Glossary

Asset Classification (AC) – It is important to note that some banks report DPD as per the Asset Classification norms defined by RBI, which are as follows: 

                         



Actual Payment Amount – Is the amount you have paid to you lender if it is different from the EMI Amount. This may be more or less than the EMI Amount.


Amount Overdue - Indicates the total amount that has been paid to the lender in a timely fashion (includes principal and interest amount)


Cash Limit – Applies to credit cards specifically, It is the amount of cash you are permitted to withdraw from your credit card.


CIBIL – Credit Information Bureau of India Limited


Credit Information Reports (CIRs) - A report on a loan applicant’s willingness and ability to make payments in a timely manner in the past.


Credit Rating (CR) – A judgement of a person’s ability to repay debts. The rating is often based on a person’s current and projected income and past debt payment history. Also called a credit score.


Credit Score – Is a number, between 300 and 900, that reflects a person’s credit history.


Control Number (CN) – This is your report number and is essential if you need to raise a Dispute Requests.


Collateral – Is provided to a lender as security to protect the lender in the event you are unable to repay your loan. This may be property, shares, gold, etc.


Credit Limit – Applies to credit cards and overdraft facilities. It reflects the total amount of credit you have access to with regard that credit card or overdraft facility.


Creditworthiness – The ability of a consumer to receive favourable consideration and approval for the use of credit from an establishment to which they applied.


Current Balance – Is the amount you still owe on a particular c credit card facility. Lender, typically take 30-45 days after your payment is received to update this information with CIBIL.


Dispute – If a consumer believes an item of information on their credit report is inaccurate or incomplete, they may challenge, or dispute the item. CIBIL will investigate and correct or remove any inaccurate information or information that cannot be verified.


DPD (Days Past Due) – DPD or Days Past Due apears in the Account information section of your CIR. The DPD indicates how nary days a payment on that account is late that month. Anything other than ‘000’ or STD is considered negative by a lender.


EMI Amount – Is the EMI (Equated Monthly Instalment) that you pay on the loan.


Enquiry – Enquiries are added to your report when you apply for a loan or credit card and the lender decides to access your CIR. Details such as the name of the loan provider size and type of loan are captured in this section. Please note that the date of the enquiry may differ from your actual application date because the lender may access your CIR a day or more after you have applied.


High Credit – Applies to credit cards and facilities. It reflects the highest amount ever billed (including interest and fees) for that particular credit card or overdraft.


Ownership – This field tells the lender who is responsible for payments on that loan or credit card. There are 4 types of indicators that can appear on your CIR:
1. Single: You are solely responsible for making payments on the accounts.
2. Joint: You and someone else bear joint responsibility to payments on these accounts. this wiIl also reflect on the other individuals CIR.
3. Authorized User: This is used for add-on credit cards that you may have. While this reflects on your CIR, lenders know that you are rot responsible for paying dues on that particular account.
4. Guarantor: A guarantor pledges to repay a loan on behalf of a third party who has taken a loan. Hence, he provides a guarantee to the lender that he will honour the obligation, in case the principal applicant is unable to do so.


Repayment Tenure – Is the term at your loan. This field is to be read with the ‘Payment Frequency’ field in order to accurately understand the term or the loan. For example, 120 at a monthly payment frequency would mean the term of the loan is 10 years.


Sanctioned Amount – This is the loan amount disbusmed is Applies to account types other than credit curds aid overdraft.


Settlement Amount – When an amount owed on a loan account in disputed, the individual and lender settle at some amount in between. lt’s what the lender believes is owed and what the individual believes he should pay. This is the amount the individual has agreed to pay. The rest of the amount (that the lender believes is owed) is written-off by the lender.


Suit-Field / Wilful Default – In case the lender has filed a suit against you, there is specific reporting prescribed by the Reserve Bank of India (RBI). This is as follows:
1. No Suit Filed (or the field will be blank); 2. Suit filed; 3. Wilful Default; 4. Suit filed (Wilful Default)


Written-Off Amount (Principal) – This field reflects the principal unpaid written-off by the lender. It follows that the difference between the total and principal written-off amounts is the interest amount that has been written-off on this account.


Written-Off Amount (Total) – When a loan is written-off there is an interest and principal component. This field reflects the total interest and principal amount written-off.


Written-Off and Settled Status – If this section is populated the lender has either restructured your loan by offering you different terms (extend the loan tenure or reduced the interest rate, etc) Written off this amount, or settled at some amount less than what the lender believes it was owed.
The possible values are as follows:
1. Restructured Loan; 2. Restructured Loan (Govt. Mandated); 3. Written-off (WO); 4. Settled; 5. Post (WO) Settled

Source: Secondary

Avoid home loan rejection this way.

Real estate is the most coveted investment instrument in the country. Buying a home, whether for investment or residential purposes, can take years to materialise and given the prices, few can afford to pay the money upfront. In such situations, buyers inevitably turn to banks for home loans.

Although the norms for approving home loans have eased in the recent past, don't expect it to be a cake-walk. One small mistake can result in you merely dreaming of the house, and never actually owning it. 

We look at factors that can play a crucial role in getting your loan approved or rejected.

                         

BAD OR LOW CREDIT SCORE

You cannot build a house if the foundations are flimsy, right? When it comes to loan approvals, banks use a similar analogy. If you have a low credit score, you will be denied a home loan out rightly even if you fulfill all other conditions. Credit score is considered to be the most important factor by the banks while disbursing a loan. 

Credit score reflects a consumer's behavior towards the financial transactions. In some ways, it is a mirror to his financial habits and underwriters base their decision and develop risk-based pricing based on the credit score.


So, if a person has defaulted or delayed the payment on any kind of loan or credit cards, it will have a negative impact on the credit score. Other factors like being guarantor to a person who defaults on payment of his loan can affect your credit report too if you fail to repay his loan. So, be very sure before taking up the role of a guarantor. There are credit rating agencies like CIBIL, Experian Credit Information Corporation of India, Equifax Credit Information Services and High Mark Credit Information Services that provide credit score to individuals. Once you submit your loan application, the lender seeks a copy of your credit report from the bureau. They analyse this not only for the credit score, but also to review the extent of existing loans / credit cards, performance of ongoing and closed loans. All these go in to the final assessment of your loan application.

A credit score provided by CIBIL is a three-digit TransUnion score which is derived from the credit history found in credit information report (CIR). A CIR is an individual's credit payment history across loan types and credit institutions over a period of time. It ranges between 300 and 900. It indicates the probability of default of a borrower based on their credit history.

To maintain a healthy credit score, one should ensure timely dues payment and avoid taking too many unsecured loans as it may be considered negative. But if the damage is already done, you can work towards improving it slowly. 

INCORRECT PERSONAL DETAILS IN CREDIT REPORT

Your credit information report contains your personnel detail, so wrong information can lead to a mismatch between the details on your loan application and credit report and hence lead to your loan rejection. If there is any change in the personal details, you must update your lender so that it is reported to the credit information bureau and is reflected in your credit report. Any individual can get the credit report for a nominal fee from the credit bureaus.

However, it is important to check the report for anomalies like a credit card listed in your report but not owned by you, or a loan on their name which they had never taken. Prospective borrowers can also apply directly to the credit bureau for their credit report for a nominal fee. This allows you to review the facilities listed against your name, seek corrections if you spot any anomalies like a credit card listed in your report which is not yours and to know your bureau score. All bureaus have dispute resolution forms on their websites which aggrieved customers can fill and send with relevant identification documents.

REJECTION OF LOAN BY OTHER BANKS

Some people tend to apply to multiple banks at the same time. However, remember that if your loan is rejected from one bank then it can have an impact on your credit score and hence lead to the loan being rejected by other banks too. It is better to wait for the reply from one bank before applying to another so that you know why your loan is rejected and get the same rectified.

NEW OR UNSTABLE JOB

Since the repayment of loan is of utmost priority to the lender, they would like to ensure that you have timely repayment capabilities when he disburses the loan. In case of salaried person a steady flow of income is determined by the stability of job. Since repayment of home loans is normally sanctioned for 15-20 years, stability of income in future becomes a necessary criterion to be assessed at the time of loan sanction. For example, if the borrower has a contract of employment with just eight months left in it, it is natural for the lender to enquire if the contract has been renewed in the past or whether the borrower holds any professional qualifications which would give comfort that alternate employment would be forthcoming.

It is a similar story when it comes to changing jobs. While it may give the buyer a higher income level, it gives a negative impression to the lender. It is generally advised not to change your job if you are planning to take a home loan in the near future. In fact, the financial strength of the employing company is also considered as one of the factors for the evaluation of the application. People working in a proprietorship company, having less than 50 employees & not having provident fund facility, face issues in getting a home loan.

AGE FACTOR

Age is one of the most important factors considered by the lender while disbursing a loan. Typically, they put a minimum age bracket of 23-24 years and maximum limit of 60-65 years for loan applicants. Assuming a 22-year-old, who has been working for the last three years, applies for a home loan and the qualifying criterion for that lender is a minimum age of 23 years with at least two years of continuous work experience, the lender would in all probability turn down such an application.

APPLYING WITH RELATIVES OTHER THAN SPOUSE/PARENTS

If you want to get a home loan of a higher amount, clubbing the income of your spouse is a good option. But while banks allow clubbing of income of the spouse, father and son, the same does not extend to every family member. Some banks are skeptical of clubbing the income of the siblings because in case of a dispute, the EMI could be delayed. Clubbing the income with any other relative is not allowed. Also, a co applicant can't be a minor.

LOCATION OF THE PROPERTY

Banks also make their decision to disburse loans on the basis of the project's location. Take for instance, Noida Extension, where a number of projects suffered due to lack of clearance and acquisition disputes in 2011. As a result, a number of public sector banks stopped sanctioning fresh loan sanctions in the area, as per news reports. All lenders have limitations with the geographic locations. If the property is beyond such limit, the loan will get declined. The technical valuation of properties in remote locations may also be lesser than the purchase cost; banks do try to cover the risk of funding in an under-developed area on case-to-case basis.


UNSATISFACTORY EVALUATION OF THE PROPERTY

You must ensure that you are buying a house at a price which is close to the market price. This is important because the bank does the valuation of the property itself and will give a loan of upto 80% of the property value after considering other factors like your repayment abilities.

UNCLEAR PROPERTY TITLE
In the event that the property does not have a clear and marketable title, or there are issues connected to the approvals from the relevant authorities, normally banks or home finance companies keep the loan sanction letter valid till the customer finds another property which has clear title and approval. So, before buying a property you must ensure that it is not involved in any dispute.

LACK OF REPAYMENT CAPABILITIES

Banks ascertain your repayment capabilities before disbursing the loan. It depends on the disposable income that is left in your hand after paying off existing EMIs. Banks generally give a loan which amounts to an EMI of upto 50% of the disposable monthly income. So, first assess your repayment capabilities before applying for a loan.

Source: Secondary

Medical debt affect your credit score in these ways!

Even when you have health insurance, medical costs can add up, forcing you to borrow in order to pay your bill. While it would be nice to think that the debt you incur for health care costs won’t ruin your credit, the reality is that, like any debt, can impact your credit score.

Medical debt that appears on your credit report normally hurts your credit score, no matter the reason for how it got there. Medical debt can be reported by the providers, collection agencies, and through public records if the creditor files suit in court.
                             

Medical debt and your credit score

How medical debt impacts your credit score also depends on the scoring model being used to determine your score.  Medical debt that has been sent to collections will have a smaller impact on your score than non-medical collection accounts.

However, Not every lender uses the most current version of credit scoring models. This means that your medical debt might still count against you, depending on how it is reported, and which scoring model and version of that scoring model are used. In general, though, it’s safe to assume that your medical debt is likely to have some impact on your credit score, especially if you have missed payments. Any debt account that isn’t kept up to date will drag on your credit score.

How to reduce the impact of medical debt

“The best way to keep medical debt from dragging down your score is to keep it off your consumer report,” says Haney. In many models, paying off your medical debt can also prevent it from having a big impact on your score. The good news is that medical debt is in a class by itself when it comes to your credit report and your score.

Haney suggests working with your health care provider. The information on your credit report appears there because it has been reported by a creditor or service provider. This means that if you can work out a payment plan with your provider, and you stick to the terms, there is a good chance that it won’t be reported to the credit bureaus. Most providers will not report medical debt when consumers are actively communicating, and making an earnest effort to resolve open claims issues with insurers, and paying down the balance.

Many hospitals and other health care service providers offer payment plans for expensive procedures. Additionally, you can usually find reasonable payment terms if you have a high deductible. The problems come in when you stop making payments as agreed and the provider feels like the account needs to be turned over to a collection agency. Most providers do not have systems to report but collection agencies do.

Also, be aware of the difference between organizing a non-loan payment plan with your provider and the “payment plans” offered as loans through third parties. These types of plans are commonly offered by dentist offices and vision specialists. You are referred to a payment plan, but this plan is actually set up through a third-party and is a special financing arrangement. In some cases, these arrangements are reported as the loans they are, and appear on your credit report. Understand the distinction before you agree to a payment plan.

Paying off your medical debt can also reduce the impact on your credit score. Increasingly, there is pressure for credit scoring models to stop “counting” medical debt — even collection agency medical debt — once it has been discharged. Make an effort to pay off your medical debt, and you can reduce its impact on your credit score.

Watch out for identity theft

Finally, be on the alert for fraudulent medical debt. Medical ID fraud is a growing problem. Someone might use your information to receive health care, and then skip on the bill. This results in medical debt in your name. Check your credit report regularly for these types of fraudulent accounts. If you notice billing for a medical procedure that you didn’t have, follow up and dispute the account. You will likely need to prove to the health care provider that you weren’t the one who received the treatment. This can be difficult to clear up, and it’s even harder the longer the account sits, so make sure to check your credit report regularly for errors and fraud.  Your best defense is to keep on top of the situation, and try to avoid falling behind.
Source: Secondary

Need 850 credit score? See what's holding you back!

As you already know, your credit score is an extremely important three digit number (an 850 credit score equals a perfect score). It sets the stage on whether you will get approved for a loan, and the interest rate you’ll pay on a new home loan, refinance or credit card.

So, what if I told you there’s a tool out there that can show you what’s holding you back from having a higher credit score. 

With Score Analysis, you’ll find out the top four reasons why YOUR score isn’t higher and see what you can do to fix the issues over time.

 Understanding these categories can help you make better financial decisions in the future and may even help you improve your credit.
                              

Here’s a closer look at what influences your credit score.

Payment History – The most influential category when it comes to your credit score. Your payment history is a record of your payments over time. Lenders and creditors look to this as a sign on whether you will make late payments or miss them altogether.

Age & Type of Credit – Each account on your credit report has a “date opened” field. This is the age of your account or how long it has been open. As for type of credit, the different kinds of credit you have impact your report and score. For example, credit card, mortgage, and auto loans.

% of Credit Limit Used – This is otherwise known as utilization and it evaluates the overall usage of your available credit. Experts suggest keeping your utilization under 30% on each of your accounts.

Total Balances/Debt – This is the total amount of money you owe to each of your lenders.

Recent Credit Behavior – Opening new accounts and the credit inquiries for a mortgage or credit card, all fall under this category.

Available Credit – Your available credit is the amount of credit that’s available to you at any given time. It’s also tied to your percentage of credit limit used, or utilization.

Source: Secondary

Foreclosure can impact your credit!

You know that a foreclosure on your home can be a big deal when it comes to your credit. But how big of a deal can it be? You might be surprised at how much a foreclosure can impact your credit, and how long it can take to recover, depending on the situation.

Why foreclosure can be so devastating?

Foreclosure can be so devastating because it is related to your payment history. Your payment history is the largest factor affecting your credit score. Before your home goes into foreclosure, there is a good chance that you have missed at least three payments. By the time the foreclosure process is complete, you might have missed even more payments. All of these missed payments are recorded in your credit history and affect your credit score.

The more payments you miss, and the more “important” those accounts are, the bigger the impact on your score. Additionally, reports that your credit can be impacted even more if your credit score is excellent. If your score is 680 and you go through a foreclosure, you could see a drop of 85 to 105 points in your score. A higher score, of 780, could result in a drop of between 140 and 160 points.

Combining foreclosure with another problem, such as a short sale or a bankruptcy on your record, can be even more devastating and result in more difficulty as you attempt to recover your score.
                                 

Improving your credit after a foreclosure

It can take several years to improve your credit after a foreclosure. You might not even be eligible to buy a home for two or three years after the foreclosure is complete. However, you can start working to improve your score.

One of the ways to get started is to have someone with better credit add you as an authorized user to a credit card account. However, for this strategy to be effective, you need to have a close relationship to the other consumer, as a spouse or a child.

You can also start improving your score by getting a secured credit card. You might not be able to qualify for a “regular” credit card right after a foreclosure, so a secured card can help you begin re-establishing your credit. As you make on-time payments, and they are reported to the credit bureaus, you can begin to see improvement. After nine months to a year, you should be able to “upgrade” to an unsecured card that will further help your score.

Other types of small loans, such as a personal loan from your bank or an auto loan, can also help you improve your credit. You need to be prepared to pay higher interest rates, though. As long as your credit is poor, you won’t qualify for the lowest rates. When your score starts to improve, you can take advantage of better offers and lower your interest rates.

Source: Secondary

They affect your credit score most.

You probably already know about the connection between your credit history and your credit report and how both impact your credit score. Remember that your credit score is like the grade on your credit report: companies use this number to rate your likelihood that you’ll repay your debts and pay your bills.

But just what are the factors that go into calculating your credit score? And which ones impact your score the most?

Here’s the breakdown of what affects your credit score, from the highest impact to the least:

Your payment history : Whether you pay your bills on time and if you always pay at least the minimum amount. Even one late payment can impact your credit history.

                      

The amounts you owe : Some percent of your credit score is determined by the amounts you owe, which is made up of two parts: the total amount of money you owe all your lenders and the percentage of available credit that you’re using (like hitting the limit on your credit card). People who are using less of their available credit are considered lower risk than people who are using a lot.

The length of your credit history : The amount of time you’ve been using credit makes up fifteen percent of your credit score. Someone who has been using credit for a long time is considered less of a risk.

New credit you open or try to open : Some percent of your credit score is also based on the amount of new credit you’ve applied for recently. Every time you apply for a loan, credit cards, store cards and even a cell phone, someone will run your credit. Someone who applies for a lot of credit in a short amount of time is seen as a credit risk.

Types of credit : The types of credit you have impact about ten percent of your credit score. People with a mix of credit types, like credit cards, an auto loan, and a mortgage may have a slightly higher score than those with only one type.

So, now you know what makes up your credit score, which is your overall “credit grade.” Your credit report, on the other hand, gives you all the details about each account and shows you everything from how much money you owe, how many accounts you have, how many accounts are in good or bad standing, and how many times a lender or another company has checked on your credit history. Since, your payment history make up 35 percent of your credit score, you’ll want to pay attention to two places on your credit report: potentially negative items (accounts unpaid or past due) and your status and payment history.

Even if you do have a few negative marks on your credit report, the good news is that on-time and regular payments can help boost your credit score. It may take a little time and patience, but paying your bills consistently can help boost your credit.

Source: Secondary

Your Credit Score and Your Car Loan

If you’re in the market for a new car, you probably have a couple numbers on your mind: the mileage, the price of the car and the monthly payment.

But the one number you may not not be thinking about that could seriously impact how much you pay for your new ride? Your credit score.

Unless you’re paying for a car with straight-up cash, you’ll like have to shop around for a car loan. And your credit score will impact what kind of rate you can get on your auto loan – or even whether you’ll qualify for a loan at all.

                        

Just how does your credit score impact your auto loan? Like other loans and lines of credit, a good (or great) credit score means you’re more likely to qualify for a good (or great) interest rate on your loan. The better your credit score, the better your interest rate and the less money you’ll pay over the life of your car loan.

On the other hand, if you have not-so-good credit, you may be stuck with a higher interest rate and pay thousands of dollars more over the life of your auto loan.

And if you have really poor credit, you may not qualify for a car loan at all.

But while good credit is important for securing a good rate on an auto, even a good credit score doesn’t necessarily guarantee the best interest rate on the market. If you’re thinking of getting an auto loan through your dealer, the dealer may not offer you a preferred interest rate (they tend to make money by charging higher-than-normal interest rates). So regardless of your credit score, it’s always smart to shop around for rates on auto loans before you head into the dealership.

Since, your credit score is such an important piece of the overall cost of your car, it’s good to know what kind of number you’re dealing with before you head out to buy a car. Before you start to shopping around for the car of your dreams or start the process of negotiating rates on an auto loan, check your credit score and your credit history. You’ll have a much better sense of the types of interest rates you’ll qualify for and a better estimate of the overall cost of the car.

If you think that your credit score may be too low to qualify for a decent car loan, talk to your local bank or credit union about their auto loan options. You may be more likely to qualify for an auto loan at a financial institution where you already have a relationship, since your bank or credit union will likely consider other factors besides your credit score in your car loan application process.

Finally, if possible, consider waiting to buy a car until you can boost your credit score or save up money to make a larger down payment – both of which will not only help you qualify for a better car loan, but will save you more money in the long-run, too.

Source: Secondary

Responsible credit without using debt!

Not everyone wants to utilize debt as a way to build credit responsibly, but most advice available on building credit relates to taking out a loan, or using credit cards to prove good payment history.
As a financially savvy and responsible spender, how are you going to establish or rebuild credit without leveraging debt to do so? Below are three smart but unconventional ways to build credit without using debt. 
Pay Your Rent
One of the main ways to build a solid credit history is to use an online service to pay your rent each month. William Paid is one of the many services available that reports your payments to the top credit agencies.
As long as your monthly payments are consistently paid on time, you can use it as an alternative way to build or rebuild your credit.
                                   
Get a Secured Credit Card
Don’t worry, a secured credit card works differently from a traditional unsecured credit card. Instead of receiving a line of credit from a credit card company and having the temptation to max out the limit, a secured credit card requires an up-front deposit that becomes the card’s credit line.
Your cash is used as collateral against the purchases made on the card, so it’s more difficult to get into credit card debt.  

Your account will be reported to the major credit bureaus, just like a traditional credit card, and help build credit more responsibly while avoiding accumulating debt.

Pay Bills on Time 
The most responsible way to build credit is to pay all of your bills on time. This includes things like rent (mentioned above), utilities, cell phone bill, cable/internet bill, etc. Start by getting at least one type of bill in your name and make consistent on-time monthly payments. 
They allow you to establish credit in alternative ways by simply paying your bills. Aside from the traditional utilities bills, this can include payments for medical bills, tuition, day care, and more.
They create a report that tracks payment history, which can be used when applying for a loan at a financial institution. It’s a little unconventional, but living a debt free lifestyle is worth the out-of-the-box thinking.

Build Credit Without Using Debt
You don’t always have to use debt products to build credit and establish a good history of paying bills on time, it just takes a bit of unconventional thinking.
Use these three ideas to prove a good history of credit and up your creditworthiness in a responsible manner, and watch your credit score increase the right way. When you’ve been in debt, and worked towards paying it off, the extra time and energy is definitely worth a debt free lifestyle.

Source: Secondary

How a foreclosure can impact your credit?

You know that a foreclosure on your home can be a big deal when it comes to your credit. But how big of a deal can it be? You might be surprised at how much a foreclosure can impact your credit, and how long it can take to recover, depending on the situation.

Why foreclosure can be so devastating

Foreclosure can be so devastating because it is related to your payment history. Your payment history is the largest factor affecting your credit score. Before your home goes into foreclosure, there is a good chance that you have missed at least three payments. By the time the foreclosure process is complete, you might have missed even more payments. All of these missed payments are recorded in your credit history and affect your credit score.
The more payments you miss, and the more “important” those accounts are, the bigger the impact on your score. If your score is 680 and you go through a foreclosure, you could see a drop of 85 to 105 points in your score. A higher score, of 780, could result in a drop of between 140 and 160 points.
Combining foreclosure with another problem, such as a short sale or a bankruptcy on your record, can be even more devastating and result in more difficulty as you attempt to recover your score.
                                  

Short sales and your credit

Ms. X, the financial writer behind A Matter of Life or Debt, and her husband  found out the hard way that a near-foreclosure resulting in a short sale can be just as debilitating to a credit situation. They bought a home in 2007, just before the bottom fell out from the market. Even though the couple filed for bankruptcy in 2008, Ms. X says the short sale process hurt them more.
They kept the house through the bankruptcy and started working to recover their financial situation. However, the market crash of 2008 meant that home values plummeted. Suddenly (and especially after putting in thousands for renovations), Ms. X and her husband were stuck in a home that wasn’t worth what they were paying for it.
“After finding out we were expecting our third child, we realized that we’d never bounce back if we stayed in an underwater home,” Ms. X says. “We started the short sale or foreclosure process.”

Source: Secondary

Go debt free!

If you get tangled in a debt trap, what should you do? The most obvious advice you will receive is to cut down on your expenses and save up to pay off your debt. You need some quick steps in order to stay pumped enough to get out of debt completely. When you start knocking off the easier debts, you will start to see results and you will start to win in debt reduction.
                           

Forecast debt plan

The principle is to stop everything except minimum payments and focus on one thing at a time. Otherwise, nothing gets accomplished because all your effort is diluted. List your debts in order with the smallest payoff or balance first. Do not be concerned with interest rates or terms unless two debts have similar payoffs, then list the higher interest rate debt first.

Low interest rate

One can low the credit card interest rates by doing a balance transfer. This refers to move your credit card to another bank that might lower the interest rate to get your business. Shop around and try to get the lowest interest rate for the longest duration.

First repay your expensive debt

You should look over the interest rates of every credit card you use to make purchases and sort them from highest to lowest. By paying off the balance with the highest interest first, you increase your payment on the credit card with the highest annual percentage rate while continuing to make the minimum payment on the rest of your credit cards.

Allocate your investments

You may need to do a little reshuffling. Ideally, begin by liquidating any investments, other than insurance products, that are paying you a low tax adjusted rate of return. Then pay off your higher cost debt before lower cost ones. To put it simply, the credit card bills and personal loans must be the first to go. At the same time, you would need to insure that you continue making payments of EMIs on asset loans, used to purchase a home or an automobile, etc.

Negotiate with creditors

Try to explain creditors that you got trapped in bad financial duress and about the hardship the business is going through. Then, ask if they have a plan that may provide better payment terms. If the creditor doesn’t offer one, request a payment plan or a reduced settlement amount.

Visit: www.cibilconsultants.com
Source: Secondary

Credit card cautions. Must read!

Credit cards have become a lifeline for everyone in modern times. However, this much-sought after boon can be a real bane to your finances if not used with care. Are you facing problems while managing your credit card balances? If so, don’t regret over it – you’re in the same boat as other consumers. Use these simple tips to stop adding to your existing credit card debt and start regaining control of your finances.

Don’t keep more than 1 or at the most 2 credit cards

The more credit cards you have, the more you may be tempted to spend and the more difficult it will become to keep a track of how much you have spent and when the repayments are due. Do remember that credit cards are the most expensive types of loans available in the market, and whether you miss your payment deadlines due to an oversight or because you have inadequate funds, you will have to pay heavily. So, while credit cards are extremely handy pieces of plastic, ideally, they should be used as a temporary substitute for carrying cash, And, if that is the only motive you have when you carry a credit card, you will find that having one or at most two is quite sufficient.

Beware of reward points
The rewards you can earn from credit cards, while a nice perk, are worth far less than the extra interest you’ll accrue if you can’t pay off the money you spend to earn such bonuses. Spending on your card just to gather reward points may not be very healthy. You will soon realise that even though you have high reward points on your card, you will have to pay hefty bills, sometimes even on useless items made unnecessarily.

Don’t use credit card for everyday expenses
Besides inadequate circumstances, you should have your budget under control enough that you can at least pay for your monthly necessities with your monthly income. By keeping required purchases like groceries and utility bills off of your credit card, you\’ll be taking a major step in the right direction to getting your spending under control. Always draw up your budget for such purchases and use your credit cards within this limit.

Pay more than the minimum balance

It’s convenient to pay off the minimum monthly payment when you are under financial duress. Try to avoid it as not only will you never pay off your bill, but the interest rates that credit card companies charge will actually keep your bill growing every month. Instead, send as large of a payment as you can afford to. Where possible, reduce your spending in other areas to focus on paying off your credit card debt.

Avoid cash advances.

To meet urgent needs, drawing money from an ATM through your credit card is an easy way to combat cash shortage; but have you realised the impact it will cause on your finances? Not only is the interest rate charged on the advanced amount, but this also gets charged from day one itself.
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Source-secondary

Are you using many credit cards?

A credit card is a loan with a difference. Here, you get credit while you go spending or paying bills. However, the interest rates on credit cards are much higher than that on other loans. The more credit cards you have, the more you may be tempted to spend and the more difficult it will become to keep a tab of how much you have spent and when the repayments are due. Do remember that credit cards are the most expensive types of loans available in the market, and whether you miss your payment deadlines due to an oversight or because you have inadequate funds, you will have to pay heavily.

Credit card cautions

If you plan wisely to use each card to its advantage, but also keep a check on the rising charges so that the debt remained under control. Maintain your credit score over a period of time so that you could remain in the good books of the credit card companies. This is exactly what multiple credit cards holders should do to disentangle yourself from debt. However, if you cannot religiously keep a track on your spending or monitor each card prudently, then multiple credit cards can become a hindrance rather than an aid to money management, so step with caution depending on the kind of spending habits you possess!

Impact on credit report

While credit cards are extremely handy pieces of plastic, ideally, banks in India haven’t set any obligations on the number of cards you can carry. In India, you can easily find customers using four credit cards and the ones that don’t even have a single card. Due to the fact, your CIBIL credit score could be strained due to irrational credit card usage. In actuality, you must keep the number of credit cards which you can afford. Avoid using more than one card if you don’t have a good monthly income source.

Monitor your credit limit religiously

Your lenders will see you as a high risk candidate if you have high amount of outstanding balance to be paid. In fact, credit cards are the easiest way to fall into a debt trap that is a situation in which you borrow just to maintain your existing borrowings. So, to be on the safer side, you need to keep your outstanding balance about 10% to 30% of the overall credit limit. By doing this, you’ll get some relief and will also able to borrow more funds, if the need arises.

Never close your old card

Your oldest credit card age will do a significant role when the banks decide to open a new account under your name. In such cases, you can earn more points for keeping a long-established relation with the bank. The credit history of your old card is always better; and for taking loans, you could use your old credit card. If you wish, you could keep another card also for several other references and shopping online. Don’t ever close down your good old credit cards, even if you’re not using them frequently because they will definitely work towards building your good credit history.

Opt for right Credit Card

The credit card market in India is overwhelmed with attractive offers and deals that are quite tempting for the customers. As per the needs, every sensible card user can acquire several credit cards frequently. If you’re a constant traveller, then you could go for a travel credit card. Petro cards and special cards for getting discounts on restaurant bills are also highly popular in India. Whoever looking forward to multiple card options can decide buying these credit cards for a suitable experience.

Ideally, cards should be used as a temporary substitute for carrying cash. And, if that is the only motive you have when you carry a credit card, you will find that having one or at most two is quite sufficient.

Source- Secondary