisation ratio impacts your credit score negatively.

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Coping with closing credit card correctly or not?

Credit cards are the easiest way to fall into a debt trap, i.e. a situation in which you borrow just to maintain your existing borrowings. There could be plenty of reasons to close your credit card: you have many cards, your card issuer increased rate of interest or maybe you don’t want to keep a credit card somehow. Any credit card cancellation must be in accordance with the banks exit policy or else it can come back to haunt the individual for pending dues. Before taking an initiative to close your credit card, find out whether closing that card affect your credit score. Undertake the following steps to close your credit card in the right way.

Pay Off the Balance

The bank will close your credit card only after it is free of any pending balance which is due to the bank. If you can, pay off the balance on the credit card before you close it. This will lessen the impact to your credit score and give you one less credit card balance to worry about. You can close a credit card even if you still have a balance, but your credit score may suffer. And, you’ll still have to make regular monthly payments (at least the minimum) until you’ve paid off the balance. Pay off your pending amount and keep a record of the payments made for future use in case of any dispute.

Communicate with the Customer Service

Once you have decided on which credit card to close first, the first step is to call the concerned customer service and intimate them about your closing card request. Call your credit card’s customer service using the phone number on the back of your credit card and follow up the request using a written communication either directly or through an email. Don’t be surprised if the representative tries to talk you into keeping your account open. For example, they may offer to lower your interest rate or enroll you in a rewards program. If you’re sure you want to close the account, don’t allow yourself to be convinced otherwise.

Check Your Credit Report

Review your credit report to make sure the credit card is reported as closed. This will allow you to keep a check on the extent of damage the credit card cancellation had on your overall credit score. Since credit utilization ratio decreases after cancellation of each credit card, it won’t necessarily hurt your credit score if it’s not reported as closed, but you want your credit report to be accurate about the status of your accounts.

Follow-up with a Letter

Once you pay off all pending dues for the concerned credit card, insist on getting a written acknowledgement to have a record of your credit card closed. After receiving a written confirmation letter only then you should destroy your card. Keep a copy of the letter for your records.
Visit: www.cibilconsultants.com
Source: Secondary

Missed the credit card deadline? Now what next?

Every month, a large number of people miss the deadline for making credit card payments. Late payments are one piece of information that credit reporting agencies use when calculating your score.  However, late payments of credit cards not only attract penalties but also bring other disadvantages like high rate of interest and affect your credit score. The best thing you can do is make your payments on time each month – that way you won’t be reported as delinquent. Here, the consequences of missing the credit card payment deadline are enlisted below:
                  

Credit score may decline

Late payments can have a significant effect on your score affecting your ability to get new credit in the future. How much your credit score declines after a late payment depends on the other information in your credit score – generally, the better your credit, the more points you stand to lose.

Higher interest rates

Creditors don’t just penalize you with a late fee, they’ll often increase your interest rate to the penalty rate, the highest interest rate on your credit card. The higher interest rate increases your finance charges making it more expensive to carry a balance.

Late payment fees

Your next billing statement will include a fee for the missed payments.Late fees range typically depends on whether it’s your first time being late in the past six months. You’ll be charged a late fee each month your payment is late.

Effect on your credit report

When your payment is more than 30 days late. Entries are added to your credit report and remain stay for seven years. If you miss the next payment, the entry is updated to 60 days, and so on until your account is charged-off after 180 days.

Conclusion

Keep a track of when payments are due every month to avoid the bad consequences. Remember to use your money in the most efficient way possible by not making payments below the minimum and understanding the difference between this amount and the total amount due. So be patient, use credit card wisely and handle credit without getting into trouble.
Visit: www.cibilconsultants.com
Source: Secondary

Is creditworthiness affected by cosigning of loan?

Being a co-signer to a loan is not at all similar to giving a personal reference….it could have much deeper implications for your financial health. Before you say yes to your close friend or relative, know about the obligations involved.

Before you co-sign

Cosigning for a loan simply means that you are vouching for the fact that the borrower will repay the loan if he or she defaults, you are going to make that repayment yourself! So think about it. No matter how close a friend or relative the borrower is, and no matter how credit worthy you think they are, there is always a chance that they may lose their job or their ability to work or run up against some life-threatening situation that takes them far away, So, only if you have the ability and the inclination to make a repayment on behalf of the borrower, go ahead and sign on the dotted line as a co-signer.

Effect on your credit score

Cosigning for a loan does not affect a credit score unless the other person defaults on the loan and the co-signer does not pay it back. When someone needs a co-signer, it is usually because the person does not have the credit score necessary to get the loan. This means either that the person has been irresponsible with credit in the recent past or that has little to no credit history. Either way, a co-signer is promising responsibility for the debt if the person defaults. If the item is a very high-value item, such as a new car or a house, the co-signer can fall into debt very quickly.

If the original borrower defaults, the lender looks to the co-signer to take over the debt. If the co-signer cannot afford it or does not continue paying the debt for any reason, then the lender will send it to collections just as if the debt was incurred by the co-signer. At that time, the collection agency begins collection activities that can include obtaining a judgement and putting the debt on the co-signer’s credit report, which drastically reduces the co-signer’s credit score and ability to obtain new credit.

If there is a charge-off, collection and judgement, then a co-signer might be looking at up to three new negative accounts on his or her credit report from one defaulted account. For these reasons, it is important to be careful about co-signing on a loan for someone else unless the co-signer knows that the borrower has the ability and willingness to pay the money back.
Visit: www.cibilconsultants.com
Source: Secondary

Whether to purchase a home with cash versus obtaining finance through mortgage.

To be a homeowner of your dream house is not merely a financial decision. It is an emotional decision too. That’s why in a number of cases, despite fixing a budget, most people tend to stretch themselves to own a house that is beyond their budget.  It’s probable to think that buying a home with cash – or sinking as much cash as possible into your home to avoid the enormous debt linked with a mortgage, is the wise choice for your good financial mileage.

But it involves a lot of consideration whether to purchase a home with cash versus obtaining finance through mortgage.

Purchasing a house with cash is a very legitimate productive investment as it eliminates the need to pay interest on the loan and closing costs. In a current market scenario, paying all can also make your purchase offer more attractive to sellers as they don’t have to concern about a buyer falling out due to financing being denied. A cash home purchase also has the flexibility of closing faster than one requiring financing, which could be attractive to a seller. Those benefits to the seller shouldn’t come without a price.  Also, a cash buyer’s home is not leveraged, which allows a homeowner to sell the house as per his convenience.

Shouldering responsibilities with mortgage

At some point you would like to own a house. Then why not do it now? Yes, buying a house on a home loan, if you can afford the EMIs, makes more sense than paying massive cash. How? There are obvious benefits. Firstly, by buying a house in which you live, you are creating an asset with the easy to pay EMIs that you pay; on the other hand, paying complete cash is painstakingly as it involves your entire life money and liquidating huge investments. Moreover, you can enjoy tax benefits on repayments of a home loan. But remember that no matter how tempting it may be, don’t liquidate all your investments to purchase that dream home. Once you moved in, you will still need to go on living; in fact, if you move into a better home, you may seek a better standard of living and therefore, need more regular spending money. Further, you still need to service your insurance policies and subscribe to tax saving investments. You may be needing money for unforeseen emergencies that are not covered by insurance.

The Conclusion

The best advice when considering which option makes the most sense is to opt for the choice that gives you the satisfaction for your entire life. Also, ask yourself which will provide the greater return on your investment.

If you decide to purchase a house with a loan, make sure you can easily afford the principal, interest, property taxes, homeowners insurance, homeowner association and other fees each month. And no matter how you pay for a house, make sure to have an emergency savings account of expenses in case your personal economy declines and you need a financial safeguard.
Visit- www.cibilconsultants.com
Source:  Secondary

Know the variance between credit limit and available credit!

The account balance of a debt plays a prominent key to which the difference between the credit and credit limit is closely tied to. Credit limit is the total amount of credit available to a borrower, including any amount already borrowed.  A borrower’s credit limit may be raised after he or she exhibits timely and full repayments. However, having a high credit limit and multiple lines of credit may hurt a person’s overall credit rating. In these cases, new potential lenders can see that the applicant has access to a large amount of debt, which may lower the chances that this person will be able to repay his or her debts in the future. As a result, new potential lenders might be less likely to offer an additional source of debt. Available credit can be a key factor in a credit score, along with amounts outstanding from various lenders. A reasonable amount of available credit proves that the customer has successfully obtained credit lines in the past, and has the discipline not to use all credit available to him or her. If you try to spend more than your available credit, your transaction will be declined, unless you’ve opted-in to have over-the-limit transactions processed.

Many credit card companies allow borrowers to increase account balances just beyond credit limits, provided that borrowers agree to this in writing. This sometimes is a result of charges and sometimes a result of interest and fees. Most credit card companies charge stiff penalties for accounts with balances above the credit limit, again, provided the borrower agrees to this in writing. In times of need, consumers may be tempted to sign any document that gives them access to needed cash.

The amount is mandated to the credit card companies which they are allowed to charge for credit card accounts over the credit limit. The charge applied may not exceed the amount the account is over the limit. Individuals who have agreed to accept fees for exceeding credit limits have the right to change this at any time by notifying the lender in writing. This does not apply to transactions made before opting out of over-credit-limit fees. Also, the lender is more likely to refuse transactions that take an account over the credit limit after a borrower has opted out.

Visit: www.cibilconsultants.com
Source: Secondary

Balance transfer on credit cards. Here's the guide!

Are you being offered with a new credit card carrying zero percent interest balance transfer? Eventually before you proceed to transfer a balance from one credit card to a new card, have a glance on our guidelines to safely transfer the balance on credit cards.

Selecting on balances to transfer

See where you stand by and then list all of your credit cards, their balances and their interest rates. Now, pick one or more cards with high rates whose balances you would like to transfer to save money on interest.

Estimate the transfer fees

Know about the balance transfer fee and calculate your balance transfer fee that you will be entitled to pay on the amount you want to transfer. Use a free, online balance transfer calculator to do the math.

Know about the incurred penalties

When you wish to do the balance transfer at zero percent, you still have to make the monthly payment on your balance to keep the zero rates. Note the interest rate you’ll pay if you lose the zero percent rates because you miss a minimum payment.

Avoid doing balance transfer with the same bank

Make sure you fulfill the basic requirements for the balance transfer. Remember, before you proceed with the process if your new account is with the same company then you cannot transfer a balance.  Also, your transfer request may be declined if you have due payments with the creditor to which you want to transfer the balance.

Keep your eye on accounts

Watch your old accounts to know whose balance you’re paying off to see when the balance transfer clears. In the meanwhile, don’t miss any payment deadlines on those accounts so you don’t incur any late fees. Each creditor has its own time frame for completing a balance transfer. Keep monitoring your new account to see when the balance has transferred over.
Visit: www.cibilconsultants.com
Source: Secondary

Surprising things that affect your Cibil credit score

Your Cibil credit score evaluates your credit worthiness. While you might be paying your bills on times, it is not the only factor that affects your credit score. Here are some surprising things that could alter your credit report.

A lot if written about how one can boost the Cibil score and clean up your Cibil report but there are some surprising things that can hurt your Cibil score. Here are some things which will make you sit up and think.

Cutting down the number of your credit cards:  If you thought applying for a credit card is what brings down you score, you are right but you cutting down on the number of cards that you hold also bring it down. While applying for a card leads to a hard enquiry, cancelling some credit cards mean your total credit limit goes down and your credit utilisation moves up. 

Requesting for an increase in credit limit:  You may think that the credit limit that the bank has allotted on your credit card is low and hence request for a higher limit. When you make such a request, the bank will ask CIBIL for your report to assess your credit standing. This means it is a 'hard' enquiry which will brings down your Cibil credit score. So until you really need it, do not request for a higher limit.

Being super cautious about using your credit card:  Many of us think that credit card usage might lead to excessive spending and bad credit habits. The fact remains that without spending and repayment history, the credit bureau is unable to rate your credit standing. Lack of credit transactions or no transaction will make your credit file inactive on the Bureau; it brings down your credit score. So it best to make regular small transactions, say grocery purchases, and pay the credit card on time.

Not checking your Cibil report for mistakes:  It is always good practice to check your credit report for any errors every 6 months or so. Often there is mis-reporting or delayed reporting by banks, which may result in faulty information on your Cibil report and a reduced score. For instance, you may have had a delayed payment in the past which shows up in your credit report but the last couple of years all payments have been on time. If you can procure a document from your lender that there is no outstanding payment and all EMIs have been paid on time your Cibil report can be rectified.

Having no loans:  Most of us have credit cards but not everyone has a loan account. Your Cibil score benefits from a good credit mix both revolving credits (credit cards), as well as non-revolving or EMI based credit (a home loan). It shows your diversity in handling different types of credit. 

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3 things to look for in your Cibil credit report

You are advised to check your Cibil report every year. Just like one would take a annual health check up to ensure all parameters are within the normal range and no red flags are popping up, so also one should check the CIBIL report annually i.e. do a financial annual check up.

There are no reporting errors from the lender

You should check your Cibil credit report at least once a year to make sure there are no errors that could keep you from getting credit or best available terms on a loan. You should also check your report before making a major purchase that would involve a loan, such as a house or a car.

While sending information to the credit bureau the lender or the bank could have made some errors in reporting your credit transactions. The first step is to find the errors by actually reading the report and not tossing it in a file after reading the Cibil score. When Lata got hold of her Cibil report and read it she saw it still showed an a outstanding amount of a credit card payment, which had expired and surrendered over 2 years ago. This wrong information was greatly responsible for lowering her Cibil credit score. So if you find mistakes, the immediate action should be to fill out the dispute form for the credit reporting bureau. If the error is actually with the creditor who reported the account, you may also need to write a letter to the creditor or alternatively raise the dispute with Credit Bureau for correction. Maintaining a high Cibil score is essential to a healthy financial future.

Is your identity stolen?

Check your report for any credit applications/enquiries that have arisen there are not made by you.  For instance, if you see a couple of home loan application in your Cibil report that you have not made, it can be a sure sign of identity theft. Look out for signs of identity theft. Alerts for possible fraud include:

• Loan accounts that you have not opened
• Credit inquiries not made by you
• Any late payments or defaults that were not made by you
• Address and Identity information which are not yours
• Phone number reported which you have never used

Incase you suspect an identity theft, immediately report any suspicious information or activity to the credit bureau that issued the Cibil report and to your banks too.

Account information

A large bulk of the information in the Cibil report is your account information - a list of your loans and credit card accounts. This is a good time to review your accounts. You can cross check the various accounts, the credit limit, current balance and payment history. Make a note of accounts that were closed or made inactive by the bank and those that have late payments or negative remarks associated with it. See which ones are active and if you would like to consolidate any of them, organise paperwork in the accounts and in general do the financial housekeeping we tend to postpone.

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Thieves may E-shop with your credit data!

MUMBAI: The Cuffe Parade police on Sunday detained three suspects from Uttar Pradesh who had conspired and executed a credit card fraud in Mumbai. The accused targeted at least 60 customers of a bank in Navy Nagar and shopped online for goods worth over Rs 13 lakh, said police.

Krishna Prakash, additional commissioner of police, south region, said, "We had earlier arrested an accused, Krishna Pandey, who had come to take delivery of the orders placed on the Web. During his interrogation, we learned that the main accused, Sonu Yadav (21), was hiding in Gorakhpur, Uttar Pradesh. The gang targeted customers of Central Bank of India, Navy Nagar branch." 

The police are in the process of getting the suspects to Mumbai. "A bank official lodged the police complaint after they received several complaints of money being deducted from the accounts of some customers," said a police source. 

"They would order TV sets, fridges, high-end mobile phones, IPads and other costly electronics items online. Their intention was to purchase online and sell these goods immediately. It's still not clear how they got the credit cards' 16-digit numbers and passwords," said an officer. Those detained in Gorakhpur include Yadav, his accomplice Harish Pandey and two others. 

A computer and hard disc have also been seized. Police said that the accused managed to obtain the 16-digit credit card numbers and hacked into the bank's system to get the password. 

Twenty-six-year-old Pandey, the arrested accused, is a class XII dropout. He told the police that he was jobless and came in touch with Yadav, who was also from his hometown. Pandey reportedly asked Yadav for a job to earn livelihood. Yadav asked him to collect products for customers of online shopping. Pandey was promised a commission. He was arrested when he went to take delivery of a TV set. 
               

While a waiting police team caught Pandey, Yadav managed to flee from the spot in Thane last week. The accused have been booked for cheating (Section 420 of IPC) and hacking (Section 66 of IT act). Yadav is said to be a diploma holder in computer studies. The gang first committed the fraud in October and continued till January this year. "We have managed to spot several transactions wherein the accused had placed orders. We have recovered some products and are hoping for more," said the police. 

O P Shrivastav, the bank's assistant general manager asked this correspondent to talk to his deputy Ayyubi, general manager (credit cards). Ayyubi could not be contacted. 

To learn about Identity Theft, visit www.cibilconsultants.com

Source: Secondary

Debit Card OR Credit Card?

If you’re looking for the convenience of a credit card but don’t have the credit to qualify for one, or want to avoid incurring any debt, a prepaid debit card might be the best alternative.

Prepaid Debit Card vs. A Credit Card
A prepaid debit card is a smart way to budget money since you’re required to pre-load funds onto the card before using it. Once the money’s gone, you either have to stop spending or reload the card’s balance.
However, with a credit card, anything you charge to the account will have to be paid off, making it a lot easier to get into debt. Research has shown that it’s a lot easier to overspend using a credit card, while a prepaid debit card is like spending your own cash.
Here are three reasons to consider using a prepaid debit card instead of a credit card.
                                       
                                                   

1. Allows you to earn cashback. 

One of the biggest reasons that many people prefer to use credit cards over prepaid debit cards is because they can earn cashback or rewards on all their purchases. However, many prepaid debit cards allow you to earn the same perks without having to charge up debt on a credit card.

Credit Card Information

Use your prepaid debit card for all your daily purchases and keep track of the rewards you’ve earned. Nearly all prepaid cards are accepted everywhere that regular credit cards are, so there’s no limit on where you can use them.

2. Has much lower fees.

Credit cards come with a wide variety of fees, including late charges, high interest rates, and over-the-limit fees. Some even come with an annual fee you have to pay in order to simply use the card.
Prepaid cards do not come with any of these fees, and may only have small monthly fees or ATM charges when withdrawing cash. You’ll never pay an interest charge, or late fee (because there are never any payments due). 

3. Make safe and secure purchases online.

Whether you’re doing some online shopping, or need to pay bills online, a prepaid debit card makes it easy, safe, and secure.
In some cases a prepaid debit card can be considered more secure for online transactions than a regular debit card. It’s not connected to your bank account, so you don’t have to worry about your account number being compromised, or having your identity stolen.
While credit cards do have their perks, like allowing you to build credit, there are many other disadvantages to them. If you have some credit card debt, or have trouble overspending, a prepaid debit card is smart way to help keep your finances on the right track, while avoiding high interest rates and fees.
You can keep more of your money, not overspend, and even earn cashback on everyday purchases. For these reasons, using a prepaid debit card is a win-win.
Looking for the credit card that’s best fit for you? Find one that matches your needs and credit history.

Visit- www.cibilconsultants.com
Source: Secondary

Days Past Due (DPD) in CIBIL Report

CIBIL Report is X Ray of one’s credit health. It is must that credit health should in good shape. A good credit health in turn is critical for your personal finance / financial health. For example, if you have low CIBIL score in CIBIL report then you cannot avail Home Loan. What it implies is that you cannot own your dream home till you save enough to buy house without Home Loan. This scenario seems impossible because of high cost. As we know that any default in payment impacts your CIBIL score negatively. Sometimes through intelligent and timely intervention, we can control the damage to CIBIL Report without much efforts. One such intervention is managing Days Past Due or DPD entries in CIBIL Report.

What is Days Past Due in CIBIL Report?

In CIBIL report, you must have observed entries like 000 or STD under each credit account reported to CIBIL by the financial institutions. These entries are recorded in 2 dimensional matrix o fMonth and Year for each credit account. In layman terms, Days Past Due or DPD means for how many days the payment was delayed for that particular month. In following example, entry for April’2010 is showing DPD of 025 which implies that payment for April’2010 was delayed by 25 days from customers end. In financial terms, Days Past Due in CIBIL Report reflects the ability of a borrower to pay the amount due on time. Any other entry besides 000 shows that borrower is not able to manage his/her finances well which impact CIBIL report negatively.

Days Past Due (DPD)

In the above example, except for 000 or XXX other entries like 025 or STD will impact your CIBIL report negatively. There is a common misconception that entry of STD is OK, which may or may not be true. STD means Payment is cleared within standard period of 90 days which may imply there was delay in payment. Some lenders ignore STD entries but few may consider it as delay in payment. As per CIBIL, STD entries in CIBIL report should not be viewed negatively. XXX means that data for that particular month is not reported by the financial institution which is perfectly OK. Other possible entries in this table are

SUB (Sub Standard): Account is NPA for upto 12 months. Account is declared NPA (Non Performing Asset) if payment is not cleared for more than 90 days from payment due date.

DBT (Doubtful): Account is Sub Standard for 12 months

LSS (Loss): Lender has declared and booked LOSS. Account is tagged as uncollectible i.e. payment cannot be collected from defaulter.

Days Past Due history is available in CIBIL Report for 36 months. If the credit account is more than 36 months old then most recent 36 months details will be available in CIBIL report. In case of closed accounts, Last / Preceding 36 months entries are reported to CIBIL database.

One of the most common mistake in case of payment default is to close or settle the account. All hopes are lost and borrower stop making further payments. This situation can be avoided in most of the cases. Mr. Ravi. Last year Mr. Ravi lost his job and skipped credit card payment for 3 months. He pressed panic button as DPD entries of 90 days, 60 days etc reflected in his CIBIL report. General feeling was that all is lost. After getting new job he thought that now there is no point making past payments as he is already defaulter. Due to ignorance, Bank also pressed panic button and requested Mr. Ravi to settle the credit card amount due and close the account.

This situation could have been handled in a better way by the bank. The solution should be win-win situation for both the parties when default is due to unforeseen circumstances & not intentional.

There is another misconception that credit account details in CIBIL is maintained for 7 years but it is not 100% true. In case of payment default, the defaulter console himself that entry will be deleted after 7 years from CIBIL report. This is the biggest mistake. Fact of the matter is that credit account entry is maintained for 7 years from the date the account was last reported by the financial institution. In case of payment defaults or settlement, Banks don’t close account and keep updating on regular basis therefore this period of 7 years keeps extending with each reporting from bank. The idea is to cause maximum damage to defaulter.

If Mr Ravi would have settled his credit card account, an irreparable damage could have been done to the CIBIL report. Right step to take is to approach the bank and restructure the total credit card amount due. Bank agreed and restructured the amount due in 6 EMI’s. Bank also agreed to keep credit card active if future payments will be on time. He should also make all payments on time from date of restructuring. In this case objective to keep credit card account active was to phase out DPD entries in 36 months i.e. to completely remove DPD entries from CIBIL report. All entries from date of restructuring will be 000 as Ravi is making all the payments on time. Moreover his CIBIL Score improved drastically in last 12 months as all recent payments are on time.

By handling situation differently i.e. managing DPD entries, the damage to CIBIL Report was minimized and CIBIL Score improved at much faster pace. Whereas settlement would have caused more damage as bank could have been reported account as “SETTLED”. DPD entries against “settled” account are freezed for next 7 -10 years. Sometimes the intent of borrower is not to default intentionally but due to improper guidance & hand holding from bank, he unintentionally cause permanent damage to his CIBIL report.

It is advisable to explore all possible scenarios before opting for settlement and always regularize payment ASAP as you can in case of default. Provided the intent of borrower is not to default and commit financial fraud. You may approach bank and explain the genuine reason for default. Do remember that for bank, yours is one among lakhs of cases but for you, its your lifeline to avail future credit.
Visit - www.cibilconsultants.com
Source-secondary

Steps to check Credit eligibility when you have low score

Though there is no standard process to check Credit Eligibility in case of Low CIBIL Score. Reason being CIBIL Score calculation is as secretive as the secret recipe / formula of Coca Cola drink :). Still we can find out at macro level what is hurting our CIBIL Score and reason for Low CIBIL Score.

As a 1st step CIBIL report should be readily available. Please note that in most of the cases, banks only pull out CIBIL Score not CIBIL Report to check basic eligibility. Based on score only loan / credit card is approved or rejected. In case of Low CIBIL Score, application is rejected without going into further details. It is important to note that information available with Bank Executive is only limited to your 3 digit CIBIL numerical value i.e. CIBIL Score. But in order to show that they know everything they pass wrong information to customer regarding Low CIBIL Score which is unfortunate.

As a 2nd step, please check all accounts which are OPEN in CIBIL Report and note down corresponding credit limit or principal outstanding. In case of Credit cards, you should account total credit limit of credit card instead of credit limit utilized. Reason being, you can utilize upto 100% of credit card limit therefore it is assumed to be credit utilized or can be utilized by the customer. Sum total of all account will give current Credit Utilization. Assuming current credit utilization is 20 lakh.

Step 3: Now check your current annual income. Only consider net take home salary as reimbursement or bonus is not considered while fixing eligibility of any loan. Assuming net annual take home salary is 10 lakh.

Step 4: Multiple net annual take home salary with 4 and it is your credit eligibility i.e. 40 lakh. Now important point is that this multiplying factor of 4 is different for different people. 

Now from above calculation, the Home Loan eligibility of a person is 40 lakh minus 20 Lakh i.e. 20 Lakh. Assuming this person utilized overall 30 lakh credit limit instead of 20 lakh then his Home Loan application will be rejected.

Please note that this article has discussed only one of the factor which influence CIBIL Score. Credit Eligibility has strong co-relation with Low CIBIL Score. CIBIL Score is complex calculation and is dependent on multiple factors. A single factor can only influence to the extent weightage assigned by CIBIL to that particular factor. In this post we are assuming that an individual has never defaulted or delayed any payment. His Low CIBIL Score is only because of Credit eligibility issue.
Visit  www.cibilconsultants.com to cure your any finance related problem.