Keep your slate clean

Errors in credit report can hamper your chances of getting loans. Here's how you can get them corrected

How will you feel if your loan application is rejected for not paying a debt that you never availed of? Worse, what if the loan in question is mentioned in your credit report as well?

But how can a loan you have not taken find its way into your credit report? Whose fault is it- banks, which send customers' details to credit bureaus, or credit bureaus, which prepare these reports? More important, what steps can you take to get such wrong entries removed from the report?

Before we seek answers, let's see the kind of mistakes that can creep into your credit report, which has become your financial 'character certificate'.

NATURE OF ERRORS

The errors can be as mundane as wrong name, address, identity number (PAN, Aadhar), even gender or date of birth. These are, however, not significant as they do not necessarily ruin your credit record.

The serious errors are inclusion of someone else's loan in your report or amount overdue that is much higher than the loan taken. 

Then there are mistakes in date of payment, account status (paid, defaulted, settled, disputed), date of loan closure, etc. These mistakes, if not corrected, can impact your credit score, resulting in rejection of loan applications or blacklisting by banks.

It is, therefore, important to keep your slate (read credit report) clean. To be able to do so, you need to look at your credit score and history regularly and not only at the time of applying for a loan.

"In the current process, credit bureaus do not verify with customers the data received from banks. It is, therefore, advisable to access your credit report regularly and see if the data there are correct," says Sanjay Patel, managing director and chief executive officer, Equifax, a credit bureau.

WHOSE FAULT IS IT?

Credit bureaus receive customers' details from lenders. They draft credit reports by collating these details, which they cannot change. They can only do 'logical' checks and reject some data if three-four mandatory fields such as PAN, address, etc, are not filled.

Errors can happen at both data submission and aggregation stages. At the submission stage, it is the lender that may be at fault. Details such as names and addresses, which are manually entered, may be wrong due to typographical errors at the lender's end. Also, data about credit behaviour, latest status of settlement, latest balance, etc, may not be accurate or according to the customer's understanding of his current status.

"Data submitted by banks are a result of multiple entries by many people. Despite adequate controls, a data entry mistake could result in an error, though these are far and few," says A Meenakshi, head, operations, ING Vysya Bank.

While sometimes there are genuine errors, there could also be discrepancies in the report because of the time lag between data collection and submission or data submission and updating of account status.

"The data come to bureaus generally with a one-month lag and, hence, the status of the account may not be up to date. This may appear as an error to the customer," says Patel of Equifax.

Imagine you made a payment on the 10th of the month and the report goes to the bureau on the 15th. In such a case, the lender has sent one-month-old data and, hence, your payment may not be captured in the report.

There are other data processing time lags too. For example, banks outsource loan collection to third-party agencies, which may have collected the cheque but not informed the bank on time. The processing of cheques itself takes time (outstation ones may take 48-72 hours to be cleared).

Then there are delays at the end of call centres. You may have called up the bank for converting a credit card payment into equated monthly installments. The process may take time and the bank, in the meantime, may report the amount as an overdue.

At the aggregation stage, bureaus use computer algorithms to put the data in sequence. However, due to various commonalties (in name, address, date of birth, etc), complex or incomplete addresses and insufficient information, it is possible that a loan is assigned to someone else's name.

Due to varying levels of quality of data such as names and addresses and unavailability of latest and complete data with lenders, the aggregation of holdings across lenders may not be complete.

"There are chances that there are over-combines on the report due to lack of data or similarity of multiple factors like name, address, date of birth, etc, which may cause errors to creep into the report," says Patel of Equifax.

THE RECOURSE

"There is recourse, but half the time people struggle because they had not seen their credit report earlier. It is at the time of loan application, when the lender informs them about the default entry, that they realise their mistake, which now needs to be corrected immediately. However, a resolution may not be possible in such a case," says Mohan Jayaraman, MD, Experian. He says one must get his or her credit report once a year so that errors, if any, can be corrected.

If one finds that a loan has been incorrectly (wrong amount overdue, wrong date of closure, etc) reported, one can take up the issue with the lender. The lender will verify the details and then submit the corrected data to the bureau, which will then change the credit report accordingly.

If a loan shown in the report has not been taken by the person, he can approach the bureau directly and register a complaint.

All bureaus have dispute resolution forms on their websites that aggrieved customers can download and send with relevant identification documents.

If the error is due to data submitted by the bank/lender, the bureau will take up the issue with the lender. According to the law, banks have to come up with formal resolution of a dispute within 45 days of the issue being raised.

DISPUTE RESOLUTION

Not all disputes arising out of such errors are easily resolved. Usually, errors at the data aggregation (bureau) level such as wrong details and loan account can be corrected easily. However, disputes related to wrong reporting of a loan (by banks) such as wrong overdue amount, status of the loan account, date of closure and date of payment can take time to get resolved.

Ankur Singla, founder and CEO, Akosha, a consumer grievance redressal company, says they generally receive complaints related to score/credit history not updated in bureau records despite clearance of the outstanding amount and those related to updating of credit scores in the wrong account.

"These cases are at times difficult to resolve because of lack of documents that can be shown as proof. Besides, most banks have outsourced collection to third parties, due to which it becomes difficult to connect to the right person and follow up with him on a regular basis," says Singla.

If you are not satisfied with the resolution of your complaint, you can approach the bank or the bureau again, specifying what you want. If you are still not satisfied, you can knock at the banking ombudsman's door or move a consumer court.

Source: Secondary

Lengthy process: Clearing Credit Report

Credit repair is a process which helps in eliminating problematic factors from your credit report. This will help your credit report to be error free. This will hence make you creditworthy.

A person’s credit report is generally known as his credit file. The credit file contains the overall history of the credits taken by him in his entire life span. It provides information regarding number of accounts, late payments, overdue accounts, and also accounts that have been written off.

It is generally said that “Making mistakes is easy but correcting the same is a difficult task.” The same applies in case of your credit file. Mistakes such as making late payments, having overdue accounts etc. will make a negative mark on your credit report, but to remove the same mistakes from your credit report and making the report clean is a difficult task and will take time.

There can be instances that some accounts can be reported in your name which you have never applied for. These types of errors can have a negative impact on your credit report and will lead your credit score to sink.

Once you identify the errors in your report and you remove those errors from your report you will notice that your score has not increased. If you have an active trade line, then your score will increase, if not your score will remain the same.

So it is important that you have an active trade line to increase your score. Only removing errors and cleaning your credit report will not improve your score. There are also other factors that will improve your score for example having different types of credit, paying dues on time, and many more factors.

Checking your credit report frequently will help you identify errors in your report and will help you to identify factors that will improve your score.

Check your credit score and obtain report at www.cibilconsultants.com

Source: Secondary

Side effects of using multiple credit cards !

Credit card companies come up with tempting card offers for investors, albeit now more cautiously after the financial markets turmoil, by offering freebies such as life-time free credit, among other things.

Customers already possessing credit cards often find themselves taking up such offers and ending up with multiple credit cards. The moot question here is, should you be content with having one credit card or does it make sense to have multiple credit cards and if so, how many are enough?

Let’s understand what the benefits and pitfalls of having multiple credit cards could be.

Why would one need more than one credit card?

Credit Limit: If you feel that your credit limit on the single card doesn’t suffice, then you may need more than one card. Nevertheless, remember, if you have a good payment history, credit card companies reward you by enhancing your credit limit, which may eliminate the need to go in for one extra card.

So make sure you make your credit card payments on time- the benefits are manifold. You credit score will not get adversely impacted, you will not have to pay high interest on your card and credit card companies may enhance your credit limit.

Convenience: At times, merchants do not accept all cards, for example, some may accept only Visa or MasterCard. So if you have only one card, you may face inconvenience. Also, sometimes your card may get rejected for technical and other reasons. So a back up is required.

Fraud Protection: If you use your credit card for online transactions, for fraud protection, you may find it useful to use only one card for such purpose and restrict the credit limit on it, so that even if your card details are hacked, the extent of damage is limited.

Benefit-oriented cards: There are some cards which provide maximum privileges or a good deal if used for a particular purpose such as petrol purchases or air miles. You may want to take advantage of the same and therefore have a card for that purpose only.

What are the drawbacks of having multiple cards?

Credit history: Maintaining a clean credit history is becoming increasingly important with credit bureaus, like Cibil tracking your payment. The probability of missing a payment date is higher if you possess several credit cards as you will have to keep track of the payment date of each of the credit cards. If you renege on your payments, your credit history will be get affected, which will adversely impact your credit score and your ability to get loans in the future. Multiple credit cards require you be to very responsible.

Purchasing Power: Credit cards give you the purchasing power as you do not need money in your account to make a purchase. If you are impulsive, then having multiple cards can prove to be a recipe for disaster as you may spend without thinking of your repayment capability. That will result in postponement of payments and over a period of time, accumulate into a large debt.

Effort: Managing multiple credit cards is an effort because it requires a proper schedule, which you need to figure out and keep a tab on. You need to keep track of the payment dates, the interest free period and the credit limit.

There is no clear cut method that determines how many cards are enough. One may not suffice, because you need a back up just in case your credit card is not getting accepted for whatever reason and also for various other reasons as stated above. But at the same time, having too many cards requires you to act responsibly so that you do not tarnish your credit history and find yourself in a financial mess. So, the next time you receive a call for a credit card, ask yourself whether it adds any value for you and whether you will be able to manage it responsibly!

For ascertaining credit score and maintaining credit report visit www.cibilconsultants.com and book an appointment now for expert advise.

Source: Secondary

Right time to access and review your credit report !

Credit Reports are the reports explaining your financial behavior to the lenders. The information in the credit report includes the place you live, number of credit accounts owed by you, how you pay your dues. Not only this, it also contains information if you have filed any bankruptcy or have you been sued. All these information provided in the credit report is sometimes called Credit History or Credit Files of any individual.

If the information provided in the credit report is incorrect or it contains errors, it must be corrected in time. You have the right to ask the lender to get the incorrect information that is appearing in your credit report to get it corrected in their record as well as update the same with the credit bureaus. Also you can ask for a free copy of the updated credit report.

There is a defined law to protect you and your creditworthiness. You should not wait until you will be denied for any credit. Few hours spent to read your credit report can save most of your time and aggravation later.

Following are some steps you should take to that will help you to clean your report:

•You should take a photocopy of your credit report, highlight the errors in it and send it to the bureau along with a letter of explanation of the errors.

•You should also contact your creditors regarding the errors that have been appeared in your credit report and ask them to correct the same.

•You should document all the communication that happened with the credit bureaus and the creditors too.

With fraud and identity theft, it is possible that someone can use your identity for obtaining credit on your name. This can affect your creditworthiness.

Checking your credit report timely can help you identify errors or identity thefts that can negatively affect your credit history.
For ascertaining your creditworthiness by credit report and rectification of errors book an appointment at www.cibilconsultants.com

Source: Secondary