ATM :: Your bad credit health is a good biz for some

By Kumar Shankar Roy | Nov 29 2015 | Kolkata |
Help available to resolve credit issues, but for a price


Having a bad credit health can be worse than being physically sick. When you are ill, the doctor, the medicines and all-round family support system ensures that things fall into place. However, most often banks and financial institutions tell people that they have a bad credit health when they are in dire need of loans or funds. Having bad credit health means the credit institution will have little or no confidence in your ability to repay the loan and so will either reject your loan application or charge rates of interest that will be exorbitant. This is why every month thousands of individuals are coming to a niche set of companies, started by experienced banking professionals, that can resolve issues impacting credit worthiness for a fee.

Lenders (banks, credit card companies and other financial institutions) report all credit-related activities of an individual borrower to credit bureau. India at present has three credit bureaus — CIBIL, Equifax and Experian. This information includes such details as the amount outstanding, interest rate, any late or missed loan repayments etc. The bureax apply complex statistical analysis to this raw data in order to arrive at an individual’s credit score that reflects their payment behaviour. The credit score is a number (the higher the better your credit health) and lenders use it to determine who is eligible to avail of loans and credit limits.

“At this point in time, the bureaux would have data of roughly about 40 crore individuals. Out of this, about 50 per cent would contain impairments. Impairments do not necessarily mean that they have defaulted. This could contain errors as well. At times, as a result of an error, your credit card/loan details may be inadvertently linked to another person with a similar profile. One out four reports has errors, which would be minor or major in nature. Leaving aside errors, there are numerous cases where individuals with actual bad credit history and health are coming to us for help,” said Credit Sudhaar chief engagement officer Aman Kapoor, who has previously worked for HSBC, Deutsche Bank and Emirates NBD.

Credit Sudhaar, founded in 2010, is promoted by IIM Calcutta alumni and retail banker Arun Ramamurthy and Gaurav Wadhwani, who has previously worked in Standard Chartered Bank and Deutsche Bank.

As per a back of the envelope calculation, an individual with a lower credit score may be asked to pay Rs 15 lakh in additional interest (as per higher interest rate) through the entire tenure for a Rs 50 lakh housing loan. Another individual with good credit score will get the best interest rates. If you are one of those financially aware individuals, you can correct the erroneous info in your credit report and even improve your credit health on your own by taking actions like making timely repayments on your loans and fully closing issues/payments due on your past loans or credit cards to the full satisfaction of your lenders. But not everybody can do it.

“You and I may do it but for a layman it’s an arduous task. Following up with lenders, escalating issues that one can face becomes difficult. Look, we don’t have a magic wand that will improve somebody’s credit score without repaying loans. They have to show their commitment once a negotiated payment has been agreed upon….We are getting thousands of people who are coming to us every month to resolve credit health issues. Depending on the extent of credit issues, it can take up to 6-8 months to reach a stage where you are loan-eligible. Those with relatively minor issues can rebuild their credit in a much shorter time frame,” says CreditMantri, CEO & co-founder, Ranjit Punja, a 23-year veteran with Citibank.

Chennai-based CreditMantri earlier this year raised its first round of funding worth $2.5 million and investors like IDG Ventures India and Elevar Equity were among those who participated.

With credit scores becoming a crucial evaluation tool for creditors, the importance of maintaining a positive score has increased manifold. You can get an Experian report for Rs 138. Equifax charges Rs 138 for basic credit report and Rs 400 for credit score. CIBIL TransUnion Score and Credit Information Report (CIR) can be received by paying Rs 500. Credit health improvement service is far more expensive as one may have to shell out Rs 10,000-20,000 depending on the plan.

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