IT department look into Credit history and loan repayment pattern of taxpayers

Prioritize cases for recovery of past dues based on a defaulter’s ability to pay.

To recover maximum tax arrears with the optimum use of manpower, the income-tax department has decided to look into the credit history and loan repayment pattern of taxpayers and prioritize cases for recovery of past dues based on a defaulter’s ability to pay.

For this, the department would consult the Credit Information Bureau of India (CIBIL) that assigns credit scores and maintains details of loans taken by individuals, partnerships and corporations, along with their PAN.

Sources said tax officials would be able to get an idea of the assets and the financial health of an assesses against which a tax arrears recovery demand has to be pursued vigorously.

The IT department which claims a massive Rs 6.74 lakh crore in arrears to be recovered is able to pursue cases accounting for only a small part of it every year due to appeals pending in various courts, inadequate assets to recover from defaulters and due to non-traceability of assesses. For FY15, it has set a target of recovering about Rs 42,000 crore of arrears, about 6% of the R7.4 lakh crore the government wants to collect this year by way of corporation tax, personal income tax and wealth tax, 15% more than what it raised last fiscal.

However, IT will vigorously pursue recovery of arrears from defaulting partnerships and large corporations even via attaching the assets of partners and directors. In the case of individual taxpayers who have expired, it intends to reach out to their legal heirs, said a field officer, who asked not to be named.

The tax authority wants to cut down the quantum of arrears to be recovered and would consider writing off smaller demands.

Source: Secondary

Don’t let history repeat itself

I have often come across friends boasting, “My credit score is higher than yours,” and those on the “lower” end of the comparison want to have higher scores. Then there are past defaulters who wish to be considered for a loan and complain that banks turn down their application even after they have settled all outstanding in full and even improved their scores. In many cases they are indignant that they have now settled all the over dues, hence should get access to loans.

Past defaulters

Let us take up the case of the past defaulter first. Let us suppose you are in the money lending business and a potential borrower has approached you for a loan. Would you lend to this individual knowing fully well that he has delayed payment in the past to another money lender and only settled a part of the amount of overdue interest to the lender? Even if he had settled his outstanding in full along with overdue interest, would you still lend to him?

Like any sensible businessman you will wait for a while till he shows better record with someone else before you lend him money. This is exactly how one who is placed in this category of borrower should do: First, settle all outstanding payments. Even you settle, do not expect an overnight increase in your ability to borrow more. You will need to slowly rebuild your history. The best way is to get loans that are available despite your adverse credit history.

You can take a secured credit card from some public sector banks where you place a fixed deposit with the concerned bank and they give you a credit card with some percentage limit of the fixed deposit amount. This ensures that the bank is completely protected from the risk of any default as they can set off the credit card outstanding against the fixed deposit amount in case of the eventuality.

The reason it helps the consumer is that when he spends and pays back on the credit card, he is building a good repayment history. The other option could be to take a loan against gold from leading banks or NBFCs. Again the lender is fully protected and hence is able to give a loan despite the adverse credit history.

Prompt repayment on such loans again creates better credit history. Over time the credit institution starts giving less weightage to your old default and more weightage to your current prompt payment and hence the overall credit score starts improving.

Keeping up with the Joneses

The second category of people compare their score with their friends discover that their credit score is lower than their friends/relatives and want to understand the reasons. Do not get obsessed about your credit score as long as it is above 750. Unlike the US where a movement of 5-10 points in your credit score could cost/save you thousands of dollars in interest and fees, in India lenders just use your credit score to eliminate people whom they will not consider for lending. So if you have a credit score of 825 and your friend has 775, you will still get the same rate and experience from the lender since both of you will make the grade to be considered for the loan. Here are a few things that you could do to make sure that your score becomes higher while waiting for the benefits to accrue:

Get a copy of your own credit report at least once a year and make sure you follow up to get any errors corrected to ensure it does not hurt your credit score.

Pay your bills on time

Keep unsecured loans to a minimum. Don’t close your old credit cards as repayment history on older credits has a higher weightage than on a newer facility. If you have used the credit limit on your card almost fully then apply to get your credit limits enhanced to show lower utilization of your credit limits.

Book an appointment to get credit report and rectify the errors at www.cibilconsultants.com

Source: Secondary

Read This if your loan has been rejected despite of high CIBIL score

Having a high credit score is a must for lending banks but it does not guarantee the loan approval. Other than credit score, there are also other factors considered before granting a loan. Eligibility and quantum of loan to be given depends on different parameters and criteria which may differ from bank to bank.

Approving of your loan application depends highly on your CIBIL credit score. But a host of other factors are required for your loan application approval process too. The reasons for rejection of a loan are:

Over leveraged:
You are expected to have at least 40% of your income towards everyday living expenses. When you are paying more than 60% of your income towards various dues i.e. car loans, home loans & credit card card bills or have way too many active loans, you are considered to be “over leveraged” by banks,
Though your CIBIL score may be above average(because you are applying for more credit) and you would be prompt in paying your loans you would still be rejected since banks consider you as “over leveraged”.

CIBIL report having Derogatory remarks: 
Your credit report is plagued with derogatory remarks such as "Settled “and "Written Off" status. Financial institutions(NBFC’s) and Banks are cautious when lending money to individuals who have such derogatory remarks on their report because such remarks indicate that you didn't pay off the payment in past transactions or if you did make the payment you did not pay it in full. Most banking agents will insist that you go with a "Settlement" with the bank as you won't have to pay the full amount, but don’t get lured and always go for a full closure.

Credit Hungry:
When we are in urgent need of money, we do the mistake of applying in multiple banks and financial institutions all at once. For example, if are applying for a loan in Bank P, Q as well as R. You will think that the other bank will not be aware of you applying in the other two banks. But this is a wrong thinking because every application will be recorded as an inquiry for credit.

Now, this could result into: your CIBIL score being lowered by at least 10 – 17 points (approximately) every time you even inquire for loans. And also this will give the impression to your lenders that you are always borrowing beyond your comfort level.

Guaranteeing a defaulter:  
As a guarantor of the loan you are equally liable to pay the loan as is the borrower. If you are the guarantor for a loan which is showing late payment pattern or has been settled with the bank with partial repayments, your loan gets affected too, for guaranteeing a defaulter.

Do not have adequate taxpaying history:
If for some reason you have recently started filling returns then the bank may reject your loan application. Banks usually need at least two years worth of income tax to be filed by the borrowers they consider favorable.

Problems with credit score ? Loan application rejected ? 
Don't worry just hurry..book an appointment now only at www.cibilconsultants.com

Source: Secondary