How to read CIBIL Score and Risk Index?

How to read CIBIL Score and Risk Index is one of the most common query. In layman terms CIBIL Score is nothing but risk assessment / credit worthiness of a potential borrower based on past credit history. Though CIBIL Score and Risk Index is the 1st level shortlisting criterion by the Mortgage Lender. Executives of financial institutions who have access to this data are not competent enough to explain the CIBIL Score / risk index to borrowers. It create panic situation among borrowers. 

How to read CIBIL Score and Risk Index?

CIBIL basically divide all Individuals / potential borrowers into following 3 categories. We will understand CIBIL Score / Risk Index in each category separately.

(a)  Individuals with either No Credit History or Credit History not reported to CIBIL.

(b) Individuals with less than 6 months Credit History

(c) Individuals with more than 6 months Credit History in last 2 years

CIBIL Score / Risk Index returned for each of the above mentioned category of potential borrowers is different. Lets check out how to read

(a)  Individuals with either No Credit History or Credit History not reported to CIBIL:

In this category, the index returned is either NA (Not Available)or NH (No History). What it implies is that individual has No credit history and / or Credit History is not reported to CIBIL by the financial institution. NA or NH cannot be classified as low score or poor credit history. It simply means there is no credit activity registered or reported. Now one whose CIBIL index was NA, asks NA or NH is not viewed negatively by the financial institution then why her Home Loan was rejected. Answer is very simple, some financial institutions have policy not to lend with NA or NH index. In short, in the absence of risk index / CIBIL Score financial institution has no criterion to check risk assessment.

(b) Individuals with less than 6 months Credit History

In this category, CIBIL return Risk Index between 1 to 5 therefore as i explained in above mentioned example that 2 is not a CIBIL Score but risk index of the potential borrower. Lets check how to read Risk index between 1 to 5

High Risk: Index of 1 and 2

Medium Risk: Index of 3

Low Risk: Index of 4 and 5

In some cases, the loan was rejected because of high risk index of 2. To maintain good CIBIL score, it is advisable to follow good credit practices from the beginning. It is observed that most of the Low CIBIL Score cases handled by me were outcome of ignorance of a borrower initially. It is always advocated that banks should appoint qualified Credit Counselors instead of executives with not even bare operational knowledge.

                                           

(c) Individuals with more than 6 months Credit History in last 2 years

In this category CIBIL Score is returned i.e. value between 300 to 900. Higher the CIBIL score, lower the risk and vice versa.  High credit score does not guarantee sure shot loan / mortgage. CIBIL Score depend on 70 parameters to arrive at your CIBIL Score. It is critical to find out parameters which are impacting CIBIL Score negatively. CIBIL Score can be linked to credit worthiness of an individual. Lets check credit worthiness

Score between 300 to 600: Very Poor

Score between 600 to 700: OK

Score between 700 to 775: Good

Score of more than 775: Marvelous

Normally people have tendency to compare CIBIL Score / Risk Index. 

One of the most common casualty is Secured Credit Card. In most of the cases, secured credit card details are not reported to CIBIL by the banks. It defeats the whole purpose behind secured credit card. Most of the people opt for this credit card to improve their CIBIL Score or Risk Index. If it is not reported then you should immediately bring it to the notice of a bank.

Lastly, as it is always request that before applying for any loan or mortgage one should check your CIBIL Score / Risk Index to avoid any future shocks. You can take all corrective steps to improve your CIBIL Score / Risk Index in advance. Its a misconception that your CIBIL score is impacted if you check your CIBIL Score. Fact of the matter is that you can check your CIBIL Score as many times as you can. It will not impact your CIBIL score negatively. You can pull out your CIBIL Report online. Click Here to get your online CIBIL Report.

To summarize, It is always advisable to understand the CIBIL Report before arriving at any conclusion. If your loan is rejected you have right to know the reason for rejection. Blanket answer from financial institutions that “Your CIBIL Score is LOW” should be supported by logical reasoning. High Risk Index is not the end of the road. You can always improve your CIBIL Score with good credit practices.

Visit - www.cibilconsultants.com

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Can a car loan be rejected?

In today’s modern life, every individual thinks to have the best for himself and his family. To give his family the best of everything, they work day and night. An individual first tries to get a safe shelter for his family and then other luxuries. Now luxury includes good interior, expensive clothing and of course a means of transportation i.e. a car.

In the present time car has become necessary for every individual, rather be a salaried person or a businessman. Every individual wish to provide an easy mean of transportation for his family. Earlier it was quite tough for every individual to get a car, but now a days due to easy financing options provided by financial companies have made it easy for the individuals to get their vehicle easily.
 
But can a car loan be rejected? Does an individual have low credit score affect his decision to get a car loan?
 
Yes, even a car loan can be rejected. Mr. Ajay, a salaried individual applied for a car loan and it got rejected.
 
Mr. Ajay is IT professional. Being an IT professional had a decent salary. As he had taken a home loan which was currently continued, could not get a car by full payment. So he applied for a car loan. Looking at his salary, it was easy for Mr. Ajay to get approved for a car loan. But he was shocked to know that the financial institutions had rejected his loan.

But even after having a decent salary, why was the loan application of Mr. Ajay rejected. The reason behind denial of loan stated by the financial institutions was “Credit score of Mr. Ajay was low, due to which the loan application was being denied.”
 
Credit Score? Mr. Ajay had never heard of such word. But can this credit score be the reason for denial of a loan?
 
Credit score is basically a three digit numerical figure which ranges from 300 to 900. This score is generally rates an individual as per his credit history. Generally a credit score of 700 and above is considered as a good score.
 
Credit history is the snapshot of past and current credit relationship of an individual. It states whether the individual has been consistent in making all his payments. Credit history nowadays has become an important part of finance. But people are not much responsible as they should be which can make their credit history poor.

These credit scores and credit history of an individual are calculated by credit bureaus. The banks and the financial institutions provide all the information of every individual to these bureaus to check their creditworthiness. The major credit bureaus in India are CIBIL, Experian, Equifax and High Mark. Every bureau has a different method of calculating their score. Based on the score calculated by the bureaus, banks and other financial institutions check the creditworthiness of individual.
 
After knowing everything about credit score and credit history, Mr. Ajay felt that all these are very important aspects of finance for every individual.
 
Mr. Ajay realised the truth that individuals with bad score and poor history would face rejection in their each financial attempt. Banks and financial institution will be able to provide financial help to such individuals. As these individuals will gain trust of these institutions as their history is poor.
 
Now where there are many individuals who have low credit score and poor credit history, these people need someone who can assist them to get out of such situation and improve their finances. Credit repair companies are those institutions are those companies whose aim is to help all the people to restore their finances.

Commonly asked questions about Cibil score !!

To have an impeccable credit history is of utmost importance these days. The way you handle your finances will impact your Cibil report and Cibil score. While a good Cibil score is your ticket to easy access to loans when you are in need of it, irresponsible credit behaviour and thereby a bad Cibil score may even harm the prospects of you attaining your dream job! Confused as to how that might transpire? Read on to find out more.

• What is a Cibil score?

Cibil Score is a numerical expression that predicts the likelihood of default of a person in the next 12 months. It is mainly influenced by your past repayment track record captured in your Cibil report. This means, if you have made payments on time on all your loans on or before the due date, it is very likely that you have a good credit score, and hence banks look at you as a good customer.

• Why is my Cibil score important?

When you apply for a new loan or a credit card, it is now mandatory for a bank to access your Cibil score to assess how creditworthy you are. A good Cibil score (above 750 out of 900) puts you in a vantage position as lenders would vye amongst themselves to offer you the best interest rates. This is because your Cibil score conveys that the chances of your turning delinquent are nearly nil. On the other hand, a poor Cibil score may lead to the rejection of your loan application altogether.

That's not all. Your Cibil score also has an important role to play if you happen to apply for certain jobs, especially in banking and finance sector, ITsector and other multinational companies as well. It has been found that those who are financially disciplined make diligent and disciplined employees in their workplace as well. Therefore, while performing a background check on you, your employer may ask you to submit your Cibil report among other documents. If your prospective employer finds that your credit behaviour is unsatisfactory, you may even be rejected as a candidate outright. It may be noted that if you are trying to find a job in a bank, a Cibil score of less than 750 will not do. However, if you approach the bank as a customer, the same bank may still consider giving you a loan if your score is between 700-750.

• What determines my Cibil score?

Your Cibil score is based on the information in your Cibil credit report. There are primarly five factors that go into the composition of your credit score. In order of their importance they are, your repayment history, utilization of credit , average age of credit accounts , your mix of credit and the number of inquiries that lenders make each time you apply for a new loan or a credit card. To maintain a good Cibil score, make all repayments of your loans and credit card outstanding on time, keep the balances on your credit cards low, keep the overall utilization of credit below 30% on your credit cards, have a healthy mix of secured and unsecured credit and finally apply for credit only when you are in dire need of it. 

• How can I access my Cibil score?

Your Cibil score is literally just a click away. You need to log on to www.cibilconsultants.com and follow the simple instructions to procure your score. You will need to fill out your personal details, make a payment thereof and authenticate your identity. Once your authentication is complete, your Cibil score will be generated.

• Does checking my own Cibil score impact my score negatively?

No. When you request for your own credit report it is considered a "soft" inquiry as opposed to that of a lender's inquiry which is considered a "hard" inquiry. Too many loans applied for in quick succession will lead to many hard inquiries which will then lead to negative impact on your Cibil score.

• How often should I access my Cibil credit score?

As a prudent practice it is good to check your Cibil score and Cibil report at least once every year. If you haven't done so, make sure you access your Cibil score and report at least six months prior to applying for a new loan. This is to ensure that your Cibil score is satisfactory and your Cibil report is free of any discrepancies.

Now that you know how important your Cibil score is and the way in which it impacts your life, it is highly recommended that you keep a check on your financial health by accessing your Cibil score periodically. Always bear in mind that it is not your income level that  important to maintain a good Cibil score, but your attitude towards handling credit! 

For availing credit related services contact us at www.cibilconsultants.com

Secured vs unsecured loans and their Impact on Cibil score !!

It is not uncommon for people to ask about the difference between unsecured debt versus secured debt and how they two types of debt may affect credit scores.Some loans can have the opposite effect and actually damage your score.It is important to for us to understand what a secured and unsecured loan is in the first place. 

If a loan is unsecured, it does not have any collateral. Personal loan and credit cards are the most popular unsecured loans available today.

Any loan that has collateral is considered secured loan for example, a home loan or car loan or gold loan.Any default or delay in the repayment in both kinds of loans is bound to affect the Cibil score of a person. The banks report credit limit and balance on credit card and the loan amount for personal loans. The banks also report repayment information to the credit Information companies.The same is the case with secured credit. The banks repayment all the secured loans held by and also the repayment history.

Secured loans have the largest positive impact on your credit when they are repaid. If you have never taken a secured loan, your credit may be low despite your good record of repayment.

"Non-payment of or serial delays in repayment of credit card dues negatively impact the credit score. Possession of too many credit cards and little or no secured loans can negatively impact the credit score," said Sridhar K, vice-president, Highmark Credit Information Service Pvt Ltd.

So before you decide any changes in the repayment schedule, be aware of the impact of each loan has on your credit score.

For any assistance regarding credit score and loans contact us at www.cibilconsultants.com

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Financial decisions impacting your credit score !!

It is not just your investments but also your spending habits that impact your financial future. Most of us are worried about the investments we make and are least bothered about the EMIs that go out of our pay cheque on a monthly basis. It is important to take care of your liabilities as much as you take care of your assets and here is why -

Locking away credit cards: If you have overused your credit card during holiday season so now live a  "cash only lifestyle" for some months and pay minimum amount due on the cards.

Our verdict: Poor! - High interest payments and high utilization. Though on the surface the move to pay minimum amount due looks good, but you need to realize that credit card is the most expensive form of debt and not only you pay huge amount of interest payments, you also have a high utilization on your cards and it can hurt Cibil score. However, locking away your credit cards is definitely a smart financial move!

Using debit card for purchases: Just decide that from now on if you were to make a purchase, use only debit card - Be aware that purchases on debit cards weren't reported to the bureau.

Our verdict: Good! - Yes, the debit cards are not reported to the bureau.Make a smart financial lifestyle choice by using debit card to make a purchase, and be aware that the debit card purchases weren't reported to the bureau. Only your liability accounts - accounts where you are borrowing money from the banks such as - credit cards, home loan, personal loan, overdrafts etc. get reported to the Cibil or other bureaus in India.

Enquiring too often for loan application: The first time you got your loan application rejected,  anxiety took over and you applied to three other financial institutions through a third party. The third parties guaranteed you that they would get home loan approved.

Our verdict: Poor! - No third party can get a home loan when you are not qualified to get one. When you got your home loan application rejected from the leading private bank, you should have looked into the cause of application rejection rather than trying your luck elsewhere. Like everything else in life, the easy route is never successful. You should have approached the bank, gotten a copy of your Cibil Report and taken corrective measures before approaching a different bank.

 we find many customers struggling with their loan application rejection. Don't wait till you are impacted because of your low Cibil Score. Get it repaired with the service packages we offer at our website www.cibilconsultants.com.
Hurry book an appointment now !!

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Effect of credit score on cost of borrowing !!

If you want to qualify for the most competitive loan and credit card rates then you need a good credit score. What’s more, you need it to stay that way. 

• How lenders decide whether to lend to you ?

Banks and credit card companies use a variety of different information to give you a credit score, which determines whether they will lend to you and at what interest rate.
Credit scoring works by awarding points based on the information you provide on your application form.The lender may already have about you, based on previous accounts you have with them, and on your credit report.

• You’ll also get a better credit score if you:

own your own home and/or have lived at the same address for at least a year ,have a good credit history by repaying other credit agreements on time, for example your credit card, auto loan, gold loan, personal loan , overdraft , Cash credit facility, Consumer loan  or Housing  loan.Have evidence of stability – for example you are employed rather than self-employed, you’ve lived at the same address, worked for the same company and had the same bank account for a long time are not connected financially, through your mortgage or joint bank account, to people with a bad credit score.

• How a poor credit score affects your ability to borrow ?

A poor credit score can mean you’re  rejected with any credit facility or loan or  charged higher interest rates, given a smaller credit limit. A lenders or banks or NBFC doesn't have to give you the interest rate they are advertising or that you see in best buy tables on comparison websites.  You may be offered an interest rate that’s higher – this is what’s called your personal APR. 

For more details visit www.cibilconsultants.com
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