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

To Pay Less Next Time, Repay Loan Installments On Time.

You may soon be able to negotiate lower interest rates on loans offered to you by banks and non-banking finance companies.

Have you always been paying your personal loan installments on time? Never defaulted on your credit card bills?

Good. You may soon be able to negotiate lower interest rates on loans offered to you by banks and non-banking finance companies (NBFCs).

But those who default, beware: you may have to shell out far more for everything, from personal loans to home loans and insurance premia.

The Credit Information Bureau of India Ltd (Cibil) has launched a rating system based on the gigantic amount of data on personal loans that is in its possession.

Cibil maintains a database on the credit history of over 135 million individuals and companies. It will now provide personal loan scores ranging between 300 and 900, where 900 indicates a good borrower.

This score is referred to as the Cibil Trans Union Personal Loan Score and a bank or NBFC can access this score through Cibil.

“Earlier, there was no objective mechanism to distinguish a good personal loan borrower. But with the personal loan score, individuals may be able to get lower interest rates for a good score,” said Satish Pillai, general manager, analytics and decisioning services at TransUnion, a stakeholder in Cibil.

The personal loan score is based on the amount of loans you have pending with other members of Cibil, your repayment track record, the number of inquiries that banks have made on your credit history, the amount of loans you have given up repaying (defaulted on), your credit card repayments, and in case there are any suits filed or loan write-offs.   But if you are wondering how you will get to know your rating then you will have to wait. 

“By the end of this year we will be ready with the infrastructure to provide individuals their own credit score,” says Arun Thukral, Cibil managing director.

Once you know your credit record, you can negotiate with a bank to give you better rates. Of course, the bank would have many other parameters to take a decision, but repayment capability would be a major criterion. 

This score will be available to all 165 member banks of Cibil and other financers to help them weigh the chances of a borrower defaulting on a loan.

Thus, if a bank gets an application from a person and finds that his personal loan score is 890, then it would be willing to welcome such a quality customer. Personal loan interest rates offered by banks differ from individual to individual, ranging from 15 to 30%, with some NBFCs charging up to 48%, as per industry estimates.

Source: Secondary

Learn how your business credit cards affect your CIBIL score?

Yes,Every business credit card affects your credit report. But how they affect your credit report depends on you- more specifically, how you choose to handle your company's decision to grant you a business credit card.

Only having business credit card will not improve your credit score. If you're paying your bills on time with your business credit cards, you can expect your credit score to be improved in your credit reports. But if you're not paying on-time, it will harm your credit score.

Personal and Business credit: New businesses don’t have a lot of their own credit history. You may not have built up specific credit accounts related to your business name - that's why you're looking for a business credit card in the first place.

Lenders will routinely look at personal credit for new business owners who haven't yet established their own enterprise. That shows having a good score will benefit you a lot, and help you dedicate yourself to repay borrowed amount.

Personal Credit History: You will be surprised to know that, having no credit in the past, also might count against you on some card applications. Lenders routinely run a simple credit report for a potential borrower. There are a lot of issues that can come up on this credit report, that may stand in the way of your loan or business credit card.

If you have someone is consignor on a loan with you, that can be a potential solution, but those individuals have to know what they are getting involved in, and it's up to you to reassure them that the situation won't end up as loan default and complications. You can also shop around and try to find lenders who will take the time to scratch the surface of your credit history.

Source: Secondary

Credit score can fall even after repayment of loan.

Traditional wisdom says repaying loan(s) helps one get a good credit score. However, this might not always be true.

Consider the case of a professional Rahul . Recently, his application for a housing loan was rejected, as his credit score was lower than required by the lender.

His score, 680 two years ago, dropped to 620 this year, despite the fact that he completed the repayment of a car loan of Rs 10 lakh within the term of five years (which ended in December last year).

Most lenders require a score of 700-750. Lenders and credit counselors say there are a number of reasons for such rejections. Typically, those in a situation such as Rahul should check their repayment history, as irregular loan payments hit one’s credit score.

In Rahul’s case, one factor might be the fact that he doesn’t have any loan to service now. If there’s no loan to be repaid, there is no case for a credit score. Experts say this could easily pull down one’s credit score by 5-10 points. Therefore, it might be a good idea to own a credit card and make small spends through it, though owning a credit card but not using it lowers one’s score.

Such customers are termed ‘credit-hungry’. Each enquiry could pull down the credit score by 5-10 points. As such, shopping for best loan rates online is a better idea.

One should ensure she/he does not take too many unsecured loans —personal loans, credit cards, etc. One who is servicing more than one personal loan will always have a lower score than someone servicing one or more housing loans, even if the personal loans are repaid on time.

Similarly, those with more than three credit cards have a lower credit score, even if their repayment history is good. Try not to repay credit card bills in equated monthly installments, as this hits your credit score. over-utilizing active lines of credit could also have a negative impact on credit scores.

Those who have negotiated with a lender to settle loans also have lower scores. Usually, an unpaid credit card bill is considered a non-performing asset (NPA) after 90 days. Once termed an NPA, the lender can’t charge interest. Subsequently, the borrower pays only the outstanding, or principal, and closes the account. However, while it might be easier to repay such a loan, this isn’t good for your credit profile.

Protect your credit score by opting for packages at www.cibilconsultants.com

Source: Secondary

It is important to stay credit healthy

A sound credit history can be your most precious financial assets. If your credit health shows that you had been prudent in paying off your debts, you will not only be able to qualify for credit whenever you need it, you will also be able to borrow money at the lower interest rate. Lenders use these credit reports to evaluate your ability to repay, your character and any joining to take a decision to entrust you money. These ratings are also used by debt financing firms, investment banks and dealers to know your credit potential. If you find that there are discrepancies in your credit report but neither have time nor knowledge how to remove name from CIBIL defaulters list, it is better to hire an experienced and professional credit repair agency.

By delegating responsibility of eliminating errors from your credit report into the hands of professionals, you can utilize your time and efforts in completing your other essential tasks. Also, professional firms make sure that your credit repair process is completed without any procrastination by taking immediate action on all procedural formalities. 

There are many who believe to take help of professional credit repair agency at-least once in a life time so as to understand all the procedures and tricks to eliminate problems with CIBIL report as well as to understand the procedure so next time, they can do it themselves.

Remain credit healthy and creditworthy by opting for appropriate credit health packages at www.cibilconsultants.com

Source: Secondary

How banks can goof-up with your credit report?

The prudent see danger and take refuge, but the simple keep going and pay the penalty, goes an axiom. This applies to everything in your life, but more so in your money life because here you should learn from others’ mistakes.

For example, take the goof-ups banks make on your credit cards, bank lockers, ESC and the like. If you are wise, you would learn from others’ experiences and ensure that you don’t face a similar situation. Tracking your finances, especially loans regularly is imperative, especially since nowadays credit reports and credit score matter more than ever before. So, what can go wrong between a loan and a credit report? To know more read on.

Picture this: Suppose you have a loan with bank A. You repay regularly until it is completely paid off. A few years later, you approach bank B for another loan. But to your shock, you are denied one on the basis of your credit report that shows your earlier loan is still outstanding. If you thought this is just an imagination, it is not.

According to an RBI document, the customer in question investigated further and found out that even though he had repaid his loan to Bank A, the bank had not cleared his credit report for several years. Hence, he was unable to get a better deal with the new bank. He then requested bank A to update his CIBIL credit report. However, the bank said it had already done the needful. After several requests, he still saw that his credit report did not show the latest update. Finally, he approached the banking ombudsman’s office of the RBI.

The banking ombudsman found that the bank had failed to get the CIBIL database updated for the customer even after four years after the complainant had repaid the loan. “When the bank finally got his CIBIL credit report rectified it did so without compensating the customer. The banking ombudsman observed that by not updating CIBIL database in time, the bank had violated RBI/Banking Codes and Standards Board of India guidelines and therefore passed an award directing the bank to pay an amount of  Rs 5,000 as token compensation towards cost of pursuing the complaint,” said the RBI document.
What we can learn: There are a few things we can learn from this example. For one, do not think that your bank will automatically update your CIBIL credit score, though technical they have too, above example shows, they might just miss doing so. Ensure that you review your credit report a few months after you close the loan to check if the bank has updated the latest information about your loan account to the credit bureau or not.

Another important thing to keep in mind is that the loan is not closed with just paying your last EMI. You need to tie a few loose ends to close the loan properly, for example get a no-dues-pending letter once the loan is paid off. Tracking your credit report once a year, is a good idea.

Track your credit score and obtain credit report from www.cibilconsultants.com

Source: Secondary

Learn how interest rate is affected due to credit score !

Repayment of a loan has two parts- the principle and the interest on the borrowed amount. And thus every person who is applying for a loan tries to find the lowest interest rates possible. A low interest rate makes it easier for the borrower to repay it back as there is less interest added to your monthly payment.

Bank interest rates are not set generally but they are set up on the basis of your credit score. Banks check your CIBIL score to measure your credit worthiness i.e. the ability to repay back the loan which is one of the main factors in deciding  interest rates.

The major credit bureau- CIBIL, collect data from lenders and banks about your credit history and payments and compile this data into your credit report. Banks use these reports to determine your credit worth. The better your credit score, the better interest rates you get and the lower your credit score, the higher will be your interest rate. Higher credit scores show the lender that you've handled credits well in the past and pay your dues on time and thus lower interest rates while in lower credit score, the banks see you as a high risk customer and are disbelieving about you paying off your dues.

The higher risk you pose as a borrower, the higher interest rates the banks set up for you and vice versa. The range of a credit score generally is 300 to 900. A credit score higher than 750 is most likely to get lower interest rates and anything below 600 gets you higher interest rates.

Want to learn how to step forward carefully,so that it doesn't affect your credit score and thereby your lower interest rate? visit us @ www.cibilconsultants.com

source - secondary

Follow these steps to check your Credit Score

Credit Score represents the progressing status of your lending amount accounts over a period of time. CIBIL is credit report agency that provide you a credit score. It ranges from 300-900(CIBIL). Having a higher score means there is less risk for the lender. The Credit Score/Credit Rating can vastly impact the interests you pay for loans, insurance or mortgages.

Having an idea of your credit score is vital before you plan to get a new credit card or a loan. The lenders understand your Creditworthiness by your credit score. CIBIL score or credit score is the notation used mostly to represent the score.

Here are the steps:

1) Call or log on to www.cibilconsultants.com

2) Fill in the details on the appointment form

3) Upload all the require details/documents.

4) Pay Minimum charge for comprehensive credit report.

Once you get your credit score, make sure you repay/close any lending accounts that are still pending. Build yourself a credit healthy future by analyzing your credit score and relying on a good credit agency.

Lenders Respect Financial Discipline !

An individual’s credit score provides a loan provider with an indication of the ‘probability of default’ of the individual based on their credit history. What this means in simple English is that the score tells a credit institution how likely the loan applicant is to repay a loan (should the credit institution choose to sanction your loan) based on the individual’s past pattern of credit usage and loan repayment behavior.

Given that the credit score is a loan evaluation tool developed to help loan providers, the first logical question that comes to mind is “what difference does it make to me?”

Well, the obvious answer is that the higher your credit score (i.e. the closer it is to 900) the more likely you are to get your loan application approved. The reason being, closer the score is to 900, the more confidence the loan provider will have in the individual’s ability to repay the loan.

While, this is what is claimed it is always useful to analyse the underlying data, which serves as the foundation based upon which such claims are built.

So what exactly does the data say?

The best way to analyse the impact the credit score has on an individual’s loan application is to observe the lending behaviour demonstrated by credit institutions over time. The table below shows us a comparison of new loans sanctioned by loan providers based on an individual’s credit score in 2008 as compared with those in 2011.

The data tells us that 90% of new loans sanctioned in both 2008 and 2011 were to individuals with a credit score of 700 or more. 

However, the data also indicates that over three years, lending institutions showed a change in preference from individuals with a credit score ranging from 750-799 in 2008 to individuals with a credit score of 800 and above in 2011.

Hence, you will have to maintain greater financial discipline in order to secure credit in the future.

It is important to note that loan providers also consider your total income, overall debt burden and fit with their internal credit policy before deciding upon your loan application.  Hence, if your EMI to income ratio is over the set cut-off percentage your loan application may get rejected despite having a credit score of 847.

Simply put, the Cibil TransUnion Score is like the marks one earns on school examinations. Higher marks (credit score) do increase the chances of your being accepted to college (getting a loan approval) but don’t guarantee your admission. A more overall evaluation of your extracurricular activities (income level, overall debt burden) is required before you admission is secured.

Similarly, different colleges will have different cut-offs with regards to the marks (credit score) required to gain admission (loan approval).

Renew, Revamp and Retain your credit score with packages available at www.cibilconsultants.com

Source: Secondary

Credit Card vs Debit Card

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

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

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

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

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

Source: Secondary