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

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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Credit score change again? Know why?

We believe if we don’t change any of our financial habits, our credit shouldn’t change. But our credit score depends on our credit history which keeps changing, little every time. When you generate a credit score from a credit bureau, it generates a new credit score for each credit score request and gives you the updated credit score. 

These three credit reporting bureaus- CIBIL, Experian and Equifax  create your credit reports and your credit score is based on that. When the credit bureaus receive new balances, inquiries, recent payments and any other information from your lenders; your credit report is updated and a new credit score is calculated based on this updated information. Any minute variation in your credit line could have an impact on your credit score, the main factors being changes in your payment and borrowing behaviour.

·   When you make payments, your total debt amount reduces, which is one of the factors to calculate your credit score.

·   Old items i.e. negative credit history like bankruptcy disappears from your credit report after 10 years and that may account for some changes in your credit report.

In the same way, when you close old credit card accounts they fall off your report after a period of time too.

·   When you use too much of your available credit, your credit utilization ratio rises thereby dropping your credit score. Keeping it low is the key to maintain a good credit score.

All these may account for small changes in the credit report, but they are changes nonetheless.

visit: www.cibilconsultants.com

Source: Secondary

Pay off with credit card to increase your CIBIL score.

Credit reports are used by loan companies to help them determine whether you are a good risk or not and if you are likely to repay any loan taken out. There are some very simple steps you can take to raise your credit rating. Many of these actions are things not to do also.

"If you consistently pay off your bill as soon as you receive it, your balance will remain lower. If, on the other hand, you continue to charge up the card between receiving your bill and paying it off on the due date a couple of weeks later, your reported balance will be higher. This increases the chances that when the credit bureau takes the snapshot, your credit utilization ratio will be higher."

Avoid jumping from credit card to credit card.: If you "transfer your balance" - a scheme that doesn't hurt you, and gets you 0% interest on your balance for a period of time, sometimes as long as a year – unnecessary don't open the new account. Your credit history looks better to the credit bureaus if you have long-standing, established accounts.

Rely on your seniority in age: You can't do anything about, being older, but at least there's something good about ageing! Age is one of the personal factors which bureaus take into account while giving the credit ratings.

Regularly pay your bills on time: This is actually first in the order of things you must do to better your credit score. Each late payment is affecting your credit score and presents a picture of unreliability. You must determine that, if you want to improve your CIBIL score, you should pay your bills on time. The biggest hunk of your credit score is based on your payments history.

Source: Secondary

Rare ways to improve credit score

When it comes to your credit score, you are known to the common routine to raise and maintain your good credit score; paying your bills on time, not closing old accounts, keeping the credit utilization ratio low etc. But other than these common rules about your credit score, most people are not known to some other uncommon ways which may increase or decrease your credit score.

Payments before due date:
The banks report your balances to CIBIL or other credit reporting agencies on the statement date, not necessarily on the due date. The balances can be reported before the due date too so you paying the balances on the due date may not make it to your credit report. This may increase your credit utilization ratio thereby affecting your credit score. Try to make all the payments before your due date and by the date of the statement, as that is most necessarily the date till when banks send reports to bureaus. You can also make multiple payments to periodically pay off your balances before the due date.

Collection agencies:
Sometimes our debts go for collections when we are not able to pay them off. Debts going into collections can affect your credit score negatively to a very great extent. You can talk to these collections agencies and many of these agencies will agree to remove the debt from your credit report if you pay it off your debt. But get it in writing before paying off such collection debts.

Deletion by ‘good-will’:
If you are a person who regularly serves his debt and is credit responsible but have 1-2 small things which are hampering your credit score, then  you can get these things sorted by the bank. If it is one of the rare instances when you have made a late payment, talk to your bank ; they might cut you some slack and you can get your credit score improved.

Source-secondary

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

Debts can destroy your credit score !

There are some differences in how the different types of debts affect your credit score. let us understand how :

Mortgages
Value of your house less than the mortgage value? Your credit score won’t be affected as long as you keep up with the payments. Your credit report won’t have the value of your house listed on the report, so value of your house being lower than the mortgage value won’t be an issue. Excellent credit can be still maintained even if you are financing home with hefty loans, provided that you make payments on time. But if you are having multiple mortgages with pending balances, then they are likely to impact your score.

Auto Loans
Your payment history is more important than the amount you owe on your auto loans. If you have a habit of buying too many cars or have multiple auto loans with pending balances on your CIBIL report then your credit scores can be impacted. But even then your payment history will have more importance than the amount of debt virtually at all times.

Credit cards
These loans are revolving accounts, not like installment accounts. Hence, they are treated differently to some extent from the ones mentioned above. While the number of revolving accounts you have with unpaid balances and the amount you owe are taken into consideration, the available credit you use is the most important factor. The credit score will have a look at your limits and then compare then to your current balances as reported by your lenders. This ratio is known as your 
credit utilization ratio.

To manage your debts and improving your credit score just consult credit specialists at www.cibilconsultants.com

Source: Secondary

Credit card cancellation affect your CIBIL score !

The decision to cancel a credit card usually comes in mind when we want to avoid excessive spending or if the terms of the credit card are not friendly anymore but you have to make sure to do it in such a way that it gives the least damage to your CIBIL score.

Choose which credit card to cancel wisely:
If you are carrying multiple credit cards, always make sure, never to close all your credit cards at the same time. Your credit score may be badly reflected if you close too many cards at once, it may also hamper your chances of getting a credit card or a loan in the future. Credit card cancellation must go according to the terms of the banks exit policy or it will go on to reflect a very bad credit score. Try to compare the rewards and schemes the card gives, the interest rates and the other details and then choose which card will give the best advantage. Also, remember that is better to close the credit cards which have been attained recently than the older credit cards to avoid any dip in the credit score.

Pay off any pending balances:
The bank will cancel your credit card only if it does not have any pending balances due to the bank. Pay off the balances on the card in full, or transfer the balance to a balance transfer card if you have found one with better terms. If you don’t want any more dues till the time you pay off your earlier dues, you can get your card frozen till the time you clear the balance and close off your card. If you want to close your credit card accounts without impacting your credit score then you need to make sure that you have zero balances on your CIBIL report for all your active cards.

Keep checking your CIBIL score for updates:
When you close a credit card it reduces your credit limit, which eventually gets reflected in your credit score. Keep checking on your CIBIL report after you cancel your credit card. This will allow you to keep an eye on how much damage the cancellation of the credit card had on your credit score. The credit utilization ratio goes down after the cancellation of each of your cards, thus hurting your credit score temporarily. Also remember that is easier to improve your bad credit score than to fight off the huge debt traps of the dues on your credit card.

Credit card utilization is an important factor in determining your credit score so deal with it efficiently and effectively.
For Assistance regarding credit score optimization visit www.cibilconsultants.com

Source: Secondary

What is debt consolidation ? How it affects Credit score ?

When the debts you have taken pile up, the one option for paying it back is debt consolidation. Your debt consolidation report, before you combined the bills, should look better than your credit report. Ultimately, the aim is to improve your credit score, not ruin it. Debt consolidation saves us time and money when we are trying to get out of the debts of loans and credit cards. But does debt consolidation only help our credit or does it hurt it too? It depends on how we consolidate and what we do after consolidating.That is why, it is important for us to understand how debt consolidation will affect our credit.

First let us understand what is debt consolidation:

In simple terms, debt consolidation is taking one big loan which would be enough to pay off your multiple outstanding debts. You get the money to pay off the debts, and then have to make only a single payment to pay the new debt. In this way you don’t have to worry about different loans and their interests but just one loan. Debt consolidation can be done in different ways- we can take a loan or make a new credit card account and transfer all our existing credit balances there.
Debt consolidation will obviously affect our credit score as we are taking a new credit card or loan. It can affect our credit score both negatively as well as positively:

Positive effects:
It is easier to deal with a single payment than managing several outstanding accounts. Instead of worrying about the fees and interest piling up on your several accounts, you now have to worry about only one account. Due to this fact, you will now be able to efficiently budget your money as you will know exactly, how much your monthly payment will be. Likewise, it will also help you save money.Personal and home loans have lower interest rates than most credit cards. Many people also use credit cards with zero percent interest rate for debt consolidation. If you have huge amount of debt at very high rate of interest, then consolidating these debts will help you save 20% or even more on your debts.

Negative effects:
Debt consolidation works only if you manage it correctly, but usually even doing the right can damage your CIBIL score temporarily. It depends on your actions on how it will your hurt your score.Missing a payment on your debt consolidation loans can bring your credit score down. If you close your credit card accounts after consolidating, it can negatively affect your credit score. Don’t close your old accounts as they give you the longest credit history. Always wait till all your debt is paid off before you close your accounts. This is because, your debt level will stay but your available credit will start to decrease. This will make it look like you “maxed out” and can be a big risk.

When you are applying for a new loan or credit card, you apply for new credit which will eventually lead to a “hard enquiry” in your credit and your score would go down.
Your credit score also partly depends on your credit utilization ratio.If your credit cards maxed out and you open a new card it will increase your debt and will make your utilization ratio go down which will eventually help your score. But if you carry a high balance on any of these cards, your score will take a dip. If you have transferred your multiple debts and closed your credit limit, your credit score will still suffer even though your other credit cards are paid off.

The conclusion is, handling your debt consolidation properly will have a positive effect on your credit but if you go the wrong you will do more harm to your credit score.

Deal with credit score issues by consulting doctor for all your financial worries only at www.cibilconsultants.com

Source: Secondary

How does Balance transfer affect your Credit score?

Balance Transfer is when the credit card company gives you a service for a limited period of time, where you can transfer your debt to a new credit company which has low or zero interest. Balance Transfer is basically the bank giving you time to pay off your loan and not be held down by high interest rates too.

But the main question is- whether balance transfer affects your credit score? The answer depends on how you go about the process and how you use it. Depending on many factors, it can either hurt or help your credit score.If balance transfers are used responsibly, they can help you reduce your debts and even give a boost to your rating. And though it does help you in saving money, we should consider the overall impact of it on our credit score.

Inquiries:
When you apply for multiple balance transfer cards with low interest rates, you can negatively affect your credit score. Applying for several cards means several “hard inquiries” against your report. Hard inquiries stay for 2 years on your report and can take your score by several points. They also reduce your chances of approval and indicate that you may be a lending risk. Do proper research and then apply for one card than multiple cards. Also compare the balance transfer cost and the long term cost of keeping that high interest debt,

Average credit account age: 
The longer the lengths of your accounts, the higher your score. When you open a new balance transfer account, since it doesn't have a long credit history, the average age of your credit accounts comes down. Also most people tend to close their old accounts after balance transfer, which further decreases their average age and in turn decrease the credit score. So even if you opt for balance transfers, keep your old accounts open- they’ll help you in the long run.

Credit utilization rate:
The lower your credit utilization rate, the higher your credit score. When you open a new balance transfer account, since you will be using all of the account to pay off your debts, your credit limit is fully utilized which will lower your credit utilization ratio and then your credit score. So it is better to get an account which has a credit limit more than what you need for your debts. Don’t close your old account, it’ll keep the available credit more and won’t let your credit utilization ratio go up and thus, won’t decrease your credit score.

For any assistance regarding credit score contact us by booking an appointment at www.cibilconsultants.com

Source: Secondary

Credit Card vs Debit Card

Credit and Debit Card both are very similar in their usage; the main difference being that in debit card, the money is used from your account where you deposit your money, while in credit card the money is used from your line of credit which you have to repay at the end of each month. So which card gives better benefits than the other? Check the reasons below to find out:

Building Credit Score: 
It is common knowledge how a credit card is very useful in improving and maintaining your score. The only criteria is that you should keep your credit utilization ratio low.While a debit card is obviously not a credit account, therefore it can hurt or help your credit score.

Protection from Fraud:
The liability for fraudulent charges is fixed in a credit card. If your card or card number gets stolen, fraudster cannot steal money beyond a certain limit while in a debit card, the liability is unlimited, depending on how fast the fraud is reported. Your whole account balance is at a probable risk.

Protection during purchases:
During purchases, if you are unsatisfied with the services or products of the seller, the credit card allows you to reverse the purchase charges that have been charged on your card. So that is why in large purchases, even if you can use cash go for a credit card. You can use the cash later to pay off the credit card bill. In debit card, there is no such protection. Money once charged from your account cannot be taken back. Your debit card cannot save you from a poor customer experience.

Perks & Rewards:
Credit Cards offer various perks and rewards for using the card like air miles, purchase points, travel points, gift cards etc. So, even if the credit card does charge you an annual, the rewards would overpower the fees any day. While in debit cards, there are very few cards which can offer such rewards and even if they can offer rewards the rewards aren't of much par with the debit cards.

Source: Secondary

How to maintain good BUSINESS credit score ?

You don’t only have a personal credit score-If you own a business, there is something known as a business credit score too. It is on the basis of your business credit report that lenders determine whether to give credit to your businesses.

Managing credit for your businesses is very challenging for small business owners. Lack of knowledge makes them commit various mistakes like using personal credit cards for business transactions, missing out on small business credit opportunities etc. thereby affecting the credit worthiness of their business.

Don’t close your old accounts: 
Unlike, how it is said in personal credit to close unused accounts, in business credit it is recommended to not close unused accounts. In business credit score, the more accounts (even if they are unused) the better. The more accounts you have, the more credit you can borrow in future. Closing unused accounts reduces the amount of credit you have available therefore reducing credit utilization ratio and also your credit borrowing limits later in future.

Keep your financial accounts updated:
Though this factor doesn't directly affect your business credit score but if you have applied for any credit, lenders may seek your balance sheets and check whether there are any differences in the actual revenue and the revenue you claimed in your application. This can have an effect on your credit limits and in some cases even the loan amounts.

Evaluating your company’s structure: 
Though sole proprietors firms and partnership firms are the easiest firms to create but they have the most financial constraints. You have to keep evaluating the structure of the company as it may affect your credit score.  

Don’t apply for multiple credit obligations:
Your business credit score can be negatively affected if you apply for multiple credit cards or loans in greed of discounts and increasing your credit history. Too many applications will give you the ‘credit hungry’ tag by the lenders and more credit checks i.e. ‘hard inquiries’ will be done against you, thus hurting your credit score.

Balance transfers:
As said, the more accounts you have the better. But managing multiple accounts become a little hard and sometimes balances remain on some cards. Try to pay off all your balances and if you can’t there are some banks which offer transfer balances at 0% for a certain period of time to pay off the balances.

Source: Secondary