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

Your credit needs to be in shape, before you apply for mortgage!

One of the biggest purchases you will ever make is likely to be your home. A home purchase is usually so large that you need to borrow money to complete it. Your mortgage is a large amount to borrow, no matter the price of your home. As a result, one of the best things you can do if you want to save money over time is to get the lowest possible mortgage rate.
The most important factors considered by mortgage lenders when determining your rate is your credit score. “The higher your credit score, the lower the rate you’ll get for your mortgage,”
She points out that lenders will also look at items like your debt-to-income ratio, employment history, and down payment when approving you for a loan and setting your interest rate, but a good credit score is the item that carries the most weight in determining your interest charges. “Over the course of the loan, a lower rate can save you a ton of money,”.
                                     

How to improve your credit score before applying for a mortgage?

The time to work on your credit score is before you apply for your mortgage. The first step is to check your credit report. 
Look through your information to determine if there are inaccuracies in your report dragging you down. Those need to be corrected if you want to see your credit score improved. Cibil Consultants offers insightful information about your financial situation so that you can identify potential problem areas to target.
Your payment history is the biggest factor influencing your credit score, so make sure you continue to make your payments on time. “If you’re not already on a budget and tracking your spending, you need to set this up right now,”. “This will help ensure that you pay all your bills on time.”
You can’t make up for past late and missed payments, though, so one way to help get your credit score in good shape is to pay down some of your credit card debt.
 Credit utilization is the second-most important factor in determining your credit score, and one of the easiest difficulties to overcome, if you have the means to pay down some of your credit card debt. “The golden rule is to keep your credit utilization ratio below 30%,” she says. “But if you want to boost your score as much as possible, keep it below 10%.” Between paying your bills on time and paying down credit card debt, you should be well on your way toward boosting your credit score to a point where you qualify for a better mortgage rate.

How long does it take to see improvement in your credit score?

The chances are that you won’t see an immediate improvement in your credit score. Your credit score is based on information that is reported to the major credit bureaus, so it depends on when your creditors report their information. Many credit card issuers report your balance (and your current credit limit) to the bureaus every 30 or 60 days. This is another reason that reducing your credit card debt can help you boost your score relatively quickly. However, there is no guarantee that your information will be reported as quickly as you like, so you might need to wait 90 days or more to see improvement.
 Black marks on your credit history can slow down your ability to get your credit score in good shape. “For someone who has a bankruptcy in their recent past, it will take longer to see improvement,” she says. “If you don’t have negative items on your credit report, you just need to wait until you can get your utilization ratio as low as possible and the issuers report it.”
Even though it might be tempting to apply for a mortgage first, and then worry about the credit score later, it’s better to wait. You won’t be offered a good deal if your credit score is only fair. Even saving 1% on your mortgage can mean a savings of tens of thousands of dollars over the course of a 30-year loan. Waiting a few months to get your score into the higher range of good, or getting it up to excellent, can be a smart money move.
“Unless you have a reason to get a mortgage as soon as possible, it’s best to wait until you can maximize your score,”. “It truly does make a huge difference in your monthly payments and this will help you in the financial long run.”

Source: Secondary

Fewer checks, faster loans, with good credit score

If you have a good credit score from a credit bureau, it is not necessary that you may get a loan at a lower rate. But you could get your loan faster and with fewer checks by the lender. Process differentiation is the first advantage that customers can look forward to as a result of their good credit scores. The second advantage would be the rate differential, which may take some more time, said Mohan Jayaraman, MD, Experian Credit Information Company of India.

 

A credit score is a number that indicates the borrowers potential to repay and chances of default. It indicates the creditworthiness of the person. Banks and lenders now increasingly rely on credit scores, which are given by credit bureaus, to decide if the loan should be approved. Usually, the higher your score, the more are the chances of your loan application getting approved.

 

Explaining why banks are not yet offering lower rates for customers with a good credit score, Jayaraman says that for Indian banks consumer lending segment is a fairly low margin business. So, their aim would be to keep margins steady. But many banks have now started making the process simpler for customers with better scores.

 

For example, for a customer with a good score, the bank may do away multiple field investigations. If normally the bank conducts two field investigations before approving the loan, in this case the bank may do with just one.

 

Similarly, the turn around for approving the loan could be faster in case of a customer with a high credit score. For instance, the bank may approve the loan of a customer with a good credit good within one or two days, while for other customer it may take up to a week. 

Unsecured loans, such as personal loans is where the differential, especially the rate differential is likely to be seen before other segments, since the margins are higher in that segment.

 

In personal loans, some banks offer better deals for customers of a particular profile, such as those working in a particular company and who may have their salary accounts with the bank. Or customers who already have a banking relationship with the bank. 

"'Eventually the credit score bank will be a new segment for banks to approve the loan. For instance, banks will say that borrowers in certain band will get better scores,'' Jayaraman said.

 

Shyamal Saxena, general manager, retail banking products, Standard Chartered Bank said that the market will eventually evolve to the pricing differential based on credit scores. As of now for a customer with a good score, banks may do fewer verification. "The retail credit penetration in India is still very low and there are a large number of customers for whom banks will do the extra verification,'' he said. 

Customers can know their individual scores by accessing the individual credit report from credit bureaus.

Source: Secondary

Your loan future is decided by your credit history.

What is your credit history? A question often posed to most borrowers may as well be the driving focus over the next couple of years in determining the future course of the borrowing market. The current scenario in which borrowers seek loans on the same rate regardless of their payment record and financial history is unfair for those who are diligent with their payments. In fact, it will be increasingly more and more difficult for consumers to borrow unless they have a sound credit history across a range of products.

 

Capturing of relevant and timely information by credit bureaus and its effective sharing with financial institutions will have important ramifications in driving the efficacy of the whole lending industry. Last year, the RBI made concrete moves in widening the field for credit bureaus by issuing licenses to three new credit bureaus.

 

From then on, these credit bureaus have been steadily building their presence in India amid the burgeoning number of Indians who use financial products. The presence of multiple bureaus augurs well in improving lending decision making. It makes for the availability of a wide range of data, and value-added products that help interpret the value of that data, thereby improving decision making quality.

 

Most credit rating bureaus operate as joint ventures between banks. In many ways, this is a mutually beneficial relationship—facilitating data sharing between banks and bureaus, and the subsequent access to reports. We are also seeing many banks following the test-compare-adopt model with credit bureaus. Thus in a competitive market the multi-bureau system is well appreciated.

 

Active portfolio management of accounts will be the next important step that lenders will undertake. Typically, banks do not actively track customer activities after the sanctioning of loans, unless the customer defaults or delays a payment. Customer profiles are fast changing with a new penchant for multiple credit cards and loans.

 

A once-diligent customer is likely to go overboard and over-leverage after taking the first loan, and may even turn delinquent. Active portfolio management will help track customers constant efforts at leveraging themselves. Credit bureaus will play a key role in the implementation of active portfolio management. Thanks to modeling and monitoring tools like these, lenders can actively manage their loan portfolios to ensure an efficient risk/reward ratio and sufficient diversification of loans—much as they would in an investment portfolio.

 

The scope of offerings by credit bureaus in the Indian market is likely to get more sophisticated.

 

Personal credit reports will play a key role in empowering borrowers to begin negotiating interest rates based on their credit history. This assumes special significance in an environment marked by both high interest rates and spiraling cost of living. The time is not far off when consumers with good credit history will be in the driver's seat while going to their banks of choice and negotiating better rates for themselves. A multi bureau set up implies this will be done sooner than later, making it a win-win for both consumers and lenders.

Source: Secondary

Is someone ruining your Credit score?

Your credit history is a major part of your financial life. Even if you don’t think that you will borrow money anytime soon, the information in your credit report can influence your auto insurance rates, whether or not you can rent an apartment, and can even keep you from getting a job.

Keeping tabs on your credit history, and keeping up with the information in your credit report is an important part of protecting your finances. While it’s possible to monitor what goes on with your credit with the help of credit consultants like CIBIL CONSULTANTS  , the reality is that protecting your credit is your job.
It’s important that you protect your credit from others. Here are some of the ways that others can damage your credit — and how to stop them from ruining your financial reputation:

Loaning someone your card

“Sure they promised to pay, but if they don’t it’s on your credit report, not theirs,”.
When you hand over your card, you are offering the other person access to your available credit. They can use as much of it as they wish. If they run up more bills than you can afford to pay, you are still responsible for the balance, since you gave your permission for the use of your credit card.
Someone’s use of your credit card can impact your debt utilization, which in turn can bring down your credit score. And don’t forget about the costs that come if the person goes over your credit limit with your card.
“Don’t ever give someone your credit card, regardless of how desperate their plea may be,”. “You can offer to help them out of the jam, but not by handing over your credit card.”

Authorized user

Maybe you don’t hand over your credit card. Perhaps, instead, you decide to add someone (like your college-bound child) as an authorized user on the account. He or she gets a personal card. However, the reality is that it’s still your account. “The authorized user has charging privileges, but is not responsible for repayment,”. “Activity is reported in both names.”
This can be a way to help someone else, like a spouse or a child, build credit, but you are still responsible for repayment of the loan. “If they spend recklessly and you can’t repay the debt, it’s a real problem,”.
If you decide to add someone as an authorized user, recommends that you set clear boundaries, and carefully watch spending activity online. That way, it’s possible to head off any spending disasters before they get out of hand.

Cosigning a loan

It can be tempting to help someone out by cosigning their loan. After all, you aren’t actually borrowing the money, and the “real” borrower is responsible for repayment. It’s a bit different from adding an authorized user to your credit card, since the bill isn’t coming directly to you when you cosign. Unfortunately, there are major pitfalls associated with cosigning a loan.
“Some people think that you’re each responsible for half of the debt". “Actually, each cosigner is responsible for payment in full.”
All payment activity is reported to the credit bureau in each signer’s name, she continues, "so nonpayment by the borrower can wreck an otherwise good credit report and score for the cosigner.”
Even if the cosigner pays regularly and on time, the fact that there is debt on your credit report means that your ability to borrow could be hampered. If you plan to make a major purchase with debt (like a home or a car) in the near future, your ability to borrow or get the best possible interest rate could be significantly reduced.
If you decide to cosign, make sure that you set clear expectations for the borrower. Monitor payment, and insist that the borrower talk to you if he or she runs into trouble so that you can salvage your credit. “Only cosign on a loan if you’re willing to pay it all yourself,". That way, you are prepared for the worst-case scenario.

Identity theft

Of course, it’s not just people you know who can ruin your credit. You might be the victim of identity theft that can cause problems. “Identity theft and scams can damage your credit at least temporarily,”
Loans taken out in your name can reduce your ability to borrow. Additionally, if a fraudster takes out a loan in your name and doesn’t pay, it can be a fast way to tank your credit.
In order to catch identity theft early, it makes sense to monitor your situation.You can also get access to your free credit scores if something goes amiss with a credit application.
Keeping up with these actions can help you see red flags and remedy the situation as quickly as possible. You don’t want others to ruin your good financial name, so take steps to keep your credit in tip-top shape.

Source: Secondary