Check, Recheck your Credit Score on Daily Basis!

You’ve probably heard that you should check your credit regularly. But why is that advice given? Before you decide that you don’t really need to check your credit report, here are few reasons to take a look on a regular basis:

Prepare for a major purchase or life change

One of the biggest reasons that you should check your credit is in preparation for a major purchase. When you buy a home using a mortgage, the lender wants to verify that you are likely to make your payments. Another major purchase that requires a credit check is a car.

You might even need to prepare your credit ahead of moving into a rental. Many landlords want to see if there are potential red flags that could result in missed payments. Checking your credit ahead of time can be one way to prepare for what’s next.

It also makes sense to prepare for major life changes by checking your credit since there has been a movement toward including non-credit information, like utilities and rent payments, on credit reports. While such measure might be slow in coming, they could still impact you down the road. Pay attention to what is happening with credit reporting in the news so that you know what actions are likely to cause problems.

                               

Identify and fix errors

You don’t want to be one of those whose credit reporting errors costs more money in the long run. Checking your credit report can help you catch mistakes and have them fixed. Credit reporting agencies are required by law to fix mistakes in a “timely” manner. While credit bureaus don’t have to remove negative and accurate information from your profile, they are supposed to update inaccurate information to provide a better picture of your behavior.

Check your credit report regularly and dispute inaccurate information. This should be done before you apply for credit so that you can avoid a nasty surprise while you’re sitting with the loan officer.

Look for signs of identity fraud

Monitor your credit report for fraudulent accounts, which could be a clue that someone is using your name to open new lines of credit. You should also backup your efforts by checking your monthly account statements and checking your online banking for indications that your credit card numbers are being used to make fraudulent purchases.

By checking your credit report regularly, you can catch identity theft early and take steps to head off further problems. The longer identity fraud goes on, the harder it can be to reverse the impacts and avoid future issues.

Better understand your financial situation

Your credit report can also provide you with clues about your current financial situation.  This can help you make better decisions about your finances moving forward so that you have the ability to improve your credit situation.

Checking your credit report can also help you understand how those in the financial industry view you. Try looking at your credit report as if you were a lender trying to decide whether or not you are a good risk. Understanding your credit report from that standpoint can provide you with ideas for an action plan to look better for financial industry decision makers.

When to check your credit?

The good news is that you can check your credit anytime, and it won’t impact your credit score or the information on your credit report. You are entitled to a free credit report every year from each of the three major credit bureaus.  These resources can provide you with the ability to get a general idea of what to expect when you apply for credit, as well as stay on top of your situation. In some cases, consumer credit sites can also alert you to actions you can take to improve your situation and even save money.

While checking your credit report regularly won’t guarantee that you won’t have problems, the reality is that it is a good way to monitor your situation. At the very least, you can prepare for the most important purchases you plan to make ahead of time.

Source: Secondary

No Credit Score Can Negatively Impact Your Finances

If you aren’t planning to borrow, it seems like it might be pointless to worry about building up your credit profile. After all, if you don’t have a credit score, it doesn’t matter if you aren’t going to get a loan, right?

The unfortunate truth is that this isn’t always the case. In fact, there are many situations in which your credit score matters more than you think. Even though you might not think it’s fair, having no credit score says something about you to financial service providers and others. The lack of a credit score is an indication to others that they can’t trust your ability to be responsible with your finances.
                                             

Financial Setbacks Due to a Lack of Credit Score

Not having a credit score can actually cost you money. A landlord can charge you a higher security deposit on a rental if you don’t have good credit (and having no credit is often seen as just as bad as — or worse than — a poor credit score). You might also find yourself with less than ideal terms when it comes to signing up for a cell phone plan or getting Internet service.

Additionally, in some states, it’s legal for insurers to check your credit score when determining your premiums. 

When you think about the extra costs of not having a credit score, and how they can add up over time, it becomes clear that you could easily be missing out.

When You Decide to Buy Something Big...

The biggest issue you run into, though, is when you decide to make a major purchase that practically requires that you borrow. You might decide to never get a credit card, or even to pay for your cars with cash. But if you make buying a home a priority, having no credit score means you will have a very hard time qualifying for a mortgage.

No one wants to loan tons of money to an unknown entity with no history of making loan payments (and credit cards count as loans). While you might find some lenders willing to take a chance on you, you will likely have to pay a subprime rate to make it happen.

You don’t have to go into debt to build your credit history. If you get a credit card, use it, and then pay it off every single month, you can get a good credit score without the accompanying debt. You’ll be able to further your finances, and get a house when you’re ready.

Visit: www.cibilconsultants.com
Source: Secondary

Credit highly impact your mortgage

If you’re in the market for a mortgage or looking to refinance your home, you’re probably already tracking the mortgage industry and the rising interest rates we’re seeing in the housing market. Over the last year, mortgage interest rates have climbed more than a percentage point. While increasing interest rates could signal an improving economy and a rebounding housing market, it also means a more expensive home for home buyers.

Here’s what you need to know about the mortgage rules and your credit history, and some simple ways to improve your chances of landing a mortgage:

• Your outstanding debt and what you earn has a bigger impact on your mortgage. Thanks to the Ability to Repay Rule, lenders will be looking more closely at two things: your income and your outstanding debt, including credit card balances, student debt and car loans. You debt-to-income ratio – or what you owe versus what you earn each month – is going to have a bigger impact over the type of mortgage and the mortgage terms you qualify for. There are a few ways to improve your debt-to-income ratio: 1) increase your repayment amounts for any outstanding debts, 2) avoid taking on any significant, new debt during the mortgage application process, and 3) consider earning money on the side or asking your employer for a raise to help boost your income.                                                                  
• Paying off your smaller debts could boost your credit history and your mortgage application. Since lenders now have to document and verify all of your income and debts under the Ability to Repay Rule, your finances will be even more under the microscope – and you’ll likely have to wade through a longer application process. To help shepherd along your application and to increase your chances of qualifying for favorable mortgage terms, you should begin to focus on paying off your smaller debts. If you have a lingering credit card balance or you only have a few hundred left on your student loans, focus on paying off those smaller debts in the short term. The less outstanding debt you have in multiple accounts, the more favorable your mortgage application will look.
• Your overall credit still matters a lot – if not more. The Qualified Mortgages Rule means that lenders are not allowed to push consumers into a higher interest loan just to earn a commission. From the consumer protection point of view, this rule is a winner. But it also means that loan officers will be forced to make smarter loans and will therefore be looking for more qualified lenders. So while your credit history and credit score still mattered significantly in the past, it matters even more now as loan officers will want to be absolutely sure you can repay your debt.

Source: Secondary

Why to check your credit regularly?

You’ve probably heard that you should check your credit regularly. But why is that advice given? Before you decide that you don’t really need to check your credit report, here are 4 reasons to take a look on a regular basis:

Prepare for a major purchase or life change

One of the biggest reasons that you should check your credit is in preparation for a major purchase. When you buy a home using a mortgage, the lender wants to verify that you are likely to make your payments. Another major purchase that requires a credit check is a car.
You might even need to prepare your credit ahead of moving into a rental. Many landlords want to see if there are potential red flags that could result in missed payments. Checking your credit ahead of time can be one way to prepare for what’s next.
It also makes sense to prepare for major life changes by checking your credit since there has been a movement toward including non-credit information, like utilities and rent payments, on credit reports. While such measure might be slow in coming, they could still impact you down the road. Pay attention to what is happening with credit reporting in the news so that you know what actions are likely to cause problems.

Identify and fix mistakes

Five percent of consumers have errors that could cost them more in terms of higher interest rates and even higher insurance rates (in some states).
You don’t want to be one of those whose credit reporting mistakes costs more money in the long run. Checking your credit report can help you catch mistakes and have them fixed. Credit reporting agencies are required by law to fix mistakes in a “timely” manner. While credit bureaus don’t have to remove negative and accurate information from your profile, they are supposed to update inaccurate information to provide a better picture of your behavior.
Check your credit report regularly and dispute inaccurate information. This should be done before you apply for credit so that you can avoid a nasty surprise while you’re sitting with the loan officer.

Look for signs of identity fraud

The FBI identifies identity theft as a major threat to many consumers. While you might not be able to prevent identity fraud in all cases, you can watch for signs to attempt to catch it early. Monitor your credit report for fraudulent accounts, which could be a clue that someone is using your name to open new lines of credit. You should also backup your efforts by checking your monthly account statements and checking your online banking for indications that your credit card numbers are being used to make fraudulent purchases.
By checking your credit report regularly, you can catch identity theft early and take steps to head off further problems. The longer identity fraud goes on, the harder it can be to reverse the impacts and avoid future issues.

Better understand your financial situation

Your credit report can also provide you with clues about your current financial situation. This can help you make better decisions about your finances moving forward so that you have the ability to improve your credit situation.
Checking your credit report can also help you understand how those in the financial industry view you. Try looking at your credit report as if you were a lender trying to decide whether or not you are a good risk. Understanding your credit report from that standpoint can provide you with ideas for an action plan to look better for financial industry decision makers.

When to check your credit ?

The good news is that you can check your credit anytime, and it won’t impact your credit score or the information on your credit report. You are entitled to a free credit report every year from each of the three major credit bureaus. Additionally, there are consumer credit sites, like Cibil Consultants, which allow you to look at information related to your credit report anytime. These resources can provide you with the ability to get a general idea of what to expect when you apply for credit, as well as stay on top of your situation. In some cases, consumer credit sites can also alert you to actions you can take to improve your situation and even save money.
While checking your credit report regularly won’t guarantee that you won’t have problems, the reality is that it is a good way to monitor your situation. At the very least, you can prepare for the most important purchases you plan to make ahead of time.

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

Reasons to check your credit regularly!

You’ve probably heard that you should check your credit regularly. But why is that advice given? Before you decide that you don’t really need to check your credit report, here are 4 reasons to take a look on a regular basis:

Prepare for a major purchase or life change

One of the biggest reasons that you should check your credit is in preparation for a major purchase. When you buy a home using a mortgage, the lender wants to verify that you are likely to make your payments. Another major purchase that requires a credit check is a car.
You might even need to prepare your credit ahead of moving into a rental. Many landlords want to see if there are potential red flags that could result in missed payments. Checking your credit ahead of time can be one way to prepare for what’s next.
It also makes sense to prepare for major life changes by checking your credit since there has been a movement toward including non-credit information, like utilities and rent payments, on credit reports. While such measure might be slow in coming, they could still impact you down the road. Pay attention to what is happening with credit reporting in the news so that you know what actions are likely to cause problems.

Identify and fix mistakes

Information from the Federal Trade Commission indicates that one in five consumers have an error on at least one of the reports issued by the major credit bureaus. Five percent of consumers have errors that could cost them more in terms of higher interest rates and even higher insurance rates (in some states).
You don’t want to be one of those whose credit reporting mistakes costs more money in the long run. Checking your credit report can help you catch mistakes and have them fixed. Credit reporting agencies are required by law to fix mistakes in a “timely” manner. While credit bureaus don’t have to remove negative and accurate information from your profile, they are supposed to update inaccurate information to provide a better picture of your behavior.
Check your credit report regularly and dispute inaccurate information. This should be done before you apply for credit so that you can avoid a nasty surprise while you’re sitting with the loan officer.

Look for signs of identity fraud

The FBI identifies identity theft a a major threat to many consumers. While you might not be able to prevent identity fraud in all cases, you can watch for signs to attempt to catch it early. Monitor your credit report for fraudulent accounts, which could be a clue that someone is using your name to open new lines of credit. You should also backup your efforts by checking your monthly account statements and checking your online banking for indications that your credit card numbers are being used to make fraudulent purchases.
By checking your credit report regularly, you can catch identity theft early and take steps to head off further problems. Some of these steps might include contacting local law enforcement or reporting the issue to the FTC. The longer identity fraud goes on, the harder it can be to reverse the impacts and avoid future issues.

Better understand your financial situation

Your credit report can also provide you with clues about your current financial situation. Consumer sites like Cibilconsultants offer you access to credit reporting tools that allow you an overview of where you stand financially, based on the information in your credit report. This can help you make better decisions about your finances moving forward so that you have the ability to improve your credit situation.
Checking your credit report can also help you understand how those in the financial industry view you. Try looking at your credit report as if you were a lender trying to decide whether or not you are a good risk. Understanding your credit report from that standpoint can provide you with ideas for an action plan to look better for financial industry decision makers.
                      

When to check your credit

The good news is that you can check your credit anytime, and it won’t impact your credit score or the information on your credit report. You are entitled to a free credit report every year from each of the three major credit bureaus. Additionally, there are consumer credit sites, like CIBIL Consultants, which allow you to look at information related to your credit report anytime. These resources can provide you with the ability to get a general idea of what to expect when you apply for credit, as well as stay on top of your situation. In some cases, consumer credit sites can also alert you to actions you can take to improve your situation and even save money.
While checking your credit report regularly won’t guarantee that you won’t have problems, the reality is that it is a good way to monitor your situation. At the very least, you can prepare for the most important purchases you plan to make ahead of time.
                                                                                                                                                                                                                     
Source: Secondary

Down payment for buying an affordable house

The major step in a person’s life is to buy a home. It is often considered to be a significant achievement, a good investment and a celebratory occasion. However, the experience can take a negative turn if the transaction is not handled efficiently, and one of the most important factors that could affect the process is the amount that should be allocated towards your down payment.

Selecting home based on down payment: If you are able to make a large down payment towards your home purchase, you should consider whether it is wise to do so vs. buying a cheaper house. A large down payment on your dream home could mean larger mortgage payments, while choosing to use that same amount towards a home that is less than what you might consider your dream home could mean smaller mortgage payments and more money available to use to cover other expenses.

Don’t forget other expenses
One of the biggest mistakes that homebuyers make is to overlook their other expenses when calculating how much disposable income they will need each month. You can avoid making such a mistake by ensuring that your budget is up to date and includes all of your monthly expenses, such as utilities, other loan repayments, any car payments and insurance, and property taxes that will be owed on your new home.

If you currently live in a rented property, some of the expenses for home repairs and incidentals such as repairing a pipe to mending a fence might have been handled by the owner of the property. This means you should consider setting up a rainy day fund for these items. If the availability of financial resources could be an issue, buying a cheaper home might be a better choice.

Other positives of a cheaper home
Buying a cheaper home has other benefits in addition to the possibility of a lower down payment. .Consider, too, that lowers monthly payments and more disposable income means being able to add more money to long term savings, such as your retirement nest egg and college funds. Finally, it could mean the difference between being able to stay in your home vs. going into foreclosure if your financial status takes a negative turn.

Visit www.cibilconsultants.com

Source-secondary

Borrow responsibly !

Whatever you want, you can avail instantly with the help of loans.  But, wait! Have you ever thought that if loans have made our life much simple, then why so many borrowers spiral into debt traps which is making their life severe?  The reason is – ‘borrowing more than you can afford’. Here’s a sneak peek on lending basics for guiding you aim at your goals with the help of borrowed money.

Three essential goals are to be kept in mind. First, don’t borrow more than you can comfortably handle. Second, minimize your borrowing costs by maintaining a good credit score and favoring secured loans. Finally, before retirement, you should strive to be debt-free.

Unsecured debt

Lenders grant unsecured credit without requiring anything from you as security. There is a considerable amount of risk on the lenders part, because if you fail to pay, they have to take legal action to recoup the money they lent. This is why unsecured credit generally carries a higher interest rate than secured credit. However, if you have proven yourself as a good credit risk by having a long history of borrowing and repaying money responsibly then the interest rates can be appealing.

Most people consider having one or more credit cards, which are another form of unsecured borrowing. The interest rate is often high. Indeed, while credit cards can help you manage your monthly expenses; try not to carry a large balance on a regular basis. If you find it hard to control your credit-card spending, consider a debit card instead, where money is taken directly from your bank account. That may make you more careful about your spending.
                   

Secured loans

With secured credit, an asset (called collateral) secures the loan. Due to this security, the lender assumes minimal risk – if you miss a certain number of payments, they can take the collateral. The lender doesn’t have to go the expense and hassle of taking you to court and winning a judgment before foreclosing on your home or repossessing your car.

If you need to make major home repairs or update your house, you might take a mortgage, which is another type of secured borrowing. Interest rates for home-equity loans are typically low, and you can usually deduct some of the interest from your income taxes. Remember, though, that these are secured loans – if you can’t meet the payments, your home is in jeopardy. Secured credit cards allow you to begin in the world of credit. All you need to do is put down a small deposit as security and you can start charging – and building a positive credit history.

Don’t ‘borrow beyond means’

Irresponsible borrowing can not only put you in trouble but can also make your family members’ lives difficult. If you plan to apply for a loan, particularly a home loan, make sure to only borrow what you need and can repay. Most people will want to be debt-free by retirement. While you may borrow a fair amount in your earlier twenties, you should be looking to pay off debts in your fifties, so you’ve eliminated any loans and the associated monthly expense by the time you quit the work force.

The lender will likely to check your credit score, when you apply for a loan. A higher score will increase your odds of getting the loan and may also mean a lower rate. Because your credit score is so important, you may want to head off unpleasant surprises by reviewing it yourself.

It is incredibly easy to take on more debt than you can afford. Whether the balance is secured or unsecured, the consequences for falling behind are severe. However, if you borrow wisely, you can come out ahead and achieve your financial goals quickly and affordably.

Source-secondary

Secured loan or unsecured?

Every borrower has different financial objectives and priorities in life, and attitudes towards risks. Many consumers often find themselves in a dilemma when it comes to choosing between secured and unsecured loan. However, a lender evaluates a consumer’s credit history before making a loan under either circumstance. Understanding the differences between the two and other characteristics unique to each are mandatory for borrowing money. Want to know – which type of debt is more important for you? Let’s find out…

Secured Debt

Secured debts are tied to an asset that’s considered collateral for the debt. Lenders take on less risk by lending on terms that require an asset held as collateral. As this type of loan carries less risk for the lender, interest rates are usually lower for a secured loan. A prime example of a secured debt is a mortgage, where the lender places a lien, or financial interest, on the property until the loan is repaid in full. If the borrower defaults on the loan, the bank can seize the property and sell it to recoup the funds owed. Lenders often require the asset be maintained or insured under certain specifications to maintain the asset’s value.

Unsecured Debt

With unsecured debts, lenders don’t have rights to any collateral for the debt. Lenders issue funds in an unsecured loan based solely on the borrower’s creditworthiness and promise to repay.  If a borrower fails to repay the loan, the lender can sue the borrower to collect the amount owed, but this can take a great deal of time, and legal fees can add up quickly. Therefore, banks typically charge a higher interest rate on these so-called signature loans. Also, credit score and debt-to-income requirements are usually stricter for these types of loans, and they are only made available to the most credible borrowers. Credit card debt is the most widely-held unsecured debt. Other unsecured debts include student loans and medical bills.

Prioritizing your debts

If you’re strapped for cash and faced with the difficult decision of paying only some bills, the secured debts are typically the best choice. These payments are often harder to catch up with and you stand to lose essential assets – like shelter – if you fall behind on payments.

You might give more priority to unsecured debts if you’re making extra payments to pay off some debt. Unsecured debts sometimes have higher interest rate that makes it expensive to spend a long time paying these off. Even when you’re in debt repayment mode, it’s important to keep up the minimum and installment payments on all your accounts.
Visit: www.cibilconsultants.com
Source: Secondary

Paying home loan has beome easier! See how?

Buying a home is not merely a financial decision. It is an emotional decision too. Are you planning to shed the weight sooner rather than later of home loan? It may be prudent to do so as you become free of EMIs most important benefit of closing your home loan early is obvious – you become free of EMIs and heavy loan debt. It requires discipline and planning, but it brings you much closer to the proud day on which your bank hands you the ownership papers of your fully paid-up house. Have a look on the simple steps to prepay your loan easily and save money for the future ahead.

Just pay more

Start playing with mortgage calculators and see how adding a little payment to your principal here and there can shorten the length of your loan. If you pay a little more principal, you get a bonus. The lower your principal gets, the more every payment from then on is applied to principal, as less goes to cover interest expense. When you pay extra, make sure the extra is applied to the principal balance, not just set aside for the next payment. And before you make extra payments, read your contract and make sure you won’t have to pay prepayment penalties.

Consider your financial plan

With the financial safety net in place, it is time to build the corpus that you will need to close your home loan early. You should begin by taking a close look at all the ways in which you lose money each month. Evaluate the investments and the returns produce on them. Once you are assure that your investments are sufficient to take of financial security ahead. So, you can transfer the surplus to pay off your home loan debt.

Switch to partial payments

Many banks permit their customers to make partial payments of home loan in a year. If you are salaried, you can divert your salary hikes, yearly bonuses or incentives towards your repayments. Businessmen can similarly use any extra profits towards paying off the loan. Check if your bank will set up a biweekly payment plan. Some banks do it free; others charge. Ask the bank to credit extra payments toward principal so you save more on interest expense. Some banks set aside extra payments until the end of the year.

Cut down on unnecessary expenses

Want to pay off your home loan financial debt earlier as to lessen the financial burden every month. Try to cut your extra expenditures wherever possible and use that money to prepay your home loan, You may have to let go holidaying or some unnecessary purchases as they can backfire hugely. However, make sure that the cost attached to prepayment of home loan, if any, in the form of a penalty does not nullify the benefits.
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

When not to use Credit Card

Life has become simpler with the convenience of credit cards and the uncountable benefits it caters. But it often comes at a price of making considerable section of borrowers falling into debt trap which is turning their life difficult. So how can you identify the best times to plunk down the plastic? Here are a few guidelines.

When to say ‘Yes’ to credit cards

Gaining reward points

So many popular credit cards offer reward programs, it’s hard to think of a good reason to carry a credit card that doesn’t. Some offer cash back on every purchase, others pay points. Consumers who qualify can earn hundreds, even thousands of rupees back each year on everyday household spending.

Owning warranty and purchase protection

A credit card can be a great way to protect a major purchase. Most card issuers offer purchase protection and an extended warranty for items bought with the card.

Security purpose while travelling

People who travel can be more vulnerable to fraud simply by virtue of the unfamiliarity of the local language or surroundings. Lost or stolen cash is gone forever, but a credit card can be shut down and replaced during one phone call.

Reaping benefits exclusive to card

Co-branded credit cards typically offer exclusive benefits specific to the brand. For example, some airline credit cards offer free checked bags to people travelling on tickets purchased with the card.

   Beyond your budget

It doesn’t matter if it’s a restaurant meal, a new outfit, the latest smartphone, or a vacation you really think you deserve. Big or small, if you can’t afford it, don’t buy it. Don’t let a credit card trick you into thinking you should have something when it is, in reality, something you can’t afford.

Acquiring mortgage

Mortgage underwriters don’t want to see any changes in your creditworthiness between the time you apply for a loan and the time it closes. If your credit card utilization suddenly goes up, your credit score could take a hit, leaving you unable to qualify for the loan.

Fees is chargeable 

If you’re thinking of paying your mortgage, health insurance premium or other recurring bill with a credit card in order to rack up reward points, think again. Even if the servicer allows credit card payments (many don’t), they’ll charge a fee that deflates or even outweighs the value of any reward.

Having a balance carried

If you have credit card debt, you can’t afford to use your cards. Instead, pay down the balance before you add any new charges to the mix, or you risk getting stuck in a cycle of debt.
Visit- www.cibilconsultants.com
Source: Secondary

Check the categories and know debt for better benefits

At one point in our lives, many of us switch to debt as a method for making large purchases that we usually could not afford under normal circumstances. While encountering debt, you should know that there are several forms of debt: revolving debt, unsecured debt, secured debt and mortgages. It’s essential for you to review each category of debt thoroughly as not all debts are created equally and therefore some are considered to yield better benefits than others.

Revolving Debt

Revolving debt is an agreement made between a bank and customer that guarantees a maximum amount that can be loaned to the customer. Along with the commitment fee there are also interest expenses for corporate borrowers and carry forward charges for consumer accounts.  It is usually used for operating purposes, fluctuating each month depending on the customer’s current cash flow needs. Revolving debt can be unsecured, as in the instance of a credit card, or secured, such as on a home equity line of credit.

A line of credit and credit card are examples of revolving debt.

Secured Debt

Assets backing debt are considered security, which means they can be claimed by the lender if default occurs. A credit check is necessary for the bank to judge how responsibly you handle debt, but if you default on repayment, the bank seizes your assets, sells it and uses the proceeds to pay back the debt.

For instance, if you require a loan to purchase a car, the lender supplies you with the cash necessary to purchase it but also places a lien, or claim of ownership, on the vehicle’s title. In the event you fail to make payments to the lender, it can repossess the car and sell it to recoup the funds.

Unsecured Debt

This debt is not backed by an underlying asset. When a bank makes a loan with no asset held as collateral, it does so only on the faith in your ability and promise to repay the loan. It presents a high risk for lenders since they may have to sue to get the money they’re owed if the borrower doesn’t repay the full amount owed. As a result of this high risk, unsecured debt tends to come with a high interest rate.

Some instances of unsecured debt includes credit card debt, medical bills, utility bills and any other type of loan or credit that was extended without a collateral requirement.

Mortgages

Mortgages are the most popular form of debt and largest debt that many consumers confront in their lives. Mortgages are used by individuals and businesses to make large real estate purchases without paying the entire value of the purchase up front. Over a period of many years, the borrower repays the loan, plus interest, until he/she eventually owns the property free and clear. It typically carries the lowest interest rate of any consumer loan product, and the interest is tax deductible for those who itemize their taxes.
Visit: cibilconsultants.com
Source: Secondary

The right time to buy a house

If you’ve been considering buying a house but you’re still unsure, consider some of the personal and economic conditions that favor home purchases. If you find that a number of these signs ring true for you, it might be time to contact a real estate agent and start shopping.

Funds for down payment
Having a hefty down payment helps in the same way as finding a low interest rate. Ultimately, the less you owe, the less you’ll have to repay and the less you’ll have to tack on for interest. If you find yourself with a nice lump of cash, putting it toward a home purchase is definitely a solid financial investment. Just think, you’ll be building equity in your home which you’ll see again when you sell, and you’ll have somewhere to live in the meantime.

You’re ready to commit
Home ownership comes with a plethora of responsibilities, including home maintenance, property taxes and the process of selling the property when it comes time to move.

Legal fees, moving expenses, and all incidental costs associated with buying a home can really add up. To make the most of these costs, it’s best to plan on living in your new home for a stretch of time. Consider whether you have a stable job that will provide a solid income for a mortgage, and if there’s any chance you’ll have to relocate in the near future. If you feel you can commit to sticking with a home for at least five years, then it might be just the right time for you to buy.

Owning costs less than renting
If you’ve examined your  budget and realized that your monthly payments associated with buying a home are less than you’re currently paying in rent, it’s time to consider a home purchase. Talk to your bank and look at what your mortgage payments would be for a variety of different properties and gauge what you can afford. Factor in any additional costs you may have to pay, such as condominium fees or extra utility bills, and compare your total costs to what you’re paying in rent.

Buyer’s market
When demand for housing is low and there’s a wealth of properties on the market that aren’t moving too fast, that’s known as a buyer’s market. You’ll have a lot more bargaining power under these conditions than if you’re buying in a seller’s market, which is when demand for homes is high, resulting in few properties on the market that are selling fast. In a buyer’s market, chances are you’ll be able to negotiate a seller’s list price down – sometimes quite substantially – and save yourself a lot of money in the process.

Low interest rates
When interest rates are low, it’s a great time to look at buying a home. You will be able to get a reasonable interest rate on your mortgage loan, which can save you a lot of money in the long run. A home is generally the single largest purchase anyone makes, and the amount of interest tacked onto a mortgage really adds up over the years that you’re repaying the loan. Even a difference of a fraction of a percentage point can make a pretty big difference over the long term.
Visit- www.cibilconsultants.com
Source: Secondary

CIBIL Score and Credit Card Limit

Credit Card Limit is basically “Spending Limit” allowed on your credit card. Credit Card is riskiest business for any bank. The default rate is very high on credit cards as it is totally unsecured credit extended to customer. Now a days banks are extra cautious while issuing a credit card. A credit card is issued only after due diligence. Every credit card has different credit limit depending on risk profile of the customer. Credit card limit is decided based on income, current loan portfolio, expense pattern and overall risk assessment of customer by the bank. Banks pull out CIBIL report of a customer to check most of these point. If CIBIL sore is less than 750 or there is a default on payment in past then Credit Card application is not be approved. Basically CIBIL score is a credit report card of a customer i.e. how he manages his personal finance and credit discipline followed by the customer.

Credit Card Limit and CIBIL Score

When the credit card is issued, banks play safe and keep Credit Card Limit on lower side. Based on the usage of customer and payment history, banks keep revising Credit Card Limit at regular intervals normally 12-18 months. At macro level, higher credit limit shows that bank has high confidence on customer that he/she will not default on credit card payment. Credit Card Limit is good pointer how your CIBIL score is moving. If bank offer to increase your credit limit then you should grab the opportunity. It also implies that you are following good credit practices.

As a thumb rule, you should never use your credit card limit more than 30% of approved credit card limit. If current limit is not sufficient then you can always request bank to increase your credit card limit. It is not necessary that bank will oblige. As a back up plan, you may opt for 2nd credit card which will give slight cushion. Credit limit will not increase drastically until unless you are eligible for enhanced eligibility based on usage patter and credit history. An increase of 20%-30% is decent. It is always advisable not to keep more than 2 credit cards.

In normal scenario, financial advisers suggest not to increase credit card limit even if the bank offer to increase the same. Their main concern is that with increase in credit card limit, a customer will tend to spend more. The point is that Bank offer to increase Credit Card Limit only when they observe that customer is following good credit practices. It also imply that customer is using credit card responsibly and making all payments on time. As it is mentioned that as and when bank offer to increase the credit then you should opt for it. At the time, increase in credit limit does not mean that you should stop following good credit practices. Obviously with increase in income level, credit card usage will increase. In order to maintain discipline you should never utilize more than 30% of available credit card limit.

As it is highlighted that higher credit limit means high confidence of bank in your re-payment capability therefore high Credit Card Limit has positive impact on CIBIL Score. Normally Credit Card Limit is around 2.5 to 3 times of monthly gross salary. Assuming a person's monthly gross salary is 1 Lakh. His credit card limit should be between 2.5 lakh to 3 lakh. This cumulative limit is across credit cards in case he is carrying multiple credit cards. If he have 2 credit cards then my cumulative credit limit should be in this range. Credit Limit of more than 3 times monthly gross salary will have positive impact on your CIBIL Score. 

High Credit Card Limit will reduce my future Loan Eligibility

This is the biggest misconception that increased credit limit will eat into your Loan eligibility. Credit Card limit is somewhat similar to overdraft facility extended to the customer i.e. facility is extended, customer is availing or not is different. Credit Limit should not be misunderstood as Loan or Mortgage. Reason being, till you utilize this limit it will not be considered as Loan or credit. Therefore it is advisable to utilize only 30% credit card limit at any given point of time. A parallel can be drawn between Credit Card Limit and Home Loan Eligibility. In case of Home Loan, assume based on his eligibility bank fix his Home Loan eligibility as 1 Cr. If a person only opt for a Home Loan of 40 lakh. In this case his loan/credit liability is restricted to Home Loan availed i.e. 40 lakhs not 1 Cr (Home Loan Eligibility). Similarly in case of a Credit card, if a person's credit limit is 3 lakh and he only utilize 75k then his credit/loan liability is 75k which will eat into his total loan eligibility.

Holding Period of a Credit Card

Some people have habit of churning credit card as and when they receive new credit card offer. It is not advisable to churn credit card because holding period of a credit card i.e. from how long the customer is using particular credit card also impact Credit Limit thus CIBIL Score. It require atleast couple of years time to understand the credit behavior of a customer. Normal credit cycle is of 1 year because credit usage vary from month to month. A person's credit card usage is high during the month of April as he pay all his annual insurance premiums during April. Similarly, usage can be drastically low during September and February. In order to discount all these seasonal variations, credit cycle of atleast 2-3 years is considered to understand credit behavior. Besides credit cycle, longer holding period of credit card shows stable credit behavior of a customer. Holding Period directly impact CIBIL Score therefore if you are using same credit card from last 5 years then there is high probability of better CIBIL Score.

To summarize, Credit Card if used judiciously and intelligently can help to improve CIBIL Score in long run. Some people have misconception that since they don’t use Credit Card therefore they should have high CIBIL Score. Answer is CIBIL score is a derivative of Credit history. If you don’t have any credit history then how financial institutions will check your Credit history. Only a good credit history can help to build good CIBIL Score of more than 750 in long run. Credit Card is one of the easiest and convenient way to improve CIBIL Score & you should not miss this opportunity.

Hope you liked the post and remember that good CIBIL score is result of good credit practices. It cannot be improved overnight. Beware of agencies or companies which promise overnight improvement in CIBIL Score through fraudulent ways.

Source-secondary