Credit score being affected by debt payoff plan?

When asked by lenders, “Do you have any current liabilities?”  , many borrowers are tempted to say ‘No’ or make unsubstantiated claims. Having debts could lessen your chances to possess credit at times however; it’s always wise to settle your debts timely. But many borrowers often think, “Will a debt settlement program affect my credit score?”  Let’s find out…

Impact on credit score

Settling your debt could have negative impact on your credit score. The impact depends on a number of determinants: your past and existing liabilities, the repayment history, whether or not your settled debts are presently in good standing, how much less than the original balance the debt was settled for, and many other factors.

Accounts settlement

Often settling many accounts at a time could hurt more than settling just one. While there isn’t always a hard and fast rule, generally your credit score drops less as you become more delinquent in your payments.

Negotiation with your creditor

It’s better to request your creditor ahead of time to have the account reported as paid in full, even when that is not the case. Your creditor is not compelled to do this, but it is not unheard of.

Consequences of non-settlement of your debt

In case, you do not settle debts then your score is not hurt right away. However, not settling might lead to continued late payments, default and credit collection attempts. These may end up hurting your score more in the long run. In such circumstances, debt settlement is a net positive on your score. The debt settlement remains on your credit report for seven years. If your settlement took place over seven years ago and is still showing on your report, contact the lender and the credit bureau to have the record changed and the settlement removed.

Conclusion

By nature, a debt settlement plan modifies or negates the original credit agreement. When the lender closes the account due to a modification to the original contract, other lenders are likely to take notice and be more wary about granting credit in the future.

Visit- www.cibilconsultants.com

Source:  Secondary

Manage Your Debt

It has become really hard dealing with credit in the present economic conditions. Your loan application is examined more thoroughly now by lenders and banks. Your credit report is what is used to evaluate your loan application and debt forms a big factor of your report. But managing debt is different for every individual as your debt could be because of different circumstances like job loss, medical conditions, etc. You can just follow these basic tips to manage your debt:

Prioritize:
Prioritize your payments; Think of paying off which debt would be beneficial to you. Decide if you want to pay off a smaller debt first or debt with higher interest first.

Negotiate:

Negotiate with your bank or creditor to lower your interest.Talking to your banks helps you as they cooperate with you for your debt payments.

Debt Consolidation: 
If negotiating doesn't work, you could look at consolidating your debt. Debt consolidation is taking one big debt with a lower interest rate or zero interest to pay off all your debts. It helps you as you don’t have to paying off multiple debts but only single installment a month.

Credit Counsellors:
If sometimes you can’t help yourself, credit counsellors can. They help you draw your budget, reduce your spending, negotiate with your banks for lower interest rates. To get best services at best prices,research well before consulting to any agency.

Settlement/ Bankruptcy:
If you have no other resort left, settlement can be the last option. In cash settlement with your credit or bank, the bank gives you a big discount for paying off your debt by a certain date in cash. If you don’t have cash for a cash settlement, then you may have to declare bankruptcy.

Settlement and Bankruptcy both negatively affect your CIBIL score  and stay on your credit report for a long time, so try to follow the above steps and try to never reach the last resort.  

contact us for a more tips : www.cibilconsultants.com
source: secondary

Read This if your loan has been rejected despite of high CIBIL score

Having a high credit score is a must for lending banks but it does not guarantee the loan approval. Other than credit score, there are also other factors considered before granting a loan. Eligibility and quantum of loan to be given depends on different parameters and criteria which may differ from bank to bank.

Approving of your loan application depends highly on your CIBIL credit score. But a host of other factors are required for your loan application approval process too. The reasons for rejection of a loan are:

Over leveraged:
You are expected to have at least 40% of your income towards everyday living expenses. When you are paying more than 60% of your income towards various dues i.e. car loans, home loans & credit card card bills or have way too many active loans, you are considered to be “over leveraged” by banks,
Though your CIBIL score may be above average(because you are applying for more credit) and you would be prompt in paying your loans you would still be rejected since banks consider you as “over leveraged”.

CIBIL report having Derogatory remarks: 
Your credit report is plagued with derogatory remarks such as "Settled “and "Written Off" status. Financial institutions(NBFC’s) and Banks are cautious when lending money to individuals who have such derogatory remarks on their report because such remarks indicate that you didn't pay off the payment in past transactions or if you did make the payment you did not pay it in full. Most banking agents will insist that you go with a "Settlement" with the bank as you won't have to pay the full amount, but don’t get lured and always go for a full closure.

Credit Hungry:
When we are in urgent need of money, we do the mistake of applying in multiple banks and financial institutions all at once. For example, if are applying for a loan in Bank P, Q as well as R. You will think that the other bank will not be aware of you applying in the other two banks. But this is a wrong thinking because every application will be recorded as an inquiry for credit.

Now, this could result into: your CIBIL score being lowered by at least 10 – 17 points (approximately) every time you even inquire for loans. And also this will give the impression to your lenders that you are always borrowing beyond your comfort level.

Guaranteeing a defaulter:  
As a guarantor of the loan you are equally liable to pay the loan as is the borrower. If you are the guarantor for a loan which is showing late payment pattern or has been settled with the bank with partial repayments, your loan gets affected too, for guaranteeing a defaulter.

Do not have adequate taxpaying history:
If for some reason you have recently started filling returns then the bank may reject your loan application. Banks usually need at least two years worth of income tax to be filed by the borrowers they consider favorable.

Problems with credit score ? Loan application rejected ? 
Don't worry just hurry..book an appointment now only at www.cibilconsultants.com

Source: Secondary

What's good for your credit score: Settlement or Full payment?

There is an old debt in your account for a long time and the bank offers you a settlement to pay less than you owe. So what do you do? You may be in two minds, where on one hand you would be tempted to pay the settled amount and clear the debt while on the other hand, wait for some time and pay the full amount. People are confused on what effect any of these options may have on their credit score?

Settlement of a debt is when the bank offers you a lower amount than your actual debt in exchange of you making a one-time full payment for the settled amount. It is basically you pay off the amount in one time to have your debt forgiven. Settlement is usually an option for unsecured debts like, credit cards and personal loans where the credit has no collateral backed up and which could be sold off to pay your debt. Since, the creditor has a risk of getting no payment, he goes in for settlement where at least he would receive a smaller one-time payment than no payment at all.

But as tempting settlement can sound due to the lower amount, it does affect your credit score in a negative way. Firstly, it would show up on your credit report as ‘Settlement’. Whenever you pay an amount less than what you owe, it does hurt your credit score and credit history. In addition to all that, a ‘settlement’ on your credit report looks bad to potential lenders in future as it shows a history of not paying off what you owe.

But if you already have missed payments and your debt has been taken over by a collection agency, then your credit score already has been damaged. Taking a settlement would further have little or negative effect on your CIBIL score.

Full Payment is always the best option to eliminate a debt. When you pay off the borrowed amount in full it gets wiped off from your debts. It also affects your credit score positively in two ways- one, by reducing your total debt and other, building a good payment history.

If you are looking for a loan in near future, then settlement would be a very bad option and full payment should be the only option. If you can wait for some time and pay off the debt in full, then that would be very good for your credit score. But, if you think the interests are piling up and there is no way you can pay off the whole amount then settlement is the way for you.

Find out your credit score at www.cibilconsultants.com

Source: Secondary