No Problem, if you have no credit score!

Seems like you need credit for everything: buying a house, getting a loan, and even renting an apartment. Your credit score is your magic number to unlocking a lot in your financial life. But if you’ve never had a line of credit to your name or you barely have any credit history, you may be struggling to think of where you fit into the credit history equation.

If you don’t have any credit history, you have two options: start building credit history or go off the grid and try to avoid needing credit in the first place. We’ll cover how to accomplish the first point – which is arguably a lot easier than the second choice, though not impossible.

So, just how do you go about building your credit history? Here are a few simple steps to building solid credit:
                       

• Double check to make sure that you do or don’t have any credit history. You’d be surprised what may or may not be in your credit history, even if you don’t think you have any credit to your name or you’ve never checked your credit before. Before assuming that you’re starting with a blank slate, you’ll want to check your credit report. That will show you if you have any lines of credit that have been opened under your name. If there are any accounts you don’t recognize, your name might have been used to open up an account without your knowledge (or it could be that one account you opened years ago that you forgot about…).
• Ask your bank about a secured credit card. A secured credit card is an easy way to start building credit through your bank or credit union. They’re kind of like a mix between a debit card and a credit card, since you’ll need to make a security deposit first and then you’ll receive a credit limit that’s usually equal to the deposit you made. But unlike a debit card, activity on your secured credit card will be reported to the credit reporting bureaus, helping you build credit history.
• Once you have momentum, open a second line of credit. Once you’ve got some positive credit history with a secured credit card, you’ll want to open a different line of credit to help build your score and mix things up. Different types of credit besides just a card can help boost your credit score, so consider taking out a smaller loan or opening up another account.
• Use your credit responsibly. Once your start building credit, you’ll want to make sure that you use it responsibly. The worst thing you could do is damage your newly established credit history! Late payments, even on small things like your utility bills, can end screw up your credit history in the long run.

So that’s the basics of credit building. But if that’s not your style, you may choose,

Go off the grid. If you don’t want to play the credit score game, it can be really difficult but not impossible to live with a super low score or no credit score at all. Instead of using a credit card or taking out traditional loans, you’ll probably have to resort to using debit cards and borrowing from friends, family or other alternative lending sources.

Source: Secondary

Bankruptcy: Merits and demerits!

The feeling that your finances are out of control, and that you’ll never be able to afford anything again, is a terrible one. But if you’re overwhelmed by debt and you can’t see how you could possibly get out from under it, bankruptcy is an option you may want to consider.

Bankruptcy is a legal process through which existing debts, under the protection and supervision of a court, are eliminated or reduced, and/or the repayment period is extended.

                    

PROS

– You get a “fresh start.” Most unsecured debts – such as credit card debt – will be discharged through bankruptcy. That means you no longer have to pay that debt. Secured debts are those that have collateral, such as your mortgage (for which your home is the collateral) or your car loan (for which your car is the collateral). If you continue making the payments, you will most likely be able to retain your home and car throughout the bankruptcy proceedings and beyond. However, if you cannot afford the payments or stop making them, the creditor is likely to try to repossess the property or at least re-negotiate the loan.

– Filing for bankruptcy creates an automatic stay against collection efforts. This means that any creditor who tries to collect on the debt after the stay has gone into effect may be cited for contempt of court or ordered to pay damages. If you are about to be evicted, foreclosed on, or have your utilities shut off, the automatic stay resulting from filing for bankruptcy can give you a little breathing room. However, note that creditors can ask a court to lift the stay, and it will likely be granted if it appears you cannot or will not pay off even a part of your debt. Additionally, the automatic stay does not apply to certain types of debt, so depending on the type of debts you have, it may not be helpful.

– You probably won’t lose as much as you think. Every state protects certain types of assets during bankruptcy proceedings, such as your home, personal transportation vehicles, money invested in qualified retirement plans, household items, and clothing. 

CONS

– Bankruptcy is a public legal proceeding, so your family and friends may find out that you have declared bankruptcy. If you have been hiding your financial difficulties, then you may be embarrassed to have others know about your situation. However, unless your case is publicized by the media or you personally know your creditors, it is unlikely that your friends and family will find out about the bankruptcy proceeding the same way they would find out about a new job or new baby.

– Certain types of debt cannot be discharged through bankruptcy, including student loans, child support, alimony, and debts arising from criminal conduct. Thus, if these types of debts comprise all or the majority of your debts, bankruptcy will not relieve your financial burden.

– The bankruptcy will remain on your credit report for ten years, and is the worst kind of negative entry you can have. Thus, you may find it extremely difficult or impossible to borrow money, or the rates you are offered may be much higher than what the average borrower could get. However, it is certainly possible to rebuild your credit history and eventually have a good credit rating.
Visit- www.cibilconsultants.com
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How to maintain a good credit score?

You might be known that loan applications often get rejected due to less credit score. Have you ever thought what leads to constituting your credit score? Keep in mind, only repaying your loans in time doesn’t edge a good credit score as there are other factors also which impact our credit history. A good credit history can be maintained by following these simple rules:

Pay your dues on time:

Paying your EMIs regularly helps in upgrading your credit score whereas a delay in payment negatively affects your credit score as well as your credit history. Making late payments are viewed negatively by the lenders and affect drastically the chances of getting your loan approved.

Use your credit limit wisely:

Don’t fully utilize your credit limit on your credit card. You must be careful not only about making payments in time, but also about using your credit limit. If you over utilize your limit, the negative it is for your credit score. It is always prudent to use up to half the limit of the sanctioned amount on your credit card. Avoid relying on borrowings and secure yourself financially while using lesser credit limit.

Uphold a healthy mix of credit:

Usually, a borrower credit history should sustain a mix of secured loans and unsecured loans. Secured loans comprises of Home loan, Car loan etc. whereas unsecured loans comprises of Personal loan, Credit card etc. If the borrower is defined to high mix of unsecured loans, then the risk of default increases. The indefinite credit history should contain a mix of a home loan, car loan and a couple of credit cards.

Regularly inspect all your accounts:

You should examine your co-signed, joint and guaranteed accounts monthly and ensure that all your loan repayments made in time. As a guarantor or co-applicant, you are held equally liable for missed payments. Remember, your joint holder’s negligence could affect your ability to access credit when you need it.

Avoid applying frequently for loans or credit cards:

Many inquiries for loans or credit cards may affect your credit score. The lender will take it negatively as the borrower behaviour shows ‘credit hungry’ and indicates that the debt burden is likely to or has increased and you may be less capable of keeping any additional debt. If you have made many applications for loans or credit card, it could reflect in your credit report which will lead a loan provider to view your application with caution.

Monitor your credit report timely:

Paying your dues in time does not initiate a good credit score. As some errors like inaccurate late payment may pull your score down. So, reviewing your credit information report frequently may ensure that your credit history reflects your current financial status accurately without any errors.

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.

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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

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

CIBIL score improvement tips

There is no scientific formulae to improve credit score. Only Brahamastra to improve CIBIL score is to follow financial discipline & maintain healthy Credit Portfolio. Lets understand from following case study of Mr. Gupta, How we can improve CIBIL Score.

In June, 2007, Mr. Gupta opted for credit card from one of leading MNC bank. The bank executive assured that card is free for lifetime but next year his credit card statement had a transaction of Rs 2000 towards credit card annual fees. He approached bank multiple times to reverse the fees but bank refused to reverse the fees. He paid balance outstanding excluding annual fees of Rs 2000. Now in May’12, he approached one of leading PSU bank for Home Loan of 30 lacs but his loan application got rejected as his CIBIL Score is 675. He approached an adviser regarding same. On studying his CIBIL report, the adviser observed that Rs 26754 is being “Settled” by MNC bank against his credit card account. This entry impacted his CIBIL Score adversely. Adviser sent him 6 points to improve his CIBIL Score based on his CIBIL Credit report  Recently his home loan got sanctioned. Let's understand 5 important points which can help to improve CIBIL Score

1. Make All Payments on Time:

The most important point for Healthy CIBIL Score. It is better to opt for ECS facility for payment of Home Loan EMI’s, Credit Card Bills etc. on time. All the payments should be made atleast 5 working days before due date. If you are making payment through cheque then it is better to drop the cheque 10 days before due date as cheque clearance take time. While making payment through cheque we tend to ignore holidays falling between due date and date we dropped the cheque. In 89% cases customer dispute that they dropped cheque before due date & still bank levied charges for late payment. Please note that banks consider the date of payment not the date of cheque drop. 

Assume, your salary is due on 5th of every month and your employer handover cheque on 5th evening i.e. Friday. Saturday and Monday is a bank holiday. Your cheque will be cleared only on 11th of that month. From employer perspective he gave salary on 5th but from your perspective, you received it only on 11th. It is critical to make all payments on time to improve CIBIL Score.

2. Don’t show credit Hungry Behavior:

Now lets take e.g. of  Ms. Shwetha from Cochin, she passed out from college in 2010 and got a job in call centre. After opening salary account, she received call from 6-7 banks for credit card and she availed 5 credit cards. It shows credit hungry behavior. She got married in May’13 and she applied for home loan along with her husband. Home Loan got rejected due to low CIBIL score. Reason 5 credit cards shows credit hungry behavior and secondly she missed payment due date on many occasions as she used to forgot due date of few credit cards. It is advisable to keep only 2-3 credit cards. Also don’t keep changing credit card every now & then. Please remember older credit card with regular payment record helps you improve CIBIL score rather new credit card.

Another e.g. of credit hungry behavior is by availing multiple loans simultaneously like personal loan, Car loan, Education Loan etc. Ant any point you should not have more than 2 loans.

Lastly too many credit enquiry in your CIBIL database by financial institutions shows credit hungry behavior. It will not impact your CIBIL Score if report is pulled by you.

Credit hungry behavior is a big hindrance to improve CIBIL Score.

3. Use Credit Cards Responsibly:

95% of people's CIBIL score is adversely impacted due to Credit Cards but if used irresponsibly then credit card is a biggest curse. It is advisable to exhaust only 30%-40% of available credit limit every month. Any excess usage might impact CIBIL score. If you need more limit then opt for 2nd card and plan your usage accordingly that it should not go beyond 40% on either of cards. If you are planning to make big purchase then you can request bank to increase your credit limit. If your track record is good then bank will happily increase your limit.

Another blunder committed by many people is that they opted for Settlement in case of  payment dispute. Kindly note that bank report such cases as “Settled” in CIBIL and it adversely impact CIBIL score. Never ever opt for settlement rather close the account by clearing 100% payment outstanding. In case of dispute, you may approach bank ombudsman but by not paying & reaching settlement with bank will not help you.

Lastly whenever you close any credit card then it is recommended to take NOC from credit card provider. In many cases, customer place request for closure and then don’t follow up. Credit Card is closed only after receiving NOC from bank and your CIBIL database should be updated by bank within 45 days else it may impact your CIBIL Score negatively.

4. Secured & Un-Secured Loans:

Secured Loans like Home Loans improve CIBIL Score as Home Loan builds long term appreciating asset whereas unsecured loans like car loan (depreciating asset), personal loan, credit card debt etc negatively impact CIBIL Score. It is advisable to opt for right mix of secured loan & un-secured loan. You credit portfolio should be 80% secured and 20% unsecured loans.

5. Credit Worthiness:

Consistency builds credibility & credibility improve CIBIL Score. Good history of timely payments and responsible credit behavior are key to credit worthiness. CIBIL Score of 750 score or more shows credit worthiness and above 800 CIBIL score means you are in elite club.

These days almost 100% loans are approved for customers with CIBIL Score of more than 700. There is no quick fix solution to improve CIBIL score. You have to work on your credit portfolio to improve CIBIL Score. Hope the above mentioned points will help to improve CIBIL Score.
Visit- www.cibilconsultants.com
Source: Secondary

Home Loan Closure Adversely Impact CIBIL Score! Why?

Home Loan is a secured loan and it impacts your CIBIL Score positively i.e. after availaing Home Loan, your CIBIL Score will increase because of its secured nature. Contrary to popular belief, closure of Home Loan negatively impact CIBIL Score. Let’s understand why

Recently Ramesh cleared my Home Loan and he was very happy about this fact but this happiness was short lived. It is very important to check that your Home Loan account is closed by lender in CIBIL Score database after Home Loan is closed. When he checked my CIBIL score, it was a shocker because his CIBIL score reduced by 12 points after Home Loan Closure. He was expecting improvement in my CIBIL Score as he cleared huge debt of Home Loan.

When he studied in detail, he observed following reasons for drop in CIBIL Score post Home Loan Closure: 

1.  Question mark on Future Re-Payment Capability:

During Home Loan tenure, we pay regular EMI and it reiterate our re-payment capability every month but after Home Loan Closure CIBIL does not have any secured parameter to check re-payment capability. You must be wondering what about credit card payment. Credit card is un-secured loan/credit and has limited positive impact on CIBIL Score even in case of timely payments but has huge negative impact on CIBIL Score in case of even single default of small amount.

2. Reduced Credit Worthiness:

In laymen term credit worthiness of individual is magnitude of risk which a lender is ready to take on individual i.e. max credit he is willing to offer. Home loan increase credit worthiness many fold but after Home Loan Closure Credit Worthiness is back to square one thus lower the CIBIL Score.

3. Secured Loan in Credit Portfolio:

Any secured loan like Home Loan in credit portfolio improve CIBIL Score thus Home Loan Closure takes away crucial points from CIBIL Score. Personal Loan and Car Loan are unsecured loans and negatively impact CIBIL Score.

4. Lender’s Negative Outlook:

Though last point has nothing to do with CIBIL Score directly but as the Average duration of any Home Loan in India is 7-8 Years and if you are closing your Home Loan much before 8 years then there is a probability that you might face difficulty in availing 2nd Home Loan in future. Reason bank borrow money at a cost and any pre-closure/pre-payment is liability for bank. If money remain idle due to low credit take off then its a loss for bank. Therefore besides CIBIL Score, pre closure of Home Loan too early can impact future credit worthiness despite good CIBIL Score.

It's better to be debt free as early as possible because of uncertain economic conditions, unstable job market and forced early retirement even if there is slight negative impact on CIBIL Score it’s fine.
Visit- www.cibilconsultants.com
Source: Secondary

Get loan with almost NO or bad Credit score?

An individual with low or no credit score has a hard time getting a loan as they are looked upon as a lending risk that may default and leave the lender in losses. People with no credit find themselves into a muddle state since, banks refuse to give them credit as they have no credit history and they need credit to build themselves a credit history. So what do you do in such situations? How do you get credit to build your credit history:

Be ready to pay a deposit: 
Understand that you do have a bad credit score and you’ll be needing to pay a deposit to get a card or loan. Many people shy away from secured cards as they have to pay a deposit against it. But remember that, a secured card is the best way to improve your credit score, as in almost all cases you’ll be denied a card or loan with bad credit. So, this is the easiest of all to build your credit score quickly and then apply and get accepted for better loans.

Also, make sure you apply for a secured card which reports your on-time payments to the credit bureaus. Some cards do not do so, and all your efforts of being credit responsible will go to waste as your good habits aren't reported to your credit report and there will be no difference to your credit score.

Credit builder Loan: 
This is something similar to a secured card but in the form of a loan. Here, the bank will lend you a small loan for an object you needed to buy. The object is being held by the bank while you make monthly payments to the bank and the possession is given back to you when you pay off the whole loan. This not only gets you the object which you wanted to buy but also helps you build a good credit record.

Avoid Multiple credit applications:
In all these though, you need to avoid applying for multiple credit lines. Applying for multiple credit lines  at the same time does more damage than help. Multiple credit applications leads to several hard inquiries against your credit report which lowers your credit score. So be slow, research well and be selective about the credit you apply for. It is very dangerous for people with no credit as they look as an individual having no credit to bursting into the credit scene which can be bad for their credit health. Don’t waste your time on credit cards or loans which require excellent credit- it is a waste of time as well as a dent in your score due to the multiple inquiries.

Discuss with lenders:
Talk to your lenders before you apply for a loan. Some lenders have services wherein they can pull out your data, which may be not be included in your credit score but may show your repayment patterns and credit worth. Though, it is not included in your credit score, but the lenders may be willing to take a risk and give you a loan despite your bad credit.

Source: Secondary

Secured cards help in building your score

Getting credit nowadays is becoming a much harder task. Lenders take a look at CIBIL reports before giving out loans and credit cards. And thus, the people with lower credit scores get stuck since nobody is ready to provide them loans due to their lower scores. So what possibly could be a good solution for these people?
With low credit scores, there are very few card options out there for such people. These people have trouble getting unsecured cards and that is why secured cards would be the solution for them.

What is a secured card?
A secured credit card is basically a card given, based on the money placed as security deposit which is taken as collateral. And that is why lenders get the confidence that they will get their money back even if you have bad credit or no credit history. The credit line in your secured credit card is determined from your ability to pay, your income and your cash collateral deposit.
Secured cards are like prepaid cards but unlike prepaid cards, your payments would be reported to the major credit rating agencies like CIBIL, Equifax etc. thereby ensuring that your account history will be reported to your credit report. Thus, secured credit cards will help you establish your credit history.


How will these secured cards work?
Secured credit card works just like unsecured credit cards. You can use them for the usual everyday transactions where you use normal credit cards. As much as these secured credit cards can help you rebuild your credit history, a default in your payments and you would be back to square one, with the card issuer keeping your collateral deposit. The monthly payments are just as important for a secured card just as it is for an unsecured card. Secured cards are also reviewed at regular time intervals, if the card issuers find your credit behavior responsible (i.e by being regular on your monthly payments) they may qualify you to move to an unsecured credit card and get a refund of your collateral deposit.

That is how by making timely payments and maintaining your balances well within your credit limits on secured credit card , this responsible credit behavior might help you a lot in building or rebuilding your credit score.

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Apprehend your Credit History

Credit history is an individual’s or company’s records of his past borrowings, repayments, other payments and bankruptcy. It is basically all the past records of your credit life. Credit History plays a very important role in building up your credit score and that is why it is important to understand your credit history.

All the factors affecting the CIBIL score are somehow or the other related to your credit history. Having a good mix of credit in your credit history forms 10% of your credit score.  You should’ve taken a good mix of unsecured and secured loans including home loans, auto loans, personal loans etc. to score higher in your credit report. Not only taking loans but servicing them in time also affects your credit score. You should have timely made payments as part of your credit history so as to get a good score.

The other factor which gets affected by your credit history is the length of your credit accounts.  The longer your credit history, the better your credit score. That is why it is recommended by most people not to close old credit card accounts which have been going on for a long time, as it brings down the average length of your credit history. 

But also be aware that defaulting on your payments and bankruptcy stays on your credit history for a long time too and negatively affects your credit score. Therefore, making timely repayments and servicing your debts responsibly for a long time is the way to a good credit history which in turn is the way to maintain a credit healthy life and a good credit score!

Learn about credit score and apprehend your credit history by just booking an appointment at www.cibilconsultants.com

Source: Secondary

Don’t let history repeat itself

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

Past defaulters

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

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

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

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

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

Keeping up with the Joneses

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

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

Pay your bills on time

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

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

Source: Secondary

No credit to credit in easy steps !

Has your loan application been rejected because you don't have any credit history? So how do you build your credit history? Well, yes, it's a cycle of credit and credit again!

As per two recent notifications by the Reserve Bank of India, all banks and other lenders need to take into account credit information reports or CIRs from one or more agencies in all lending decisions and account opening. However, a loan application should not be rejected just because the applicant has no credit history. So, let us get going and look at the 3 ways that will help you build your credit history.

1. Apply for a secured credit card 

A secured credit card is backed by a savings account or by a deposit used as collateral on the credit available for the card. As you keep paying your outstanding dues on time, your good credit behavior will be reported to the credit bureaus. And this good credit behavior will help build your credit history.

2. Become an authorized user

Become an authorized user of a family member's or spouse's credit card - it should be one of his/her oldest credit card accounts. But do make sure this 'someone' repays outstanding dues on time. After you become an authorized user, you will have access to some form of credit. Once you have that, make sure you make 100% payment of all your dues on time and don't spend beyond what you can repay.

3. Check your credit score

Do check your credit report for your latest score. For an individual with no credit history or who does not have enough credit history, the score generated is NA or NH (CIBIL score). Typically, conservative lenders could view NH negatively as per their credit policies of not lending to an individual who has no track record. But an aggressive lender with a higher risk appetite may approve your credit application. Hence, look for lenders where you may have a better chance.

We hope you will be able to build a good credit history with time. Just make sure that you do not apply randomly for credit facilities as this indicates a credit-hungry behavior. Also, too many inquiries are viewed negatively by lending institutions.
visit www.cibilconsultants.com to check your credit score !

Source: Secondary

Mobile bills also affects your credit score. know how !

Your cellphone/ telephone bills are one of your necessary monthly payments. Most people don’t know this but skipping a bill payment or not paying your mobile bill doesn’t only cut off your network, there is another reverberation to it too. Like your other monthly expenses like mortgages and loans, not paying your mobile bill affects your credit score too.

So how exactly do your mobile bill payments affect your CIBIL score?

Like it usually happens with other bills, not paying off your mobile bill may damage your credit score. Most mobile networks would cut off your network if you don't make your payments. You may think that you only have an outstanding bill and there's nothing for you to worry about. But you wouldn’t even know and by the end of this you’ll be stuck with an undischarged bill as well a low credit score.

After cutting off your network they’ll most likely report your non payment dues to the credit bureaus and then turn your debts to the debt collections agencies. An account which makes itself to collections stays on your credit report for a good 7 years thereby harming your more. So pay off your cellphone bills on time to save your credit report from any harm.

You may be thinking not paying a bill can negatively affect my credit score so does paying it improve the score? No it doesn't. Since your bill payments are paid by cash or from your bank account and also your mobile network company hasn't given you credit, your payments are not reported to the credit bureaus.

If you do want your regular bill payments to affect your credit score positively, then use a credit card to pay off your bills instead of paying it in hard cash and if you can’t get a credit card, you could opt for a secured credit card. Whatever you charge on your credit card is limited to the amount you put on your card. And your credit card issuer will report your payments to the credit bureaus, and thus, you can build your credit score with your mobile bill payments.

Get more solutions and expert advice @ www.cibilconsultants.com

source: secondary