Where to Start If You Don’t Have Credit ??

Your credit history may be the most important record of financial information that you have to your name. But what about if you have no credit history?

There are a lot of reasons you may not have anything on your credit report yet: maybe you’re a college student with no track record, or perhaps you’re new to the country. Or you may have just avoided opening up a line of credit in the past because you had no reason. While you may think that having no credit gives you a “clean slate” when it comes to your money, having nothing in your credit files could actually be worse than having mediocre credit. Because there’s no information about your financial habits, lenders, banks and landlords could deny you a loan or place to live just because of your lack of credit history.

Don’t worry: if you’re starting from scratch and you don’t have any credit to your name, there are a few simple ways to start building your credit history:

Open Up a Secured Credit Card

Your local bank or credit union may be able to help you out with a secured line of credit. A secured credit card offers you a credit limit just like a regular credit card, with one caveat: your financial institution will require you to put down a security deposit to guarantee that you’re good for the money. In that sense, a secured credit card is very similar to a debit card, except the activity on your secured credit card gets reported to the credit bureaus. That’s a good thing; but since you’re new to the credit scene, be sure to use your secured credit card responsibly so you can build good credit, and not start off negatively.

Consider Using a Cosigner

If you have limited or no credit history, your bank or lender may ask you for a cosigner before you take out a loan. A cosigner will sign a loan with you and promise to repay the loan if you are unable to pay. As the borrower, you’re responsible for regular and on-time payments. The cosigner is there to give the bank or lender assurance that someone will step up if you’re unable to make your payments. Before you ask a friend or relative to be a cosigner on a loan, be sure they understand all of the responsibilities and expectations. If you miss your payments, both of your credit scores could be negatively impacted.

Get a Credit Builder Loan

Some credit unions, community banks and nonprofit organizations offer loans specifically for the purpose of helping people build their credit history and credit scores. A credit builder loan is typically approved for a small amount, usually less than $1,000. But instead of receiving the loan and being able to spend that money as you wish, the funds are placed into an account that you make payments toward (including interest) until the loan is paid off. Because it is still considered a line of credit, it gets reported to the credit bureaus and can help you build credit.
For any assistance you can contact us at www.cibilconsultants.com

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Can missing a single payment affect your Cibil score?

To your surprise, even a single default in payment of any credit dues can harshly affect your cibil score. Let us understand how :

Many people believe that a single payment delay won't hurt the Cibil credit score if you can quickly catch up with the time lag. This may be partly true. It really depends on the timing of your missed payment and the severity of the payment. If it was just one or two payments that you delayed in the past, it may hurt your score temporarily. But if it is beyond that and if it is a missed payment in the last six months and if you are applying for a loan now, it could hurt you dearly.

Missed and delayed payments are things lenders frown upon.However it is important to understand the difference between minor and major defaults. Any payments that are delayed or missed less than 90 days are considered minor defaults. This is considered minor because lenders believe that such a default could be cleared.

If your delay a payment beyond 90 days or the account becomes an NPA, if your property has been repossessed by the lender or you have written off or settlements in your Cibil credit file are considered major derogatory remarks.

Both kind of defaults have different impact on your credit score and affect your loan eligibility in different ways.

So how would such a delayed payment actually affect you?

If yours is a minor default, you can actually catch up with the payment and your Cibil score will eventually bounce, though not to its original score, but somewhere close.

Your credit score however will be considerably lower as long as it shows that you are missing your payments. Lenders especially the credit card companies do frequent account reviews on quarterly basis and if they find you score deteriorating you credit card limit might be reduced. The intention behind such a practice is lenders take a call on whether or not they want to do business with you basis the credit risk they take. If they see that you are up to date on your payments, you are more likely to get better deals and higher credit limits.

So try not to miss your payments ever. If you do, catch up with it as quickly as possible.

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What is compound interest ?

The Good Side of Compound Interest

Compound interest is interest that is paid on interest. Basically, it’s money that you receive on your returns. If you have a savings account that pays in compound interest.

If your account paid simple interest, and you added nothing new, your next interest payment would be the same, until at the end of the year you had, With simple interest, your earnings are only on your principal.

Compound interest changes things up. You receive interest on your interest earnings as well as your principal. 

Where compound interest really helps, says Steven Elwell, CFP and vice president at Schroeder, Braxton & Vogt, is when you use it over the long term. “It’s not too powerful over short periods of time,” he says. He also points out that you should invest some of your money, rather than put it all in a savings account.

Compound interest is more useful when you put your money into things that have the potential to earn over time. “Look to investing in stocks and bonds with higher dividends and potential growth,” says Elwell.

And the earlier you start, the better off you’ll be. “No amount of money is too small to start saving,” Elwell says. “You need to start as early as possible to maximize the effect.”

“Most people don’t fully understand the long-term effect of compound interest. The most important variable for compound interest is the length of time for the interest to compound,” says Elwell. “This why it’s so much easier to save for retirement if you start in your 20s as compared to your 40s. Imagine earning dividends on your dividends’ dividends.”

The Bad of Compound Interest

Most people think of interest in terms of what they are paying, however. And it can, indeed, be problematic. This is because when you’re paying compound interest, it is equally powerful as it’s holding you down and making it difficult for you to get ahead financially.

One of the issues that you run into with paying compound interest is the fact that often it is compounded daily — particularly when you have credit cards. You might only have your interest compounded on a savings account or other investments once a month, once a quarter, or once a year. (There are some savings accounts that compound daily, and some dividends pay quarterly, so compound on that basis.)

The more often interest is compounded, the more you earn — or pay. With credit cards, the problem is, er, compounded by the fact that the annual rates are often so high. 

“This causes big problems with long-term credit card debt,” Elwell points out. And you can see how carrying balances over time can start to really make a dent in your finances. “The effects of compound interest can make poor spending and budgeting habits worse over time,” Elwell continues, “and can lead to bankruptcy.”

If you don’t keep a lid on your debt, and you are on the paying end of compound interest, it’s difficult to build wealth over time, since the effect of high-interest debt compounding daily can cancel out the effects of the interest you earn on investments over time.

So, if you really want compound interest to work for you, it makes sense to pay off your high-interest debt as quickly as possible (or avoid it altogether if you can), and then start investing right now.

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LET US UNDERSTAND THE TERM CREDIT !!

In financial sphere

Credit is a contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some date in the future, generally with interest. The term also refers to the borrowing capacity of an individual or company.For example, when you make a purchase at your local mall with your credit card it is considered a form of credit because you are buying goods with the understanding that you'll need to pay for them later.The credit concept can be applied in barter economies as well, based on the direct exchange of goods and services. Credit is in turn dependent on the reputation or creditworthiness of an entity which takes responsibility for the funds. 

The cost of credit  is the additional amount, over and above the amount borrowed, that the borrower has to pay. It includes interest, arrangement fees and any other charges. Some costs are mandatory, required by the lender as an integral part of the credit agreement. Other costs, such as those for credit insurance, may be optional. The borrower chooses whether or not they are included as part of the agreement.

Credit comes in many different shapes and sizes including mortgages, loans, overdrafts and credit cards.In most cases you'll have to pay an agreed amount back every month with interest i.e. EMI.

Choose your credit wisely and keep up with EMI's for a healthy credit life.

MARRIAGE AND CREDIT SCORE !!

Getting married is a wonderful moment in life, but it can affect many things, including your credit. The importance of living a financially disciplined life is to be understood. Following are the few impacts on CIBIL Score:

No immediate impact or direct impact: There is no way a marriage affects an individual's scores as all the while both of you have held individual accounts and credit cards.

If you marry a person with low score: Your spouse's low score will not pull your score down, but when you are taking a joint loan, you may have to pay a little higher interest.

If you marry a person with high Score:  If your score is lower than your spouse, do not expect to improve your personal score. In fact you may have to pay up a little extra interest in case of joint loan applications or if your score is very bad, you may not be granted any loan.

Joint accounts:  Many couples hold joint accounts together. Although your spouse's bad credit rating may not affect your individual credit score, if that person continues to be irresponsible about debt repayment, both of you may suffer if you maintain a joint account. However, there are several actions you can take to protect your credit rating. For example, do not sign joint agreements, limit authorized users and keep checking accounts separate. These recommendations will help you to keep control of your finances and preserve your good credit.

Learn 5 things about loan !!

Don't apply for a loan before judging its pros and cons..enhance your knowledge and then make a right decision.

Following are some issues to be considered before you apply for a loan:

• Ascertain actual need for loan: See if you can pull out any of your savings instead of taking a loan because returns on your savings are always lesser when compared to the interest outgo that happens on a loan. So do not be penny wise and pound foolish.

• Credit Score: Know your credit score before you apply for a loan. If you know your credit score is low, you can work towards improving it and then apply for a loan instead of being rejected by a bank straight away which could further pull down your score.

• Interest rates and other charges: Interest payment is a tough part of loan and thus before applying for loan compare the rates of all banks and compare other charges as well,then choose wise.

• Equitable monthly installments: Know your (EMI) before you borrow. See if you can afford that EMI during the loan tenure. It is advisable not to overleverage in terms of debt beyond a limit.

• Tenor of loan:  The cost of your monthly repayments will obviously depend on the amount you are looking to borrow, but it is also dependent on the period over which you will repay the debt.You can reduce your monthly repayment by opting for a longer term. However, long tenor will attract huge interest thereby making it expensive.

RAISE YOUR SCORE ABOVE 750 !!

Worried about low CIBIL score ? Not getting loans ? Drowned with high interest rates ?
Low CIBIL score puts up a question mark on your creditworthiness.
Don't worry !! Follow some tips , improve your score and get access to your dream luxuries.


Keeping open mind is a necessity

First up admit that u followed an incorrect way of handling your money, and that is what has brought your Cibil score down in the first place. Be prepared to understand and accept your mistakes and have the right attitude to go about with corrective action.

Search where you stand

Now that you have admitted the problem, it's time to access your Cibil score and your report. 

Find out where you went wrong

Your Cibil report  is not like the report card you received at your school and will not list out your mistakes. You will therefore have to learn how to read your Cibil report  and find out why your Cibil score is low. Your credit report contains all your account information including all your bank accounts, loans and credit cards. Assuming that the rest of the information is correct, pertaining to your identity and the status of your accounts, look out for your DPD or days past due in every credit card or loan that you have availed.

 Error rectification

Your bank gives information about your loan account or credit card to Cibil and some times there may be discrepancies in this reporting process. These errors may be responsible for bringing down your Cibil score. Sometimes you may find errors such as an inaccurate account balance, an overdue amount when a loan repayment has been made, or a loan account that  has been  closed from your end but does not reflect on your Cibil report.In such cases, you need to raise a dispute for getting your errors recitified. 

Stick to a plan 

Once you have identified what the problem is, make a plan on how to improve your score assuming that your Cibil report is error free. If you need to pay off unpaid debts,outstanding amounts or even settled amounts, think about the best way that you can repay them. 

 We do not say its is easy! You will have to be disciplined about your other expenses and cut corners somewhere, but be determined and patient and stick to your plan and over time you will have a clean Cibil report and will result in an improved Cibil score. A good Cibil score indicates good financial health.

Your efforts and corrective measures can help you in improving score to a satisfactory level of 750 and above.