It helps to know exactly how a single missed payment can affect your finances and your CIBIL Score.
By Hrushikesh Mehta | Feb 23, 2018 10:10 AM IST | Source: Moneycontrol.com
If you ever wondered whether a single failed credit card payment can pull down your entire credit score, the answer is YES. While a failed payment may be a mistake or the inability to pay (we all go through financial difficulties), lenders view this negatively and it can impact your access to credit in the future. Note that this doesn’t just apply to your credit cards; it holds true for add-on cards, where you’re accountable for others’ spending habits.
Impact on your finances and your CIBIL Score
It helps to know exactly how a single missed payment can affect your finances and your CIBIL Score.
Firstly, always remember that the interest on your missed payments (including the late payment fee) is compounded daily. Monthly interest rates on credit cards can range from 3-4% per month on the outstanding balance (principal, interest and late fees). So, even though you think you missed your payment by a day or a week, your interest liability may be larger than you anticipated. Paying just the minimum due or not paying for a few months will see your amount due balloon significantly.
Let’s take an example of only paying the minimum due for 6 months. On May 1, you make a purchase of Rs. 1,000 on your credit card that has a 3% per month interest rate. You then choose to only make minimum payments due (5% of the outstanding amount at the end of the month) for the next 6 months and spend no additional money on that credit card.
When clearing your balance at the end of 6 months (December), you will end up paying Rs. 1,560 — 56% more than the original amount spent.
Even without making any more purchases on the card, opting for minimum payments will stretch your repayment period to almost 9 years!
If you choose not to pay minimums, not only will you be delinquent and affect your CIBIL Score, but you will end up paying more than double the amount you had spent.
This is why it’s critical to read the fine print whenever you avail of a credit card, and it’s even more important to always pay on time.
On the other hand, your CIBIL Score is calculated based on the last 24 months of your credit history, and the four major factors that can affect your Score are as follows:
A missed payment can impact your score for as far ahead as the next two years. While it will remain visible on your credit report for 36 months, remember that it will always be a part of your credit history. This is why a credit score is like a reputation that takes years of discipline and patience to build, and just a single instant to get impacted.
Rebuilding your Score
There are ways to get back on the road to good credit health. Here are two ways to help build your credit score:
1. Ensure you clear outstanding dues on credit cards fully. Part-payments or minimum payments indicate difficulties in repaying dues. What’s more, if your amount overdue snowballs it will not only negatively affect your CIBIL Score but you also risk falling into a debt trap. Also, if a pending credit card payment is reported as “Settled” or “Written off”, this will affect your access to credit in the future.
2. If you have amounts pending on multiple cards, taking a personal loan at a lower interest rate to pay off your cumulative dues can be an economical option to avoid ballooning debt balances. Alternatively, you can borrow money against your gold, take a loan against your fixed deposit (without breaking it), or even get a loan of 50-80% of your asset value from investments in LIC, mutual funds and securities. The lower interest rate will make for more manageable monthly payments without the problem of an exponentially ballooning debt burden.
While these measures help rebuild your credit health after missed payments, adopting a proactive approach to financial discipline is always more prudent:
1. Make sure you always pay on time.
2. Don’t take on more debt than you can reasonably afford.
Why maintaining a high CIBIL Score is important
A higher credit score can lead to better loan offers at competitive interest rates primarily because lenders are keen to reward consumers who have demonstrated financial discipline. In addition, emergencies don’t always announce themselves before they arrive and having a high CIBIL Score will ensure that you are able to secure funding quickly (especially in a medical emergency). So, while missed payments can negatively affect your score, regular payments and credit-healthy habits can improve it.
The writer is VP & Head – Direct to Consumer Interactive of TransUnion CIBIL
There are many easy ways to quickly improve your credit history and score. But if you are not careful, these measures may even jeopardise your financial security
Shaikh Zoaib Saleem | First Published: Mon, Nov 27 2017. 12 37 AM IST | Livemint.com
If you need a loan to buy something you cannot fund immediately, you approach a financial institution—typically a bank or a non-banking financial company (NBFC). When you do that, the financial institution runs a background check on you, from its own database (if you are an existing customer) and also from a credit information bureau. The credit information bureau is authorized by the Reserve Bank of India (RBI) to gather information on loans and borrowers from banks and analyse it to arrive at a score of creditworthiness of an individual. If your creditworthiness is good, you would get a loan relatively easily and at better terms. If not, either the loan will be rejected or you will be charged a higher interest rate. This is especially true in case of personal loans. The institutions’ decision to lend is based in large measure on the credit score and the credit report.
What is a credit score?
It is a number based on your credit report, which is a summary of your past and current borrowing and repayment history. If you were regular with repaying loans, including your credit card bills, your credit score is likely to be higher. This score helps banks assess your loan repayment capacity and your chances of defaulting on it. “Credit score is derived from the credit history of an individual. A consumer needs to have a minimum of 6 months of repayment track record on a loan or credit card or closed credit accounts less than 2 years old before a credit bureau can generate a credit score,” said Hrushikesh Mehta, vice-president and head of direct-to-consumer business, TransUnion CIBIL. A credit score is created as your lending and repayment relationship with financial institutions evolves. However, if you are new to credit, here are some ways you can quickly start to build a credit score.
Credit cards or personal loans
If you are new in the workforce, you can start by getting a low-limit credit card from the bank where you have a salary account, said Sumit Bali, senior executive vice president and head-personal assets, Kotak Mahindra Bank Ltd. “Based on their income, banks can give them a card with low limit. Use that card sensibly and build a credit history,” he said.
In the past, people considered taking personal loans to build their credit score. However, with a personal loan you will necessarily have to spend your money in paying the interest, whereas with credit card repayments within the stipulated time, you do not have to shell out extra money. For slightly older professionals, about 35 years old, credit history is not much of a worry if their bank account status and average balance are good, and investments and tax returns are in place. They “don’t really need a credit card to prove credit worthiness. Any bank would sensibly look at it and take a call,” Bali said.
Peer-to-peer (P2P) lending platforms are an emerging option for creating and enhancing your credit history. The RBI has recognized these platforms as special category NBFCs and has mandated them to share lending data with credit information bureaus. “Once the P2P lenders receive their licence, they will be able to begin data submission. Once that happens, P2P lending will become a viable option in helping one build a credit score,” said Mehta. However, in this case too, you will have to pay an interest on the borrowed amount.
In some cases, especially where customers have a long relationship with their bank, the banks may also look at own data to determine creditworthiness, Bali added. “Credit score by and large is a good indicator but it may not be the only indicator,” he said.
Alternative credit scoring
Evaluating someone who has never taken a loan can be difficult. This is where alternative credit scoring comes in. Here, instead of relying on a credit score, lenders consider your transactions and behavioural data like bill payments, online buying behaviour and information from your social media platforms to understand your repayment capacity.
“Often people are refused big-ticket loans like a home loan for the lack of credit history, even if their finances are in order,” said Abhishek Agarwal, chief executive officer and co-founder, CreditVidya, a credit advisory that also works on alternative credit scores.
While the RBI-regulated credit bureaus are currently not allowed to use alternative data for credit scoring; in other developed markets parameters like utility bill payments, insurance premium payments have been used for credit scoring (read more on it here.
However, financial institutions including top public and private sector banks and NBFCs in India, have started using alternative data in multiple verifications and validations across the credit value chain, Agarwal said. “Innovative offerings like pre-approved offers or instant loans are leveraging alternative data from multiple sources to provide seamless customer experience,” he said, adding that leveraging alternative data for credit risk assessment of secured loans is still distant. Banks use the alternative scores “in conjunction with other things, like data that you have about the customer. This is happening for personal consumption products like credit cards and salaried personal loans. We are putting it to use but what is the outcome from that, it is too early to say,” Bali said.
While credit cards and loans help to build a credit history and score, caution needs to be exercised. If used carelessly, these can put you in a debt trap, and ruin your credit history too.
Not just that, you should also keep your digital and transactional behaviour in check, as going forward more and more data could be used to assign you a credit score.
Source : https://goo.gl/m7Ns7g
No credit or debit card of any bank restricted for payment: IRCTC Debit and credit cards of any Indian bank powered by Master or Visa, can be accepted in any of the seven gateways on the site
Press Trust of India | New Delhi | Last Updated at September 23, 2017 10:51 IST | Business Standard
Amidst reports of IRCTC barring certain banks from using its payment gateway for debit card transactions, the railways’ tourism and catering arm issued a statement denying the reports.
The IRCTC has said options to pay through payment gateway using debit/credit card and internet banking are open for all banks.
“No debit or credit card of any bank has been restricted by the IRCTC for acceptance on any of the gateway,” it said.
Debit and credit cards of any Indian bank powered by Master or Visa, can be accepted in any of the seven gateways on the site, the statement clarified.
However, it said the IRCTC has provides a value-added service of direct integration to some banks which would allow speedy transactions and reconciliations.
“Since direct integration comes at an added cost to the IRCTC, these banks were asked to share a part of their transaction charges with IRCTC,” it said.
A senior official of the IRCTC said that it was not possible for it to bear cost of individual linkage to bank websites.
“IRCTC had asked banks to share the revenue earned from online tickets because of these value-added services but some banks refused,” he said.
The IRCTC has said that if banks are willing to give the facility of zero transaction charges on their debit cards to rail ticket customers then it will give them the facility of direct debit card integration also.
The statement has further said that banks should abide by the RBI guidelines regarding transaction charges on debit cards by charging only 0.25 per cent on transactions of up to Rs 1,000 and a maximum of 0.5 per cent on transactions of values between Rs 1,000 and Rs 2,000.
Under this new offer ICICI Bank is giving cashbacks of up to 20 per cent subject to a maximum amount of Rs. 10,000 on your credit or debit card spend.
Business | NDTV Profit Team | Updated: September 15, 2017 17:04 IST
ICICI Bank, India’s biggest private-sector lender according to assets, has introduced a cashback offer for its customers who avail a new home loan or transfer their existing home loans to the Mumbai-based lender, ICICI Bank said in a release. Under this new offer ICICI Bank is giving cashbacks of up to 20 per cent (subject to a maximum amount of Rs. 10,000) to its existing credit card or saving account customers on their spends of minimum Rs. 30,000 on their credit or debit card if they avail a new home loan or transfer their existing home loans from other banks/NBFCs. The offer is valid from September 1, 2017 to November 30, 2017.
For example, Mr. Shah, a home buyer is sanctioned home loan in September 2017 with disbursal in October 2017. Also, during the offer period, he spends Rs. 55,000 on his ICICI Bank credit card. He will get cashback of Rs. 10,000 on his credit card. (eligible for 20 per cent cashback, up to Rs. 10,000).
While both the home loan sanction and card spends needs to be within the offer period, the chronology of the two does not matter, ICICI Bank said.
In the absence of credit demand from corporates, retail loans have been the focus for most of the lenders in recent days. Banks are launching new offers every other day to entice more and more retail customers. In the first quarter of the current fiscal, ICICI Bank had reported 19 per cent growth in its retail loans compared to overall loan growth of 3 per cent in the quarter.
As of 2:39 pm, ICICI Bank shares traded 0.51 per cent lower at Rs. 292.20 compared to 0.16 per cent gain in the broader Sensex.
Mayur Shetty | TNN | Updated: Sep 12, 2017, 14:42 IST | Times of India
SBI Card customers could soon make payments by merely tapping their smartphone on a swipe machine
MUMBAI: SBI Card customers could soon make payments by merely tapping their smartphone on a swipe machine. SBI Card is updating its mobile application to enable customers make contactless payments at point of sales (PoS) terminals using a technology called Host Card Emulation (HCE) which enables dematerialisation of the card.
Cardholders of the bank already use smartphones as an alternative for cards on the Samsung Pay platform and the bank will next month launch its proprietary application which enables virtualisation of the card in a smartphone using near-field communication (NFC).”Among our recent innovations we have enabled our card for Bharat QR code by incorporating the feature in our app,” said Vijay Jasuja, CEO, SBI Cards. NFC TECH SBI Cards, which recently entered into an agreement for partner GE to exit the venture, is looking to double its base from 50 lakhs in two years. The company , which is the second largest issuer in India, has a renewed focus on SBI customers through pre-approved cards.
SBI Card has doubled its base in three years to over 50 lakhs and is recording fastest growth in issuance with 15 per cent market share of cards in force (CIF) as well as card spends.”Before demonetisation the card volume growth rate was around 60,000 cards per month which increased to over 1 lakh cards per month post-demonetisation period and has now grown to around 2 lakh cards per month,” said Jasuja.
At present, 15-20 per cent of cards come from co-branded partnerships like Big Bazaar and Tata.
Some simple and straight rules to not fall in the vicious cycle of debt and high interest payments
Retrieved on 20th July 2017 | Moneycontrol.com
Shopping or paying with cards is one of the easiest things these days. Thanks to the magic of all the apps and payment gateways, using a credit card is as simple as a few dabs on the mobile screen.
But even with all the ease and convenience, paying your credit card bills requires real money. The reason many people fall into a debt trap is because they do not realise that however long the credit cycle might be, one always has to pay every penny (often times more) that you spend.
To not fall in the vicious cycle of debt and high interest payments, there are some simple and straight rules that one can follow.
Be prompt with payments
There’s a reason why credit cards are called credit, because you owe the money spent on the card to the lender. Hence, don’t expect as leeway or grace when it comes to making payments. Credit card companies are very stringent about any delays and promptly impose late payment fees, etc. Also, any delay or missing payment is also reported to credit rating agencies like CIBIL or Equifax and impact the credit score. Hence, the need to make timely payments cannot be truly overstated.
Don’t burn the credit limit
So, your card gives you a high credit limit, say 1 lakh. Why bother with the spend? Burn it all and pay later? That is surely not a good idea, namely because the percentage of credit limit consumed every month is a parameter in accounting the credit score. Hence, you are not considered to be of sound profile, if you use up say 90% of your card every month. Also, in case you track up a big bill each month, there is a possibility that you might land in financial tight spot.
Number of credit cards
People love to flaunt the cards. There’s a common belief that the more credit cards one has, the better financially networked he or she is. Well, nothing could be further from truth. The more the number of cards, the higher the possibility for over-spending. Also, each time, a credit card application is made; it is registered in the CIBIL records hence, it is best to have 2 or maximum 3 cards. In case, you desire upgrade your card to a higher one.
Typically, there is an interest-free period on credit card purchases, which can even go up to 45-plus days. To avail this benefit, the outstanding amount has to be nil. So, if you roll over certain amount to next month’s billing, there’s no interest-free period on the new purchases.
Cash withdrawals on your card do not come with an interest-free period. There could be a one-time fee plus interest charges that start from day one till you repay the amount. Given the interest rates charges and so on, withdrawing cash from credit cards should be strictly avoided, unless there is an urgency.
In the end, the simple mantra of happy credit-card-living is simple; spend less, pay all. With prompt payments and credit management, the credit card can be a nice tool that can aid you in everyday life, right from paying for your cabs or buying a new shirt. So, follow these steps and enjoy a stress free life.
A London based fintech company, RedGirraffe, is offering a facility to pay rent through credit card using its online platform “RentPay”.
Renu Yadav | New Delhi, June 15, 2017 | Business Today
Rent is generally one of the biggest component of the monthly expenditure that you make. Now, you can not only pay your rent through credit card but can also earn reward points on the amount paid. A London based fintech company, RedGirraffe, is offering a facility to pay rent through credit card using its online platform “RentPay”. For this, it has tied up with various banks including State Bank of India, ICICI Bank, HDFC Bank, IndusInd Bank, Axis Bank and Kotak Mahindra Bank. So, if you have a credit card from one of the banks that have collaborated with RedGirraffe, you can use it to pay rent.
How you can do it
To enroll for this facility you have to visit the website http://www.redgirraffe.com and create a RG Property ID by filling up the details of the rental property and attaching the rental agreement. The tenant will mention the bank account details of the landlord in the form. After submitting the form, a mail will be sent to the tenant’s mail id for giving standing instructions to the bank. After this one time registration, your monthly rent will be deducted automatically on a predetermined date.
“Bank and RedGirraffe.com have strong processes of inbuilt compliance and other tenant verification/reference checks. All the bank accounts remain automatically linked to Aadhaar and PAN details. In cases where the accounts are not linked, such customers are not allowed to transact via RentPay anyway. Apart from this level 1 verification mode, there are another 17 point checks (carried out between the bank and RedGirraffe.com) during each tenant onboarding. The verification happens over a period of 50 working days,” said Manoj Nair, Founder and CEO, RedGirafffe.com.
Why it is beneficial
The advantages of using this platform is you get 45-60 days of credit as your rent remains in your savings bank account and you earn returns on the amount. Also, if you use credit card, you can avail reward points depending on the offer that your bank is giving. “Since rent payments are typically large transactions, such spends enable customers to earn significant reward points. These points can be redeemed against the banks catalogue of over 200 options including products, gift vouchers, e-vouchers and air miles. Cardholders can even redeem points to pay their outstanding on the card,” adds Vijay Jasuja, CEO, SBI Cards. Apart from this it will also help the tenant build a good CIBIL score which can help him or her get loans at relatively better rates compared to a person with no or bad CIBIL score.
What are the charges?
A transaction fees of 0.39 per cent with a minimum of Rs 39 per transaction will be charged from the credit card holders of ICICI Bank, HDFC Bank, Kotak Mahindra Bank, Axis Bank and IndusInd Bank. Apart from this a service tax will be levied on it. So, for every Rs 10,000 rent paid the gross transaction fees including service tax comes to around Rs 45. However, in case of SBI Cards, an additional banking transaction charge of 1.75 per cent plus taxes shall be charged extra by the bank.
Your credit score indicates your financial health, thereby determining your creditworthiness. Credit scores are provided by institutions such as CIBIL, Experian etc., among which, CIBIL is the most popularly used mechanism for lending. Credit bureaus assign a score to you on the basis of evaluation of your loan repayment habits and credit card history.
By: Adhil Shetty | Published: March 24, 2017 12:46 PM | NDTV Profit
Your credit score indicates your financial health, thereby determining your creditworthiness. Credit scores are provided by institutions such as CIBIL, Experian etc., among which, CIBIL is the most popularly used mechanism for lending. Credit bureaus assign a score to you on the basis of evaluation of your loan repayment habits and credit card history.
How to read your credit score
The credit score is typically represented in a triple-digit number ranging between 300 and 900 points. While higher points reflect financial discipline and a good credit standing, lower credit scores reflect poor repayment habits—which, in turn, could reveal poor money management skills. Banks and lending institutions usually prefer a credit score of 750 and above for issuing a loan or credit card. A high credit score could help you get loans at the best interest rates available. For people who do not have a credit history, the credit score reflects to be -1.
What does your credit score say about you?
Let’s look at the various aspects of your financial life that your credit score throws light on.
Timeliness: A crucial component in computing your credit score is timeliness in repaying loans and credit card bills. CIBIL, for instance, gives timely repayment about 35% weightage in calculation of credit scores. If you pay your bills on time, you are considered to be disciplined and committed towards the repayment of your dues. While a one-off case of delay may be ignored by the credit card company, repeated delays would earn negative scores.
Trustworthiness: Banks and financial institutions consider you to be an eligible borrower if your credit score is robust, as it reflects trustworthiness. A poor score indicates increased dependence on credit and lack of timeliness in repayment, which after a point may reflect lack of integrity and therefore intent to pay back.
Credit hungriness: A credit report also indicates your dependence on credit. This is assessed in terms of your credit utilization ratio, which refers to the percentage of credit you use from what’s available. A high credit utilization ratio shows credit hungriness irrespective of when you repay it.
What if you don’t have a credit score?
It may be great to never have to take a loan. But from the point of view of developing a credit history, it’s important to have some form of credit, be it loans, credit cards, or EMI store purchases.
If you have never availed any form of credit, the credit bureaus and banks wouldn’t have a credit history to analyse you with. This could make things tricky for you if you approach a bank for loan in future.
So, how do you show a history of timely repayment? You can start with taking a secured loan or credit card and maintain a record of timely repayment to be on the good books of the banks.
(The writer is CEO, BankBazaar.com)
Source : https://goo.gl/RiZa4E
Adhil Shetty | Dec 19, 2016 | Deccan Herald
If you’re applying for a loan or a credit card, your lender would look into your credit history. A CIBIL score of 750 or more is considered desirable by most lenders. If you’ve been prompt in repaying your credit card bills and other loans, you should have a sturdy score.
But every now and then, people get a rude shock with their CIBIL score which prevents them from getting a loan product of their choosing. This means that their loan application may get rejected, or they may be offered a loan with a high interest rate.
Your CIBIL score could be low for broadly two reasons — Data in your CIBIL report is incorrect, and that you have defaulted on a loan or have been irregular with your repayments.
The first step towards ascertaining the details of your CIBIL report is to get a copy of it. You can do this for a fee of Rs 550 from the CIBIL website. Your report will be generated instantly and its details will be shared with you on your email.
Now, let’s dive deeper into these two issues.
Incorrect reporting of personal and credit history
*Check personal details: Your CIBIL report carries your personal details such as name, PAN number, contact information, employer’s address, employer information such as salary and occupation.
Next, it carries details of every credit card account or loan account you’ve opened with regulated entities such as banks and NBFCs. Any discrepancy in this data needs to be checked and challenged. Ascertain that the details in your report pertain to you and your own credit history. If you’ve mistakenly been assigned someone else’s credit history — especially an adverse credit history — your credit score would suffer.
*Check repayment details: Next in your report, go through the details of all the borrowing accounts you’ve opened: Credit cards, personal loans, home loans, car loans, etc. You also need to check the monthly repayment details of all these accounts. The CIBIL report would reflect any delays in repayments (as ‘days past due’), defaults, settlements, write-offs, value of collaterals offered, etc. Ascertain that all the details are correct and that these accounts actually belong to you. This data is reported to CIBIL by your lender. If any detail has been reported in a way that adversely impacts your borrowing history, your credit score would suffer.
*Raise a complaint: CIBIL allows you to challenge incorrect reporting through its website. You can also contact them through post. When you access the online copy of your report, you can go over your personal and financial details. Any details that you want to be corrected need to be reported to CIBIL, which will then contact your lending institution for amends. This process may take up to 30-45 days. If the lender accepts the corrections, they will reflect in your report. If the lender refuses to accept your corrections, you will have to get in touch with them directly. This is because CIBIL prepares your report from information received from your lender. Therefore, CIBIL cannot directly change the contents of your report.
Defaults, Delays In Repayments, Credit-Hungriness
If you have neglected repaying your loans, it would hurt your credit score hard. Let’s take a quick look at your options to address this problem:
*Repay loan balances on time: Whether you have loans or credit card dues, always aim to settle them as per your repayment plan. If there are difficulties in repayment, always keep your lender in the loop so that the lending terms may be made easier. With credit cards, always pay the full due amount rather than the minimum amount.
*Don’t be credit-hungry: Don’t apply for too many loans or credit cards, especially within a short time. With application, the lender will check your credit history. Too many queries into your credit history would reduce your credit score since you will be seen as a credit-hungry person. Also, having too many loans at the same time means you will have to manage several EMIs every month, which would adversely impact your liquidity and could lead to default.
*Increase credit limit on card: Try and spend no more than 20% of your credit card limit. For example, if your monthly spending limit is Rs 1,00,000, restrict your spending to Rs 20,000. It means that your credit utilisation ratio (CUR) is 20%, which is ideal. A frequently high CUR would portray you as being in constant need of short-term credit.
Asking your credit card provider to increase your spending limit, or having multiple credit cards, can help reduce your CUR. For example, your increased spending limit could be Rs 2,00,000, whereas your monthly spending is Rs 20,000, thus bringing your CUR to 10%. Also, if you have multiple credit cards, you could divide your spending between them, thus maintaining an optimum CUR on all cards rather than increasing the CUR on a single card.
*Don’t settle: If you’ve defaulted on your payments, your lender may offer you an option to ‘settle’ your loan. This means paying a percent of your principal and interest due, and considering the loan account closed. Taking this option would reflect in your CIBIL history and it would adversely impact your credit score. Any lenders you approach would see that you were unable to repay your loan. Therefore, do not take the settlement option if you can settle loans in full.
*Repay a mix of credit: You should have a history of repaying a mix of short-term or unsecured credit such as credit card balances and long-term or secured credit such as home loan. The timely repayment of a mix of credit instruments would reflect well on your credit history.
(The writer is CEO at http://www.BankBazaar.com)
By Satyam Kumar – LoanTap | Sep 27, 2016, 04.34 PM | Source: Moneycontrol.com
Also known as credit card takeover loan, this can help you get rid of credit card debt.
One of the easiest ways we can choose to build a healthy financial future is to get a credit card and use it wisely and responsibly. Let’s say, for most people, a credit card offers their first opportunity to start building a credit history. While many credit card users pay off their credit bills in full every month, there are others who take the route of making minimum payments on their credit card bills and become too comfortable with the idea. But as easy as it may seem, it is just a delusion that making minimum payments is enough to prevent late fees and interest charges. Even banks and financial institutions are not likely to specify information on the damage minimum payments might cause in the long run. There are numerous consequences of failing to pay off your charges in full every month. The lack of awareness is causing credit card holders to lose money that they could easily save. Still not convinced? Here is your chance to learn more about minimum payments, how they might affect your financial health and the best possible solution available to you to undo the damage.
The minimum payment is a fraction of the total outstanding amount that is due. So, for instance, if the outstanding amount due on your credit card for a particular month is Rs 25,000, then the minimum payment would be Rs. 1,000. It is a common misconception among many people that banks will not charge interest on their credit card as long as they are making the minimum payment. Unfortunately this is not true. The only benefit that can be derived by making the minimum payment is that one will not have to pay late fees. Also, this will keep credit score in good shape but there would still be no respite from paying steep interest.
Relying on making minimum payments for an extended period can result in a huge debt that may even exceed one’s credit limit. This is because the higher the pending amount, the higher will be the interest amount. This might pose to be a challenging financial problem. This is when a credit card takeover (CCT) loan comes to the rescue. Many consumers aren’t aware of the benefits of a CCT loan and how it might help them in saving and maintaining their credit score.
Here are a few ways it can take care of a huge credit card debt:
1. A CCT loan offers low interest rates compared to credit card interest rates. The annual rate of interest is usually 18% lower than any credit card interest rate. This dramatically reduces your interest burden.
2. It is convenient for those who are financially not ready to pay the full outstanding amount that they have run up on their credit cards. One can only pay the interest amount initially and wait until they are in a better financial position to pay off the principal on quarterly or annually, which is easily affordable.
3. A CCT Loan can help in protecting your credit score. How? We all know that delayed credit card payments can have a negative impact on one’s credit score, which eventually lowers any chances of loan approvals later in life. In such cases, taking an EMI-free loan is the best way to save the CIBIL score.
4. A CCT loan can provide the opportunity to avoid late fees and penalties as the loan can be sanctioned within a small span of time. This eventually helps in saving up a lot of money in the long run.
People nowadays opt for flexibility in everything, whether it is their job or education. Loans like CCT or EMI Free is helping those sections of people by offering flexible options to repay credit card debt. Although one can use it for numerous purposes like buying a house, paying for education fees, or even for financing one’s marriage, its low interest rate makes it a viable option to pay off outstanding credit card debt that may be creeping up on your savings without your realizing its deleterious impact.
A credit card is often looked at as a debt trap and you often hear words of caution about how its reckless use can land you in trouble to say the least. While the above may be true, most people do not see the other side of the coin when it comes to credit card usage. Your credit card, when used judiciously and smartly can actually help you increase your CIBIL score.
By: CreditVidya | July 25, 2016 8:00 PM | Financial Express
A credit card is often looked at as a debt trap and you often hear words of caution about how its reckless use can land you in trouble to say the least. While the above may be true, most people do not see the other side of the coin when it comes to credit card usage. Your credit card, when used judiciously and smartly can actually help you increase your CIBIL score.
There are many factors that influence one’s CIBIL score and one of them is a low credit utilisation. Credit utilisation is the total amount of credit you spend as against the total amount made available to you. Of course you can keep your credit utilisation low by spending low amounts on your credit card and never exceeding 30-40% of your total credit limit, but the other way to do it is by increasing your credit limit on your card.
By increasing your credit limit you can definitely give your CIBIL score a boost and thus open up doors of lenders when you are in need of credit. If you are wondering by now what exactly is to be done in order to increase your credit limit on your card, we are here to tell you just that.
Follow the golden rules of credit usage
To have to credit limit increased automatically, you need to prove to your credit card issuer that you are a trustworthy customer. The only way to do so is to follow the golden rules of credit card usage i.e make timely repayments, spend small amounts on your card, keep your credit utilisation and most important of all repay within the billing cycle. If you simply follow these basic rules, chances are that the card issuer or your bank will automatically increase your credit limit from time to time.
Make the call to your bank
If you have been doing everything right and have not seen an increase in your credit limit in the last six months, make the call your card issuer or bank yourself and make the request for an increase in your credit limit. Make sure you bring your good credit behaviour to their notice. Chances are, they may not have noted it yet or it’s just a case of negligence that you card limit has not been enhanced yet. In such cases, a polite reminder will not hurt!
Check your CIBIL report
If you make the call and your request gets denied on account of a poor CIBIL score, it is very likely that you will be taken aback because you thought you were indeed doing everything right as far as your credit usage is concerned. The problem may not be your credit conduct but a reporting error on your CIBIL report.
Sometimes errors and discrepancies creep in into CIBIL reports given the huge amount of data that lenders and credit bureaus handle. This is the reason why periodic checks of your CIBIL report is so important. If your bank denies you an increase in your credit limit, go back to your CIBIL report and check for errors. In case you spot any, make sure you raise a CIBIL dispute right away and wait for the rectifications to reflect on your report before you make a request to your card issuer again.
Do it for the right reasons
As we have pointed out so far, increasing your credit limit on your card has its advantages. However, make sure you are taking this step for the right reasons, such as dealing with a work related expense or a medical condition that will be reimbursed later, by your company or your insurer. But for those who are already in debt, or struggling to meet expenses increasing one’s credit limit may be the equivalent of stepping on a live wire, so make sure you are tread with caution!
Source : http://goo.gl/xcJpZQ
Creditvidya.com | Last Updated: June 13, 2016 10:38 (IST) | NDTV Profit
Credit utilisation is the ratio between the credit card spending and the sanctioned limit for the card. This is calculated cumulatively as well as individually which means that it is calculated for each card that one might have and also for all the cards put together. Thus, the overall spending on your card versus the total sanctioned limit is the cumulative credit utilisation.
Why is this ratio important? This ratio is important because after the repayment history this is the biggest contributor that makes or breaks the CIBIL score of an individual.
How does it make a difference if the credit utilisation is high or low? High credit utilisation is indicative of being credit hungry and also poor debt management, both indicate risky borrowing behaviour which makes the CIBIL score low. Then does it mean that zero credit utilisation is good?
No. While a high credit utilisation ratio is definitely not good for the CIBIL rating a nil one is also not good either.
Smart ways to manage credit utilisation ratio
Reduce expenditure: Well, to be honest it is not the smartest way but definitely the most obvious and the simplest way. Yet this is something that might not be the easiest thing to do. If expenditure on credit card is high because of unplanned and impulsive buying then yes you could try to reduce the spending.
Get a bigger credit limit: Either one could decrease the numerator (spending) or increase the denominator (limit) to reduce the ratio. Getting a bigger limit is one of the options. Often for cards that were issued a few years back, card holders forget to revise the sanctioned credit limit even though they are eligible for it. Thus one could check with the card company and find out if they are eligible for a higher limit. If the eligibility allows then one could get a bigger limit sanctioned for their existing card.
Opt for an additional card: If a higher limit is not possible due to the rules by the credit card issuer or you already having a high limit, then one could explore the option of getting an additional card. An additional card will raise the overall available credit limit thus making it possible for you to control a high credit utilisation ratio. However this option will work only if the expenditure is spread smartly over all cards and if one easily manages paying the dues on all cards.
Distribute expenditure smartly between cards: An additional card will not work if the expenditure is not distributed judiciously over all cards. It also makes sense to time the spending depending on the billing cycle and due date and charge it to the appropriate card accordingly. If the credit utilisation ratio is low overall but is too high for one card then also it is not a good indicator for the credit score.
Try paying mid-cycle once a while: If in one billing cycle due to some festivities or unforeseen circumstances there is very high spending on the credit card, then one could consider paying before the actual due date to keep the credit utilisation in check. Paying mid-cycle some amount will ensure that the ratio does not become too high.
Disclaimer: All information in this article has been provided by Creditvidya.com and NDTV Profit is not responsible for the accuracy and completeness of the same.
Source : http://goo.gl/Cxof7c
HARSH ROONGTA | Tue, 29 Mar 2016-09:22am | dna
Shrinking interest rate margins have made several lenders to insert hidden charges to increase their margins by stealth.
The home loan industry has come a long way from the time when the only charges that you had to watch out for were the processing charges taken under various heads and pre-payment charges. Regulation has ensured that there are no pre-payment charges and competition has ensured that there is a greater degree of transparency around the processing fee, legal fee, valuation fee or technical charges. Competition has also ensured that there is hardly any difference in the interest rates charged by various home loan lenders. Unfortunately, the shrinking interest rate margins have made several lenders to insert hidden charges to increase this margin by stealth.
Here is a list of these charges:
Charge interest on the loan which is disbursed late – This is a common practice. The lender prepares a cheque, but it is not to be handed over till certain documents are received from the borrower and/or the seller. These documents normally may take a few days to a few weeks, and meanwhile, the interest meter is ticking for the borrower. This is not as small as it looks. On a loan of Rs 1 crore, the interest @9.50% works out to Rs 2,600 daily.
The cost of a 10-day delay in handing over the cheque (which is pretty common) means an additional cost of Rs 26,000 or 0.26% of the loan amount. You should negotiate with the lender that you will only pay interest from the day the cheque is actually handed over to the seller and not from the date mentioned on the cheque.
Advancing the EMI payment date – The EMI amount is calculated assuming that the payment will be made at the end of 30 days from the date of disbursement. If this EMI is paid earlier than 30 days, the cost becomes much higher than the stated cost. An example will illustrate this. If the disbursement is made on February 15, 2016, and the EMI is payable on the first of every month then typically you should pay interest equivalent to 15 days’ interest (from February 15, 2016, to March 1, 2016) and the EMI should start from April 1, 2016, only. However, most lenders will start off the EMI from March 1, 201, and still charge you for a full month’s interest. Again, the difference is not as small as it sounds. 15 days’ extra interest for a Rs 1 crore loan @9.50% works out to Rs 39,000 or 0.39% of the loan amount. Again, you can negotiate with the lender to make sure that this additional hidden interest is not charged to you. Unlike the first point which is easily understood, this point is technical and the lender can run loops through the borrower while explaining how the EMI is calculated.
Forcing borrowers to buy expensive insurance products – Lenders have tied up with life and general insurance companies to provide life, disability and property insurance to borrowers and they force you to take these policies. The lenders earn fat commissions on the sale of these insurance policies and even though officially not permitted, they force the borrowers to sign up for these policies. It is a good practise to have such type of insurance policies when you take a loan, but the problem is that the policies being hawked by the lenders are hugely overpriced, reflecting the captive base of borrowers and the fat commissions for the lender inbuilt in such policies. To avoid having to pay for these overpriced policies, you can negotiate with the lender that you will buy these policies on your own. In all probability, you will get the exact same policy from the same insurance provider as what the lender is pushing at a fraction of the cost that the lender will charge.
Forcing borrowers to take a credit card or some other add-on products – In most cases this is offered for free while not stating that it is free only for the first year and would have an annual fee every year after that. You can easily negotiate your way out of this one.
Whilst these are the “extra” charges that lenders take from borrowers, there is a charge that they are unfairly accused of taking. For example, in Maharashtra, you have to pay a stamp duty of 0.20% of the loan amount on the document creating the security in favour of the lender. It is obvious that this charge will be recovered from the borrower (it is also mentioned in the loan agreement as recoverable from the borrower), but I have heard many borrowers complain that this is a hidden charge sprung upon them. This document is in favour of the borrower as it is conclusive proof that documents have been handed over to the lender. This is extremely useful when the loan period ends because there have been increasing the number of cases where the lenders have misplaced the title deeds and claim that these were never deposited with them in the first place. A stamped and registered document will prevent the lender from making any such claims.
In this new age, the lenders depend on the borrowers lack of attention to slip in the extra charges. It makes eminent sense for the borrowers to take the help of professionals to help them navigate through this process. The fee payable to such professionals will be more than made up by the savings in these “extra” charges.
Source : http://goo.gl/ImwYEb
Tania Kishore Jaleel & Sunita AbrahamSunita Abraham | Last Modified: Mon, Feb 01 2016. 01 46 AM IST | LiveMint.com
Understand and manage your credit behaviour to protect yourself from a low credit score
You know by now that big brother is watching your credit behaviour. One misstep in how you meet your financial obligations and your credit score will feel the effects for a long time. The credit score is a number based on your credit report—which is a summary of your past and current borrowings and your repayment history—that a credit bureau agency prepares. Currently, there are four such companies in India—Credit Information Bureau (India) Ltd (Cibil), Equifax Credit Information Services Pvt. Ltd, Experian Credit Information Co. of India Pvt. Ltd and CRIF High Mark Credit Information Services Pvt. Ltd.
A good score will help you get credit and loan facilities easily and on better terms, while a bad score will harm your borrowing interests. However, it is easy to make errors and have oversights that pull the score down.
“There are specific elements from one’s credit report that shape the scores; these are called credit score factors. These include amounts owed by a borrower, type of credit in use or the total number of credit accounts maintained, appetite for credit through credit inquiries and the number of late payments,” said Mohan Jayaraman, managing director, Experian Credit Information, and country manager, Experian India. It is important to understand and evaluate these factors, since an increase in these could result in one’s credit score being lowered.
It is good to know what may harm you if you want to protect yourself from the ills of a low credit score. Here’s what you can do about it.
Validate credit report
Check your credit report at frequent intervals to make sure that there are no errors or mistakes in the data, which may, in turn, be affecting your credit score. For example, there may be errors in your personal information. The balances reported on the loans and credit cards may be incorrect or may not reflect the repayments you have made. All of these have the potential to needlessly pull down your credit score.
To avoid that you just need to periodically purchase your credit report for a nominal sum, and if there is any disputed information, you should give an application for correcting it. The cost will vary across credit information companies. For instance, Experian charges Rs.399 for a credit score and Rs.138 for your credit report. Cibil charges Rs.500 for your credit score.
The credit bureau will make the changes after the credit institution confirms the error and provides the correct information. “It is recommended that one checks her score and report once a year. This is because it is good to know where you stand and also if there are any discrepancies,” said Aparna Ramachandra, founder director, http://www.rectifycredit.com, a credit repair and advocacy firm.
Delay or default
Delaying or defaulting on making loan payments and other obligations reflect poorly on your score. While even a one off case of delay or default will have an effect, frequent delays or defaults will indicate financial difficulties or lack of discipline and an inability to meet repayment obligations. Have systems in place, such as automated payments, to make sure that you don’t inadvertently miss a payment, if funds are not an issue.
Use credit in moderation
Just because you have been approved a high credit limit on your credit card or some other type of a loan doesn’t mean you take on the offer. Using a high percentage of the credit facility that you have been sanctioned, or a high credit utilisation ratio, may indicate a lack of control over spending habits and the risk of not being able to service the debt.
“Taking too many loans may be depicted as being credit hungry while applying for no loans means that a borrower will have no credit footprint on the bureau. Neither of these scenarios augur well for someone who plans on taking a loan,” said Jayaraman.
“Credit information companies consider consumers who apply for several new credit lines in a short period of time to be at a higher risk and hence adjust their credit scores accordingly,” he added.
Closing a line of credit, such as a credit card or an overdraft facility, while a financially prudent step, may also push up the credit utilisation ratio now that the available credit has gone down without an equivalent reduction in credit usage. Consider the impact of any credit related decisions, like applying for more credit, closing credit lines, or increasing usage.
“Taking too much credit, especially if it is unsecured credit, has a higher negative impact on the credit score. Lenders always look at debt in relation to the income for a more balanced view,” said Kalpana Pandey, chief executive officer and managing director, CRIF High Mark Credit Information.
Go slow on new enquiries
Each time you apply to use a credit facility, the credit institution will access your earlier information and this is recorded as an enquiry in your records. Too many enquiries reflect negatively on your credit score. “Space out your credit applications and limit making several applications close together as lenders may see this as a sign of financial stress,” said Pandey. It also indicates an inability to live within the available income and lenders may view this as a risk to your ability to meet repayment obligations.
Ramachandra said that a particularly big red flag in the eyes of a lender is if one makes regular enquiries about a particular type of credit. “This shows that you cannot live within your means,” she said.
Build a credit history
While a clean slate may be good news for your overall financial situation, it can hinder your ability to get a loan or credit facility in the future. Some lenders may look for evidence of responsible repayment behaviour before they lend, and not having a credit history works against the borrower in such cases.
Similarly, if you are considering reducing the number of credit cards that you hold, then retain the older credit cards in which you have a disciplined payment history, and close the newer ones. This will strengthen your credit score.
Monitor guarantees and add-ons
Standing guarantee for a loan, and holding and giving add-on cards may seem harmless but they can have an impact on your credit score. If the primary borrower defaults on the payment obligation, then as a guarantor it will be your responsibility. Similarly, whether you have given an add-on card or hold one, a default will reflect on both parties’ credit reports. Regularly monitor these obligations to make sure that there is no default. Else, you could be penalised for no fault of yours.
Since it’s difficult to avoid credit or loans, protecting the credit score should be a priority. “The most important factor to improve a credit score is to clear all outstanding credit card dues and then start paying back outstandings on your loan regularly (month on month). Once a borrower pays all her outstanding instalments and has started paying regularly, her score will improve,” said Jayaraman.
Close unused credit accounts if you no longer need them. Lenders take into account the credit limits available to you, and not just what you currently owe.
Have an emergency fund in place so that loan repayment obligations are not affected if there is a fall in income. It will also help pay for expenses such as medical situations, which may otherwise push you into additional debt.
To improve financial discipline, take simple steps like automating debt and bill payments, keeping contact details updated so that there is no missed information, periodically checking credit report and signing up for intimation by SMS or email for payment obligations.
The consequences of a poor credit score may not be immediate but it is an expensive mistake that you will pay for a long time. It will also take a long time to repair.
Source : http://goo.gl/oRVsfj
By Rishi Mehra | 20 Jan, 2016, 10.17AM IST | Economic Times
It is common to have debt in some form or the other and it is not bad to have them. However, there may come a time when runaway debt may cause problems and you may need professional help. A look at some scenarios that can indicate you need help to tackle your debt.
Caught in minimum payments – This is especially true for credit cards. When your credit card is generated there are two payment terms in that statement. One would be total amount due, while the other is the minimum amount, which is about 1 % of the principal amount outstanding. Minimum amount, being a small percentage of the total amount due, largely consists of interest and fees. This would mean if a person pays only the minimum amount outstanding on the card every month, it would take him decades to pay the entire amount. If you find yourself caught in the trap of minimum payments, it may be time to get professional help to get out of the situation.
Over reliance on credit cards – Being caught in the minimum payment trap may not be the only indicator that your finances may be off track. When debt increases, servicing it may lead to over reliance on your credit card. Having to use the credit card for daily expenses may be proof that your finances are not in shape. However, paying by credit card because you chose to and not because you have cash crunch is okay. Similarly, if you are making payments by credit cards to earn points, rewards or cash back, it makes perfect sense. However, when you start feeling your cash drying up and having to resort to credit cards to fund your monthly need, it may be time to talk to a financial advisor to get your finances in order.
Getting a loan to tackle debt – Unless it’s a credit card debt, or the new loan has substantially lower interest rates, taking a loan to settle another loan defeats the purpose. This can be very counterproductive, especially in cases when you increase the tenure of the loan to ensure you pay lower EMIs. The very idea of taking a loan should be to reduce your debt at the earliest and most frugal manner. By increasing the tenure you may be making things easier for yourself, but the interest outgo will be much higher. You also run the risk of being under debt for a longer time. If you have any debt, your first priority should be to pay them off at the earliest. If you find yourself in a situation where you think you may need a loan to settle another loan, it is best you consult an expert first to get an opinion.
Little or no savings – When your entire income goes on servicing your debt and catering to your daily expenses, it may be time to get help. When you start your career you may not be able to save immediately, but as you progress in life, you should start having some form of saving. What products appeal and suit you can differ, but it is imperative to save money, especially for periods after retirement. However, if your savings are negligible or you have no products that help you save money, you may be in a tricky situation. Get help on what products will be ideal for you and start saving diligently. Failure to do so may be painful when you grow old or during an emergency.
Difficulty in drawing or sticking to a budget – To build some sort of order and responsibility between what you earn, what you spend and what you need to set aside to cater to your debt, it is important to draw up a monthly budget. This helps you come to grips with the regular expenses every month and the special ones that may creep in. This also helps you realize when you are overspending and the need to put money aside as savings. When you have difficulty in drawing a monthly budget or sticking to it despite having one, you may need to get help to figure out ways to correct your situation.
Consistently overshoot payment deadlines – This may be an early and a potentially important indicator to know if you are having problem with your finances. If you miss payment deadlines on your bills because you do not have the requisite money and have to wait for your next payday, things may be tight for you. Servicing your existing debt may be taking its toll and you should get help to see what can be done to address your financial situation.
(The author is co-founder of deal4loans.com)
Source : http://goo.gl/vehEzi
If it doesn’t meet a bank’s cut-off limit, you could be denied a loan. Here are ways to improve this vital number
Sanjay Kumar Singh | November 22, 2015 Last Updated at 23:49 IST | Business Standard
Before you apply for a big-ticket loan such as buying a house, get your credit report from one of the country’s four credit bureaus. The report would contain your score, a three-digit number that reflects your creditworthiness.
Banks and housing finance companies (HFCs) take this number into account in deciding whether to lend to you. If your score is above 675, you are in a happy situation. If not, you might be denied a loan (different banks have different limits). Here are a few steps you can take to improve the score.
Review your credit report: In the period prior to applying for a home loan, review your credit report regularly, say, every month. Such a review will tell you where your weaknesses are and what you need to do to improve the score.
Get mistakes rectified: Mistakes are common in credit reports. They could happen because there’s a mistake in a bank’s records or you’ve been mistaken for someone else. Or you might have been a victim of identity theft. In all these cases, get in touch with the bank or HFC and get the error rectified.
Improve payment history: Before applying for a home loan, make sure you have not been delinquent in the past six months at least. If any of your loans or cards has been “settled” in the past (which means your bank agreed to take only a part of the amount due and closed your account), you should fully repay the lender.
Make timely repayments: The most important factor in improving your credit score is to improve your repayment record. “Once a borrower has managed to pay all his credit card dues and has started paying his EMIs (equated-monthly instalments) regularly, his score will start improving,” says Mohan Jayaraman, managing director (MD), Experian Credit Information Company of India.
Close unused accounts: Close any loan account that you no longer use. In deciding on the loan amount you are eligible for, lenders can take into consideration not only the loan dues against your name but also the credit limits available to you. “To maximise the eligibility on a home loan, reduce overall exposure to other loans,” says Kalpana Pandey, MD, CRIF High Mark.
Space out applications: Every time you apply for a loan, the lender checks your credit score. When it does so, it leaves behind what is known as a credit application search footprint on your score. Each time this happens, your credit score takes a small dip. “Space out your credit applications, as this could signal to lenders that you are under financial stress,” says Jayaraman.
When it is time to apply for a home loan, don’t do so to several banks and HFCs at the same time, in the hope that one of them will lend to you. “Evaluate home loan products from lenders and then apply to one or two that are best suited to you,” says Pandey.
Use credit limits judiciously: Suppose you have a card on which you have a credit limit of Rs 2 lakh. Avoid using it fully. “Don’t use the credit limit up to the hilt. Generally, it is advisable not to exceed 40 per cent of the limit,” says Arun Ramamurthy, co-founder, Credit Sudhaar, a company that helps people improve their credit score.
Build a track record: Conventional wisdom would have us believe that our credit score should be high if we have never taken a loan in the past. Things don’t work that way any more. If you have not used any type of credit in the past, the bureaus do not have data by which to evaluate you and you end up getting a poor score. This makes it imperative that you start building a record of responsible credit usage through credit cards, personal loans, etc, as soon as you start working. Doing so will prove handy when you have to take a big loan, such as a home loan.
Use the right credit mix: Two types of loans exist, unsecured and secured. Unsecured loans require no collateral. Credit cards and personal loans are in this category. Lenders consider these to be riskier than secured loans, such as a home loan, where they have the house as collateral. Beside building a healthy track record of credit usage, it is also important to use a judicious mix of secured and unsecured loans. “Suppose a person has a credit card and no other type of credit. He might be paying his dues on time, but chances are that his credit score might not be very good. This is because the credit bureaus do not have adequate data on different types of credit to be able to score that person properly,” says Ramamurthy. The right credit mix for each person depends on his income and socio-economic background, he adds.
At present, most lenders use the credit score only to decide if to grant you a home loan. If your credit score is good, your loan also gets processed faster. As time goes by, the practice of the same bank charging different rates of interest from customers, depending on their credit score, will also begin. Even today, a poor score means the frontline banks and HFCs won’t lend to you, due to which you might have to approach a smaller player. The latter might agree to lend but at a higher rate of interest. Having a poor credit score can, thus, translate into lakhs of extra rupees in interest charges over the tenure of the home loan. Hence, improving your credit score and maintaining it at a high level has become imperative.
CORRECTING CREDIT REPORT ERRORS
- Get in touch with the customer care department of the lending institution and register a complaint. Note the complaint number
- Send an e-mail, quoting the complaint number and details of the issue, to the grievance redressal officer of the lending institution
- Send a copy of this mail to the credit bureau
- The bank or HFC should reply within 30 days, stating the correction has been made
- Forward the response to the credit bureau
- If you don’t hear from the bank within 30 days or the problem isn’t rectified to your satisfaction, complain to the ombudsman
- If the ombudsman doesn’t solve your problem, appeal to the RBI deputy governor
- Finally, you could approach a consumer court
Source : http://goo.gl/2DnQj6
ADHIL SHETTY CEO, BankBazaar.com | Nov 13, 2015, 06.58 PM | Source: Moneycontrol.com
Closing a credit card is as important an event as opting for one. You have to follow the due process, to ensure that you do not suffer in future.
A credit card is a handy financial product that not only facilitates the buy-today-pay-tomorrow paradigm but also aggregates all your payments and acts as an emergency credit line should such a need arise.
However, if you need to cancel your card, there are certain considerations to grapple with. You also need to know that, if done the wrong way, it could adversely impact your personal finances and affect your credit standing.
Three essentials when closing your credit card
If you have decided to cancel your credit card, use this 3-step approach for an effective close.
1: Communicate with the bank: Communicate with the bank that you plan to close your credit card. You can get in touch with their 24/7 helpline and determine the balance that is due on your card. Send a written communication to your bank informing them about your card cancellation request. This can be useful should any dispute arise between you and the bank at a later stage.
2: Clear all your dues: After confirming the due amount on your card, you can choose to repay the dues as per your billing cycle. It is up to you whether you want to settle your dues as a onetime payment or in installments. The thing to remember here is that if you choose to pay in installments, your balance will continue to attract interest and you will be able to close the card only when it is fully settled.
3: Follow up on your card cancellation request: Do not stop at paying your dues and requesting for card closure. Many cardholders may incorrectly assume that their dues are fully repaid, while, in reality, they may still owe the bank some money. Make sure that you are at the same page with the bank and seek a no due certificate from them.
Importance of a no due certificate
After you are done paying your dues in full, do not overlook the importance of getting a written acknowledgement from your bank. Should there be any dispute between you and the bank, the no due certificate is eventually the deciding factor. Do not rely on verbal commitments; instead, opt for a no due certificate without fail.
Credit card cancellation may affect your credit score
Before you go ahead and cancel your credit card, know that cancelling a card can impact your credit score.
When you close one of your credit cards, you are also reducing your overall credit limit. This means your credit card utilization numbers will go up with the existing cards. Banks and card issuers may take this as a signal that you may be more likely to default on your future payments, thereby making you a riskier customer.
As an illustrative example, let us say you have two credit cards with a combined limit of Rs. 1 lakhs, each card having a credit limit of Rs. 50,000. Let us assume that you are spending Rs. 50,000 on both your cards collectively in a month. Therefore, your credit utilization is Rs. 50,000 out of a possible Rs. 1 Lakhs, which comes to 50%.
Now, if you close one of your credit cards, your credit limit is reduced to Rs. 50,000 only. If you spend the same amount as earlier, your credit utilizations is now 100%.
Effectively, this increased credit utilization with one card seen negatively by credit score calculators, as they will consider you as a person depending more on credit. This will impact your overall credit score.
Disputes with banks regarding closed cards
If you do not close your credit card in the prescribed way and get a no due certificate from your bank, do not assume that your card is closed automatically. There have been cases in the past where card holders have been embroiled in disputes with card issuers as they come to know only much later after “closing” their card that there are still dues on their card. In reality, not only would there have been pending dues, but also the card issuer would have charged interest on the same. Most such disputes may have resulted from miscommunication; nevertheless, these will affect your credit score badly.
Closing a credit card is just as important as opting for one. Always follow the right protocol when opting for a credit card closure and check its impact on your credit score once done.
Source : http://goo.gl/5QxgpM
PURBA DAS | OCT 21, 2015, 05.24 PM | Business Insider
If you are tempted by calls for credit cards with different schemes, hold that thought for a moment! Before you sign up the document for yet another new credit card, have you ever wondered how is your credit limit decided and if you have the room to raise it later?
“When you sign up for a credit card you are requested to fill up a form providing details of your income, KYC and employment. Based on the details you provide the credit card company first checks your CIBIL TransUnion Score and CIBIL Report to assess your credit history and past credit behavior,” says Harshala Chandorkar, COO, CIBIL.
She adds, “If your CIBIL TransUnion Score meets the cut-off limit of the credit card company and they are satisfied with your CIBIL Report, they proceed to decide your credit card limit, rate of interest and terms and conditions on your card.”
It must be noted that while each credit card company follows its own set of criteria for deciding on the credit card limit, the credit limit is primarily a function of an individual’s income and usage.
Chandorkar explains that the crucial factor that determines the credit limit for a credit card include– income documents such as salary slips, income tax return documents and surrogate methods which include your association with a brand, a merchant outlet or a premium club. But apart from the income, a credit card company before fixing the limit of the credit card also takes your credit history and credit score into account.
This is primarily done in order to understand your repaying ability. If your credit score is low, your credit card limit would also be low. And if you have a higher limit, you can swipe your card a little liberally without worrying about your card being declined.
For instance, you may have an income of Rs 60,000 per month. However, the limit on your on your credit card could be just Rs 1 lakh. If you have been wondering why your limit is so less as compared to your income, then you should probably check your credit history and your credit score once again.
We know what are you thinking now. You probably want to know if you can raise the limit on your cards. And the answer is a definite yes. “Most banks make you eligible for getting an increase on your credit card limit after 6-18 months of you availing and using the credit card, depending upon their credit policy,” says Chandorkar.
However, credit card companies do not increase the limit without their own assessment of your credit behaviour. According to Chandorkar, the raise in credit limit for a card depends primarily on two factors—your payment history for that particular credit card and your payment pattern for other credit relationships, which is reflected in your CIBIL Report and CIBIL Transunion Score.
If the banks or the credit card company finds your overall credit behaviour satisfactory, it will allow you to up your credit limit.
But the catch here is that while the banks can increase the limit on your credit card, they also have the power to reduce it, if need be. Chandorkar points out that banks and credit card companies often do it when they find an individual’s credit behaviour hinting at a possible default or delinquency on loan and credit card payments.
One must remember that credit card issuers regularly keep a tab on their customer portfolio and constantly check for their borrower’s credit behaviors. Well, this just leaves us with one advice– Spend wisely and stay safe!
Source : http://goo.gl/H5UoAv
In order to get a loan at competitive interest rates, it is mandatory to have a CIBIL score of 750 and above.
By: CreditVidya | October 5, 2015 3:32 PM | Financial Express
In order to get a loan at competitive interest rates, it is mandatory to have a CIBIL score of 750 and above. This is a fact that most people are unaware of despite the information overload about credit score and its impact. There are a lot of articles online and offline about how it is mandatory to keep your CIBIL score high. Your CIBIL score is a measure of your credit worthiness. In other words, banks look at your CIBIL score to find out how you have handled your finances and whether or not you have behaved responsibly with the credit you have already availed of in the past. But the fact is, that people are still unclear about what exactly should they do to maintain a high CIBIL score. If you too are among those who are still confused as to what really impacts your CIBIL score, here is the lowdown on what really matters:
1. Make timely payments – The one top trick to pump up your CIBIL score is to make all your payments on time – very basic requirement, indeed. This is applicable to all the credit you already have. This includes credit card outstandings and EMIs on loans. Also make sure you make other payments such as insurance premiums etc on time, though it does not fall under the credit bracket. Even a single late payment on a home loan or an unpaid outstanding on your credit card, will bring your CIBIL score tumbling down and be a blemish on your CIBIL report.
2. The total amount of credit you have availed of – Credit is something that is easily available today. You therefore probably have at least two or three credit cards that you are using simultaneously, along with a home or a vehicle loan. While you are particular about repaying EMIs, you think its OK to pile on the debt on your credit card, because you are far from your credit limit. If you are under any such impression, stop right there! The amount you owe to your lenders makes a large impact on your credit score. The closer you are to your credit limit, the worse its gets! Ideally you should not be using more than 30% of your total credit limit at any given time.
3. For how long you have had credit – “Credit history” as it is called in financial parlance has a large impact on your CIBIL score. If you have availed of credit for a long time and have serviced it well, it certainly fetches you brownie points to increase your CIBIL score. A good credit history gives a prospective lender the confidence to lend to you.
4. Too much credit in a short period of time – If you apply for too many credit cards or loans close to each other, it sets the alarm bell ringing for any bank. As for your CIBIL score, it inches lower each time you apply for a new loan. Every time you apply for a new credit card or loan, there is a “hard enquiry” made on your CIBIL score and CIBIL report, bringing down the score a few notches lower each time.
5. Good and bad debt – Believe it or not, the kind of debt you avail of, makes an impact on your CIBIL score. While home, vehicle and student loans fall under the category of good debt because they are “secured” in nature, “unsecured” loans such as too many credit cards or personal loans spell trouble and bring your CIBIL score down.
Source : http://goo.gl/yqf81M
Neha Pandey Deoras,TNN | Sep 21, 2015, 06.46 AM IST | Times of India
In an ideal world, everybody would have enough money for all his needs. In reality, many of us have little option but to borrow to meet our goals, both real and imagined.For banks and NBFCs, the yawning gap between reality and aspirations is a tremendous opportunity . They are carpet bombing potential customers with loan offers through emails, SMSs and phone calls. Some promise low rates, others offer quick disbursals. Online aggregators help customers zero in on the cheapest loan and banks take less than a minute to approve and disburse loans. However, while technology has altered the way loans are disbursed, the canons of prudent borrowing remain unchanged. It still doesn’t make sense to borrow if you don’t need the money. Or take a long-term loan only to enjoy the tax benefits available on the interest you pay . Our cover story this week lists 6 such rules of borrowing that potential customers must keep in mind. Follow them and you will never find yourself enslaved by debt.
Don’t borrow more than you can repay
Don’t live beyond your means.Take a loan that you can easily repay .”Your monthly outgo towards all your loans should not be more than 50% of your monthly income,” says Rishi Mehra, Founder, Deal4Loans.com.
With banks falling over each other to attract business, taking a loan appears as easy as ABC. But don’t take a loan just because it is available. Make sure that your loan-to-income ratio is within acceptable limits. Take the case of Hyderabad-based Phani Kumar, who has been repaying loans right from the time he started working.
It started with two personal loans of `5 lakh six years ago. Then, he was paying an EMI of `18,000 (or 40% of his take home). Kumar took a car loan of `5.74 lakh in 2012, adding another `12,500 to his monthly outgo. Last year, he took a third personal loan of `8 lakh to retire the other loans and another top-up loan of `4 lakh. Today, he pays an EMI of `49,900, almost 72% of his take-home pay .
If your EMIs gobble up too much of your income, other critical financial goals, like saving for retirement or your kids’ education, might get impacted.Retirement planning is often the first to be sacrificed in such situations.
Keep tenure as short as possible
The maximum home loan tenure offered by all major lenders is 30 years. The longer the tenure, the lower is the EMI, which makes it very tempting to go for a 25-30 year loan. However, it is best to take a loan for the shortest tenure you can afford. In a long-term loan, the interest outgo is too high. In a 10-year loan, the interest paid is 57% of the borrowed amount. This shoots up to 128% if the tenure is 20 years. If you take a `50 lakh loan for 25 years, you will pay `83.5 lakh (or 167%) in interest alone. “Taking a loan is negative compounding. The longer the tenure, the higher is the compound interest the bank earns from you,” warns financial trainer P .V . Subramanyam.
Sometimes, it may be necessary to go for a longer tenure. A young person with a low income won’t be able to borrow enough if the tenure is 10 years. He will have to increase the tenure so that the EMI fits his pocket. For such borrowers, the best option is to increase the EMI amount every year in line with an increase in the income.
Assuming that the borrower’s income will rise 8-10% every year, increasing the EMI in the same proportion should not be difficult. If a person takes a loan of `50 lakh at 10% for 20 years, his EMI will be `48,251. If he increases the EMI every year by 5%, the loan gets paid off in less than 12 years. If he increases the EMI by 10% every year, he would pay off the loan in just nine years and three months.
Ensure regular repayment
It pays to be disciplined. Wheth er it is a short-term debt like a credit card bill or a long-term loan for your house, make sure you don’t miss the payment. Missing an EMI or delaying a payment are among the key factors that can impact your credit profile and hinder your chances of taking a loan for other needs later in life. Never miss a loan EMI. In an emergency , prioritise dues. You must take care never to miss your credit card payments because you will not only be slapped with a non-payment penalty but also be charged a hefty interest on the unpaid amount. If you don’t have the money to pay the entire credit card bill, pay the minimum 5% and roll over the balance.At an interest of 24-36%, credit card debt is the costliest loan you will take.
Don’t borrow to splurge or to invest
Never use borrowed money to invest. Ultra-safe investments like fixed deposits and bonds won’t be able to match the interest you pay on the loan.And investments that offer higher returns are too volatile. If the markets decline, you will not only suffer losses but will be strapped with an EMI as well. There was a time when real estate was a very cost-effective investment. Housing loans were available for 7-8% and real estate prices were rising 1520%. So it made a lot of sense to buy a property with a cheap loan. Now tables have turned. Home loans now cost around 10% while property prices are rising by barely 4-5%. In some pockets they have even declined.
Similarly, avoid taking a loan for discretionary spending. You may be getting SMSs from your credit card company for a travel loan, but such wants are better fulfilled by saving up.”It’s not a good idea to take a personal loan for buying luxury watches and high-end bags,” says Vineet Jain, Founder of LoanStreet.in. If you must go on a holiday, throw a party or indulge in luxury shopping, start saving now.
On the other hand, taking a loan for building an asset makes eminent sense.For instance, Mumbai-based Sandeep Yadav junked plans to go on a foreign holiday and instead used the money for the downpayment of a house, bringing down the overall loan requirement.
If you take a large home or car loan, it is best to take insurance cover as well. Buy a term plan of the same amount to ensure that your family is not saddled with unaffordable debt if something happens to you. The lender will take over the asset (house or car) if your dependents are unable to pay the EMI. A term insurance plan of `50 lakh will not cost you too much.Banks push a reducing cover term plan that offers insurance equal to the outstanding amount. However, a regular term plan is better. It can continue even after the loan is repaid or if you switch lender. Moreover, insurance policies that are linked to a loan are often single premium plans. These are not as cost effective as regular payment plans.
Keep shopping for better rates
A long-term mortgage should never be a sign-and-forget exercise. Keep your eyes and ears open about new rules and changes in interest rates. The RBI is planning to change the base rate formula, which could change the way your bank calibrates its lending rates. Keep shopping around for the best rate and switch to a cheaper loan if possible. However, the difference should be at least 2 percentage points, otherwise the prepayment penalty on the old loan and processing charges of the new loan will eat into the gains from the switch. Also, switching is more beneficial if done early in the loan tenure.
The same applies to prepayment of loans. The earlier you do it, the bigger is the impact on loan tenure. The RBI does not allow banks to levy a prepayment penalty on housing loans but they may levy a penalty on other loans. Some lenders do not charge a prepayment penalty if the amount paid does not exceed 25% of the outstanding amount at the beginning of the year.
Source : http://goo.gl/ocTwU6
RAJIV RAJ | AUG 24, 2015, 12.41 PM | BusinessInsider.in
Today, each of your financial activity is being tracked not just by your bank, but the premier credit bureau in the country, Credit Information Bureau Limited (CIBIL) to rate you on your credit behaviour. Each time you apply for a new loan or credit card, your CIBIL score becomes a parameter of how creditworthy you are. Moreover, potential employers these days are often asking for the CIBIL report of potential recruit. This is to assess how responsible one is with his finances and thus how trustworthy and responsible he will be in his job.
The most important factor that has a 35% bearing on your CIBIL score is your payment history. There are other factors that impact your CIBIL score are credit utilization or how much of your total credit you have used, how long how you been servicing debt, the amount of new credit you have taken or applied for and the mix of your credit. Here we talk about how the mix of your credit can improve your CIBIL score.
Having a good mix or secured and unsecured loans
One thing that helps you attain a high CIBIL score is a good balance of secured and unsecured credit. A mortgage or an auto loan qualifies as a secured credit. But having these and not having an unsecured credit won’t make you a good scorer. A credit card with a reasonably high credit limit, or a personal loan qualifies under the head of unsecured credit. Unsecured credit means that no collateral or advance payment is required to be paid by the consumer at the time of the disbursal of such credit. Having a mortage or an auto loan and credit card that you service on time is a good way to diversify your credit mix and keep a high CIBIL score.
Another type of credit that helps you score points on the credit mix front, is having some exposure to installment credit. If you have do not have a mortage or a loan for a vehicle, your student loan qualifies as installment credit as well. In other words, any kind of loan with a fixed amount of repayment each month under a pre-specified time frame qualifies as installment credit. So, if you are in your first job and still servicing a student loan for a management degree or a vocational degree that you have recently completed, you are still scoring high with CIBIL as far as your credit mix is concerned.
Finding the right balance
The trick to have a good credit mix is to have a good balance of active credit. If you do not have a student loan and are not in a position to apply for a mortgage or an auto loan just as yet, do not be under the impression that no credit will help you have an impeccable CIBIL score. While we are not asking you to be reckless and apply for loans, you may want to start out small and prove that you are creditworthy by applying for a credit card at first when you are stepping in your professional life. A credit card is a great way to build your credit profile if you are using it responsibly. Spending within your means on the credit card and making outstanding payments in full is a great example of prudent use.
A word of caution
While we are reiterating the fact that you must diversify your credit mix, you should not consider it to be a green flag to go and apply for every loan on offer. In this intensely competitive financial world, telemarketeers and even direct mailers are always trying to lure you with loans on “low rates of interest” or “lifetime free” credit cards, but do bear in mind that things are being sugar coated and you are not being given the full picture upfront.
So don’t bite the bait easily. Not only will you end up with a loan that you do not need, your CIBIL score may drop as a result of too many hard inquiries. A hard inquiry on your CIBIL report happens when a lender accesses your CIBIL score and report to see how creditworthy you are. Therefore, your aim to diversify your credit profile may backfire against you!
Thus, as you can see diversification of your credit mix is a great way to improve your CIBIL score it has an important bearing on your CIBIL score. But when you set out to diversify your credit profile, do so carefully so as to avoid a boomerang and end up with a lower score instead!
(Rajiv Raj is the Director and Co-Founder of http://www.creditvidya.com)
Source : http://goo.gl/kHLc70
RAJIV RAJ Founder & Director, Creditvidya.com | Aug 13, 2015, 10.27 AM | Source: Moneycontrol.com
Never ever delay payment of your credit card bill, always pay your credit card bill in full before the due date
If you are 20 something with a plush job, it’s likely that your employers are willing to offer you lucrative incentives to stay on! That’s good news, but the bad news is that you are a soft target for credit card issuers, and if you do not take care at the outset, you may end up in chains, not physical ones but the chains of debt!
When you have had a taste of success early on in your life and are making good money, it is quite natural to want to reward yourself. So you jump at the offer of a credit card issuer and fall for glib talk about how sweet a deal you are being offered “just for you”. With words such as low interest rates, easy installments and money back on purchases are thrown at you and you are soon convinced that there is nothing better that you can get and you lap it up!
Once the swanky new piece of plastic arrives, you find yourself buying the expensive gadget for yourself that you have been craving, taking out your loved ones to a fancy dinner or just saving the card number on your favourite e-shopping site and simply indulging yourself. All the while you tell yourself, “its not that much I have spent and I will pay it back pronto!”
All is well till your credit card statement arrives and you realise that you have gone way beyond your means and you can in no way repay the entire outstanding on your credit card. The next thing you know you are only paying off your minimum amount due and are in the vicious cycle of debt. As a result of your high credit card debt, your CIBIL score goes down drastically and till such time you clear all your outstanding dues you are now a prisoner of your own financial habits. As scary as this sounds, it is also likely to get out of a situation like this, or better still, not fall into a trap like this in the first place. Allow us to tell you how!
Acknowledge the problem
Most people who find themselves in a debt trap because of their credit card, tend to behave like ostriches, ducking their heads in the sand! You know this as well as we do, that avoiding the problem, will not make it go away. The best thing to do is to grab the bull by its horns! This means you have to sit down with pen and paper, you credit card statements and calculate the outstanding amount that needs to be paid. That is really half the job done!
Consider resolution options
Once you have a figure in hand, your job is to see what are the best means you can deploy to pay off the debt you have accumulated. Talk to your bank or card issuer to see if your repayment terms can be made a little easier. Most likely, your bank will give you a patient hearing and will be willing to work out a solution that is win-win for both you and itself. After all, banks hate letting go off their customers and losing them to competition.
Ways to resolve the debt
If that does not work out, consider liquidating some of your assets pay back your dues. If you can do such a thing well and good, but if you cannot, consider taking a loan from close friends or relatives. If that too is next to impossible, you may even consider taking a personal loan to take care of your financial woes. While it is true, that you are resorting to more credit to take care of your original debt, but you are still going to be paying a lower rate of interest than on your credit card, the annual percentage rate (APR) on a credit card is as high as 36-40% while you will be paying 14-16% rate of interest on a personal loan.
There are other means too like opting for a balance transfer, or shifting over your debt to a new card that is offering you a lower rate of interest on a balance transfer. If you decide on a balance transfer, make sure that the deal that you are being offered fits into your scheme of things and is not just another rampant product. Things to watch out for are the repayment terms, the rate of interest and the processing fee. If you think you are satisfied on all counts, go ahead and make that balance transfer.
If your financial habits have gotten you into trouble in the first place, you need to change them. First things first, stop using your credit card altogether for a while and carry cash or your debit card around. Limit the parties that involve spending money, or keep away from the e-commerce websites that have been splurging on. Remove your credit card details from such sites so that you don’t succumb to temptation. Inculcating good financial habits will free up more money than you think, that you can then redirect towards the repayment of your debt. Once you have repaid all your dues, make sure you pull out your CIBIL report and CIBIL score to check that everything is in order. Hold on for a month or so before you do this, for it takes some time for a lender to send records to CIBIL and CIBIL making alterations in its database. As a prudent financial practice, also make sure that you purchase your CIBIL score and report at least once annually to check if there are any discrepancies.
Tread with caution
If you have not gotten yourself into a debt trap yet, and are still reading this, let this serve as a note of caution to you. If you just took a credit card and have just about started spending on it, make sure you remain within your means and pay your outstanding dues in full each month. Maintaining good credit habits will ensure that you have a high CIBIL score. A good CIBIL score in turn will ensure that you have easy access to credit when you are in need of it. Most of all, you will enjoy financial freedom and live a debt free life without having to worry about debt that is at your throat.
Good financial habits such as remaining within your means as far as your credit card debt is concerned, goes a long way in ensuring your financial freedom in your youth and an independent life in your golden years.
Source : http://goo.gl/NlszpZ
RAJIV RAJ | JUL 30, 2015, 04.53 PM | Business Insider, India
Many a times, personal finance experts must have told you that using credit cards could land you in trouble and you may end up with a bad CIBIL score. If you are using debit card or cash only to make purchases because you think credit cards are villians disguised in plastic, you couldn’t be further away from the truth!
While it is true that reckless use of credit cards can lead to a debt trap and bring down your CIBIL score, however, using credit card responsibly has many benefits.
Take a look at the best reasons to use your credit card.
When you are travelling, it is much easier to use the credit card because of its universal acceptance as compared to debit card or even cash. Especially, if you are in a foreign country and trying to book a hotel or rent a car, you credit card will be your biggest aid. Needless to say in such situations, you debit card that you use domestically will be of no use and it is certainly not safe to move around in a foreign country with hard cash.
Get a grace period to repay your dues
The best thing about using a credit card is that you do not have to pay cash for any purchase instantly. If you make a habit of paying the entire amount you spend on your credit card within the specificied time frame, you can not only hold on to the cash in your savings account, you can access credit at your convenience at no extra cost. The good thing about a credit card is that apart from the billing cycle you are given a grace period- or the time you get to pay the outstanding balance without paying an extra fee. This grace period is a time frame of 15-20 days depending upon the card issuer. If you are able to use the billing cycle and the grace period judiciously, you will end up with a good CIBIL score as well.
Save up on air travel
A debit card is an extension of you savings account and often does not come loaded with as many benefits as a credit card. However, if you have a CIBIL score of 750 or above, you could opt for a credit card that offers a sign up bonus that can be pretty significant. For instance, if you are a frequent flyer, you can opt for a co-branded credit card with a particular airlines that you are a regular with. That gives you a sign up bonus of a good number of travel miles that will save you a lot of money on your air travel. With the right cards you may end up getting a free flight or two in a month, owing to your sign up bonus and the other points you garner while you travel. Other cards offer points that can be redeemed for gift cards or other freebies.
Good cash back schemes
If you an e-commerce enthusiast and make most of your purchases online, you can be rewarded majorly with the right kind of credit card. E-commerce portals have standing tie-ups with major banks, which offer anyting between 1-5% cash back on most purchases. You can thus save up quite substantially when you are shopping online.
Stock up on reward points
All credit cards offer reward points on each spend. These reward points are the best way to get more from your credit card. If you cannot think of ways of redeem these points immediately, there is no problem with that. You can keep stocking them up for some amazing rewards later such as hefty discounts on flight tickets or hotel bookings when you are on a vacation.
No shortage of personal funds in case of a fraud
While online banking is rampant these days, cases of phishing or online frauds are not uncommon. When you use a credit card, there are better chances of safety against a potential fraud as compared to a debit card. When a debit card is used illegitimately, the money is debited from your account immediately. Till such time you realise there has been a fraud, the money from your account has already gone and the process to notify your bank and do the needful for the investigation to take place takes a good amount of time.
As a result, it also takes a while for the money to be restored in your bank account. On the other hand, if your credit card falls into the wrong hands and there is a fraudulent transaction in your name, you get a notification and you inform the card issuer immediately.
But, reckless use of your credit card may land you not only in neck deep debt but with a poor CIBIL score that may not give you access to credit later. So use your credit card responsibly and enjoy the many benefits it has to offer!
Source : http://goo.gl/daXrGz
Jehangir Gai | July 12, 2015 Last Updated at 22:06 IST | Business Standard
Customer cannot fault the bank to cover up his own default
Pradeep Bhupendrabhai Desai, a businessman, had an account with Hong Kong & Shanghai Banking Corporation (HSBC). The bank issued him a credit card. Later, a second credit card, too, was issued.
According to Desai, he used to make timely payment of all credit card bills. His record was so clear that the bank even sent a letter offering him a pre-approved personal of Rs 5 lakh at an interest rate of 14.95 per cent and one per cent processing fee. The loan would be repayable in 48 monthly instalments of Rs 13,903, payable by the 15th of each month.
The bank deposited the EMI cheques three to four days prior to the due date of the 15th of each month. There were occasions when the EMI instalment was credited two days prior to the due date. The bank also added one extra instalment of Rs 3,346.37 as the 49th instalment. Desai felt aggrieved as his financial planning got upset when the bank deposited the cheque before the due date. Some cheques also got dishonoured due to shortage of funds as he had not made the provision for payment prior to the due date. The bank also penalised him for the dishonour. This continued to happen in spite of his complaints to the bank. Consequently, he was branded a defaulted and his credit rating with the Credit Information Bureau (India) Limited also suffered.
Aggrieved, Desai filed a complaint before the Gujarat State Commission, claiming Rs 25 lakh as compensation for deficiency in service along with 35 per cent interest. He claimed another loan of Rs 25 lakh that had been sanctioned by ICICI Bank was not disbursed as his credit rating had suffered. He also lost his reputation because of the financial problems created by HSBC due to advance deposit of the EMI cheques.
The bank contested the complaint, claiming Desai had been explained the system in vogue by which the cheque would be deposited around the 10th of the month so that the EMI would be realised by the bank by the 15th. Accordingly, cheques were deposited a few days in advance to take care to the time it took for clearing. The bank also pointed out that Desai had filed the complaint to avoid his liability to repay the loan amount. The bank explained that the additional instalment of Rs 3,346.37 was towards charges for the overdue payment.
The bank pointed out that ICICI Bank had offered to advance a loan to Desai subject to his submitting certain documents and fulfilling certain conditions. The loan had never been sanctioned. Desai had lost his credit rating because he had defaulted on payment, for which he was not entitled to blame the bank. Refuting the allegation of any deficiency in service on its part, the bank sought a dismissal of the complaint.
The State Commission observed that Desai was academically well qualified and a businessman. He had signed the documents undertaking to repay the loan, but had defaulted. The Commission concluded that there was no substance in Desai’s complaint and that it was devoid of merit. It upheld the bank’s contentions and dismissed the complaint. Desai challenged the order in appeal.
The National Commission noted that Desai had admitted having defaulted on repayment of the loan, but had attributed this to be due to the bank’s action of upsetting his financial planning by depositing the EMI cheques in advance of the due date. The Commission observed that the entire dispute revolved around the question whether the bank was entitled to deposit the EMI cheque three or four days prior to the due date of 15th of every month. The Commission found that the documentary evidence on record showed that the bank had acted according to customary norms and practice and in accordance with the terms and conditions of loan repayment. The Commission indicted Desai for wanting to avoid making payment till the last minute.
By its order dated July 8, 2015 delivered by Suresh Chandra for the Bench along with V B Gupta, the National Commission concurred with the view taken by the State Commission that there was no deficiency in service on the part of the bank. Accordingly, Desai’s appeal was also dismissed.
A customer cannot fault the bank to cover up his own default.
The writer is a consumer activist
Special Correspondent | HYDERABAD | June 20, 2015 | The Hindu
79 per cent of all retail loans approved only for individuals on CIBIL credit rating >750
A whopping 79 per cent of all retail loans across the country have been approved only for individuals whose credit ratings were beyond 750, according to a data trends report filed by the Credit Information Bureau of India Limited (CIBIL).
Also, there was a significant increase in disbursal of home loans and issue of credit cards in the first quarter of the fiscal 2015-16, as compared to the corresponding quarter in the last financial year.
At an interaction here on Friday, CIBIL’s Senior Vice-President (Customer Relations), Harshala Chandorkar, said home loan growth was driven by higher demand in Mumbai, Pune, Bengaluru and New Delhi, while the maximum number of credit card applications were from Mumbai, New Delhi and Bengaluru. She said the growth was driven by increased availability of credit information.
Fielding questions, she said the number of disputes every month arising out of incorrect information furnished to CIBIL by banks were in hundreds, while CIBIL rating reports and scores were given in crores. Declining to accept that as an agency responsible for issuing reports and scores CIBIL had a role to play in such situations, she insisted that the responsibility of furnishing accurate information lay with the member banks.
Asked if payment of utility bills too would come under CIBIL’s radar soon, she said they were in talks with the concerned regulators but added that it would take some time before utility bills like telephone, power and the like would be tracked.
Ms. Harshala said credit information support from CIBIL had made lending objective, information-oriented, more reliable and less risk-prone. Delinquency of repayments (90 days and more), she said, had come down from 1.06 per cent by the end of 2010, to 0.57 per cent by this year’s first quarter.
Delinquency on credit card payments too had come down from 3.27 per cent at the end of 2010, to 1.06 per cent this quarter.
Source : http://goo.gl/YAXnpf
By: PTI | New Delhi | June 23, 2015 10:48 am | Indian Express
In order to incentivise shopkeepers, government has proposed tax rebate to them provided they accept a significant value of sales through debit or credit cards. (Reuters)
Government on Monday proposed income tax benefits for people making payments through credit or debit cards and doing away with transaction charges on purchase of petrol, gas and rail tickets with plastic money.
In a draft paper for moving towards cashless economy and reduce tax avoidance, the government also proposed to make it mandatory to settle high value transactions of more than Rs 1 lakh through electronic mode.
In order to incentivise shopkeepers, it has proposed tax rebate to them provided they accept a significant value of sales through debit or credit cards.
The proposals are aimed at building a transactions history of an individual to enable improved credit access and financial inclusion, reduce tax avoidance and check counterfeiting of currency.
“Tax benefits in terms of income tax rebates to be considered to consumers for paying a certain proportion of their expenditure through electronic means,” said that draft proposals for facilitating electronic transactions on which the government has invited comments till June 29.
It further said that all “high value transactions of, say, more than Rs 1 lakh, (be settled) only by electronic means”.
The paper said the tax benefits could be provided to merchants for accepting electronic payments.
“An appropriate tax rebate can be extended to a merchant if at least say 50 per cent value of the transactions is through electronic means. Alternatively, 1-2 per cent reduction in value added tax could be considered on all electronic transactions by the merchants,” it added.
Finance Minister Arun Jaitley in his budget speech had said that the government would “introduce soon several measure that will incentivise credit or debit card transactions and disincentivise cash transaction”.
The draft made a case for removing different types of fees and charges on e-transactions by various entities and providing incentives for such payments.
Observing that PSUs and other organisations levy a convenience fee and other charges for making e-transactions to utility service providers, petrol pumps, gas agencies and railway tickets, it said, “the feasibility of removing the charges will be examined”.
On the other hand, the paper said, “utility service providers could be advised to give a discount to users for small ticket payments through e-payments, on the lines of BSNL, which provides an incentive of 1 per cent of the billed amount if the payment is done through electronic mode”.
In order to promote wider adoption of e-transactions, it suggested rationalisation of the Merchant Discount Rate (MDR), which at present is 0.75 per cent on Debit Card transactions of up to Rs 2,000 and 1 per cent on all transactions above it.
“The existing inter-change fee on Debit/Credit Card transactions are not uniform and need to be standardised/ rationalised to encourage both issuing and acquiring banks to establish and utilise acceptance infrastructure,” it said.
A nominal cash handling charge on transactions greater than a specified level may be levied, it added.
The draft also proposes to relax the norms for reporting credit card transactions of individuals by banks.
“At present, banks have to report the aggregate of all the payments made by a credit cardholder as one transaction, if such an amount is Rs 2 lakhs in a year. To facilitate high value transactions, the ceiling of Rs 2 lakhs could be increased to say Rs 5 lakhs or more.”
Government departments, it said, should also consider introduction of appropriate acceptance infrastructure or adopt national E-payment gateway ‘PayGov India’ for collection of revenue, fee and penalties etc.
At present there are about 56.4 crore debit cards and 11.25 point of sale (PoS) terminals in the country.
Seeking to promote mobile banking, the draft suggested that the charges levied by telecom companies need to be rationalised.
“Currently, the telecom companies are levying an Unstructured Supplementary Service Data (USSD) charge of Rs 1.50 per transaction for mobile banking/payments. To enhance adoption of mobile banking/payment, the USSD charges could be examined and rationalised.
“Appropriate changes in the regulatory structure, if required, to promote mobile based payment systems.”
The proposals seek to improve ease of transactions for individuals, reduce the risks and costs of carrying cash and curtail cost of managing cash in the economy.
Besides, it will also encourage encourage government, corporates, institutions and merchant establishments to facilitate non-cash payments.
The e-transactions, according to the draft, will include transactions made through debit/credit cards, mobile wallets, mobile apps, net banking, Electronic Clearing Service (ECS), National Electronic Fund Transfer(NEFT), Immediate Payment Service (IMPS), or other similar means.
The draft proposals were prepared by the government after consultations with various stakeholders which includes RBI, NPCI, NIBM, public and private sector banks, card service providers, mobile service providers, research institutions and government departments.
The paper highlights that acceptance infrastructure, particularly Point of Sale (PoS)/Mobile PoS terminals as a percentage of the total number of Debit/Credit Cards is very low.
“Therefore, mandating banks issuing cards to deploy POS terminals in a prescribed ratio could be considered. Like in ATMs, non-banks could be authorised to install white label POS terminals,” it said, while stressing on improving broad band connectivity to enable mobile based payments on a wider scale.
On awareness and grievance redressal, it said in case of a fraudulent transaction, the money will be credited back to customer’s account and blocked and subsequently released after the investigation is complete/limited to say a maximum of 3 months.
It further said changes in the regulatory mechanisms could be examined to ensure that innovations in the payments ecosystem continue to happen.
The linkages with Aadhaar based identification for authentication could also be strengthened, it added.
Source : http://goo.gl/oSVh3i
Harshala Chandorkar | Updated On: June 09, 2015 12:58 (IST) | NDTV Profit
Before you start reading this article, please take this quiz:
- What is the three digit score which is one of the key factors that decides your access to loans or credit cards called?
- What is the range of this score?
- What is generally considered a good score by banks and credit institutions for approving loans and credit cards?
While most of you, who have taken a loan or credit card in the past, may answer this quiz quickly, some of you may still need help. This 3 digit number is your CIBIL TransUnion Score which ranges from 300 to 900. This score is calculated based on your credit history as reflected in your CIBIL report. Today an individual’s CIBIL TransUnion Score is one of the important factors that banks and credit institutions review before granting a loan or a credit card. An individual’s CIBIL TransUnion Score provides a credit institution with an indication on the likelihood of the individual paying his loan or credit card dues on time. Higher the score more favourably the loan application will be viewed by a credit institution. Most banks and credit institutions today lend to individuals, who have a credit score of 750 and above.
Therefore, it is essential to maintain a healthy credit score by following a disciplined credit behavior. Here is a list of 5 harmful credit behaviours that can hamper your CIBIL TransUnion score and derail your financial future:
1. Missing payments on loan installments: Most loan EMIs get auto debited on a set date each month from your linked bank account. Default on the monthly payment will occur if sufficient fund is unavailable in your linked account. Defaulting on loan EMIs is detrimental to your CIBIL TransUnion Score. So ensure you pay your loan EMIs month on month and have adequate funds in your bank account for the loan EMI debit.
2. Delay or default on credit card bill payment: Forgetting to pay your credit card bill on the due date or not paying your credit card bill at all can hamper your credit score drastically. Ensure you set up payment alerts on your credit card bill and make the payments before or by the due date.
3. Settlement on a loan or credit card: Making a settlement on a loan or a credit card is a harmful credit behaviour. If the customer has partly paid the dues and settled a loan or a credit card then the status will reflect as “settled” in the credit report. It is important to understand that though there will be no impact of the “settlement” flag on the customers CIBIL TransUnion Score, his credit history will show a “settled” status in his CIBIL report and there will be days-past-due reflecting on the report since the payment on the loan has not been timely. Each bank has its own policy of viewing at a “settled” status and will decide on the consumers future loan applications accordingly. Therefore it’s best to not ever get into a loan settlement.
4. Exceeding or reaching the limit of your credit card: Spending more than the assigned limit on your credit card or spending close to the limit on the credit card may affect your credit score to some extent. Therefore ensure that you spend well within the limit on your credit card.
5. High credit exposure: The total size of your debt reflects on your credit report and has an impact on your CIBIL score. Having many loans or credit cards increases the total amount of debt you owe and increases your credit exposure. High credit exposure may impact your score. If you have many loans running ensure that you close some of them so that your total credit exposure is reduced, before you apply for new loans.
A disciplined credit behaviour will automatically ensure that your financial future is safeguarded and you are “credit ready” at any point in time.
(Harshala Chandorkar is Senior Vice President-Consumer Services and Communications at CIBIL)
Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.
Manju AB | Monday, 1 June 2015 – 7:00am IST | Place: Mumbai | Agency: dna | From the print edition
Helps banks frame a strategy to sell financial products, have tie-ups with retail stores or simply entice with a good deal so that a good customer transfers his/her loan account.
Ever wondered why you are getting calls offering personal loan? Why personal loans are being sanctioned to you instantly? Or why you get inundated with calls for a credit card even if you don’t need them?
The answer is banks are engaging in data mining, where they analyse customer’s profiles and behaviour. They even track down your favourite restaurant, your eating habits, shopping preferences, movies you watch, books you read, the hospital visits you made; in fact, just anything about you.
Your loan repayments too are intensely scrutinised. These informations help banks take a quick call whether to offer you a loan or deny one, and effectively check bad loans. It also helps banks frame a strategy to sell financial products, have tie-ups with retail stores or simply entice with a good deal so that a good customer transfers his/her loan account.
A senior SBI official said, “We compile such customer data which help us decide on how to sell our insurance, mutual fund products or lure one customer to bank with us or have more than one relationship with an existing customer. Suppose a customer has a savings bank account with us and a home loan with another bank we try to woo the customer to shift his loan account.”
According to Harshala Chandorkor, senior vice-president, Consumer Services and Communications at Credit Information Bureau (India) Ltd (CIBIL), “Banks are engaging in data mining to understand the profile of their customers and understand the health and behaviour of their portfolio. It helps them to deepen their relation with existing customers, enhance credit limits on your credit cards, deny credit cards if your credit history is poor and have tie-ups with retailers. We at CIBIL undertake data mining to understand the profile and behaviour of the customers which help banks to define their strategies.”
The bank has a data mining centre in Belapur, Navi Mumbai. With strict KYC (Know your customer) norms in place, banks get all the basic information from the customers themselves. And often customers with a savings account will be having a debit card, a credit card, a home loan or a car loan. Each time your card is used your bank gets a feedback of what you do with your money.
All banks, especially those in private sector, undertake data mining to understand the customer better before marketing various financial products to them and to avoid bad loan decisions. Tie-ups with online retailers are also undertaken considering the customer profile. HDFC Bank debit card has offers on various travel portals, and jabong and ebay. Banks like ICICI and HDFC are active in making calls to sell credit cards and personal loans.
For example, SBI debit card has tie-up with LG and other traders that the bank markets it as a 24×7 market place; ICICI Bank has tie-up with Shoppers Stop, Flipkart etc. Thus, each bank, depending on the kind of customer profile, will go in for tie-ups with merchant establishments who, in turn, will give discounts on the bank’s credit, debit cards.
A senior banker with Union Bank of India said, “We regularly monitor our savings bank customers to find out from where they may have taken a home loan or a car loan. And try to find out how the bank could not have caught the customer. His relationship with the bank cannot just be a savings bank account. It makes sense for the bank to have more than one relationship with the customer.”
Source : http://goo.gl/7SKAuG
Harshala Chandorkar | Updated On: May 25, 2015 10:32 (IST) | NDTV Profit
Easy and hassle free availability of finance in the form of loans and credit cards is perhaps the biggest advantage that today’s generation has. This easy access to finance has made the potential of realising dreams a certainty, be it a dream to pursue higher education or to buy a dream home. But this opportunity must be used with utmost restraint and caution.
Take for instance the situation of Shreya, a 27-year old financially independent woman who works in an MNC. Like any other twenty first century youngster, she has her own share of aspirations and wanted to gift herself a swanky new car for her upcoming 28th birthday. However, when Shreya applied to a bank for an auto loan for fulfilling this aspiration, it was rejected. The reason for rejection was Shreya’s low CIBIL TransUnion Score due to a delinquent CIBIL Report. What Shreya did not consider was her past behaviour on the loans and credit cards she had taken. Shreya was already servicing bills on four credit cards and EMIs on consumer durable loan which she had taken to buy the latest phone. She had been missing payments on 2 of her credit cards for over 6 months and had also defaulted on her monthly instalments on the consumer durable loan on three instances. This reckless credit behaviour had impacted her CIBIL TransUnion Score and thereby hampered her dream of driving her own car on her birthday.
Shreya’s predicament is shared by a lot of youngsters today. Taking any kind of loan is a serious financial commitment and needs some amount of discipline. And although today banks may seem eager to lend, there are certain important things you need to consider to avoid any surprises and disappointments while applying for a loan which ultimately hamper your financial goals.
Here are a few tips for ensuring you have access to finance for fulfilling your future aspirations:
1. Maintain a healthy CIBIL TransUnion Score:
Your CIBIL TransUnion Score is one the most crucial parameters for being “finance ready”. Banks and credit institutions check your CIBIL Report and CIBIL TransUnion Score along with your income for deciding on your loan or credit card application. Therefore you must ensure that you maintain a healthy credit history and thereby a good CIBIL TransUnion Score.
What hampers your CIBIL Report and CIBIL TransUnion Score is missing an EMI or credit card bill payments and delay in payments. For building and maintaining a good CIBIL TransUnion Score you must maintain a healthy credit history through:
- Keeping a track of all your loan EMIs and credit card expenditures and planning finances in advance each month for servicing the loan/s and paying credit card bills
- Ensuring you make payments of your credit card bills and loan EMIs by or before the due date month -on-month.
- Reviewing your credit report regularly to keep a tab on your credit history and CIBIL TransUnion Score.
2. Chalk an aspirational roadmap
While servicing your loans and managing household expenses and other financial commitments, one tends to forget planning for future aspirations. Chalking out a roadmap of future aspirations and the cost estimate required for fulfilling each of these aspirations is the first step towards attaining them. Once you have chalked out this roadmap you need to carefully plan your expenses and loan payments and ensure that you save money for aspirational milestones according to the roadmap. Consistently saving money in growth plans, fixed deposits and other safe saving instruments will ensure you will have capital required to attain your aspirational milestone at the desired stage in life.
3. Save for the rainy day
While diligently saving for your future aspirations, do not forget to keep aside funds for contingencies. Life is full of uncertainties and unfortunate situations or unforeseen financial losses like illnesses, natural calamities or job losses can catch you off-guard and hamper fulfilment of your aspirations. Therefore it is critical to ensure you save some money or buy insurance coverage for facing such situations confidently.
Wise planning and financial discipline will help you achieve your financial aspirations and goals with ease.
(Harshala Chandorkar is Senior Vice President-Consumer Services and Communications at CIBIL)
Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.
RAJIV RAJ Founder & Director, Creditvidya.com | May 15, 2015, 10.01 AM IST | Source: Moneycontrol.com
Many individuals do carry stack of credit cards, which they may never use or may overuse all of them leading to repayment issues. It is better to analyse one’s needs and decide the right number.
The other day, while a friend was paying the bill at the mall counter, he said, “I hardly carry cash anymore you know. Just some loose change maybe. It’s all on my cards.” While I looked at his fat wallet which was stashed with so many cards, I wondered. How many credit cards are too many or too less?
Many people and specially the youth have already declared that this is the age of plastic money. Credit card companies took it upon themselves to ensure that it indeed is! Every day we are bombarded with advertisements and lucrative offers. Credit cards are just a call away. The documentation and application process is made simple and hassle-free to attract more customers. Effectively companies are flocking to lend you money! So what do you do? How does your decision affect your CIBIL score?
Too many cards, too many outlets for money!
If you have hoarded many credit cards, it also means you have multiple options for swiping. To encourage customers to gather reward points, card companies are constantly coming up with offers. Now, it’s difficult to ignore these deals. Many a time, the deal seems so enticing that we end up swiping the card for it. Which basically means, that you ended up making a purchase because you had a card with an offer on it! That is definitely less than a wise way of spending money.
So what should you do?
Nobody understands your requirements better than you do! Over the weekend spread out all your cards on the table and sit with a cup of green tea. With a calm mind, evaluate the need for having each card independently. There may be cards which you purchased because somebody asked you to or a card bought for the reward point’s scheme on it, etc. Segregate those from the cards which you use often. Now calculate the cumulative credit limit you have. Cross check that with your expenses. Ensure you add up some amount for emergency expenses or large expenses which you foresee in the near future. That would basically be all the credit limit you need on the card. Add on a buffer for feeling safer and that’s about it.
Pick and choose!
It’s time to make smart choices. Check up on annual fees on the credit card, interest rates applicable, reward point schemes, etc against the credit limit offered. Select the ones which best suits your needs. You already have an idea of the total credit limit you need. That’s it. You will arrive at your own magical number. Discard rest of the cards and have a lighter wallet and a clearer mind.
How does this impact my CIBIL score?
CIBIL score reflects your credit history and financial discipline. That means, first of all you need to have a credit history. That’s where credit cards can help you. Availing a credit card gives you a credit history. This can help you while applying for a loan. Next up is the financial discipline bit which basically means tracking your payments due. If you have been making your payments on time and not having a defaults history then your CIBIL score would be shining. Another factor which is considered while preparing the CIBIL report is the utilization. Only having a credit limit is not enough. You should be utilizing it optimally as well. Exceeding 30% credit utilization ratio during a billing cycle could do damage.
Play your cards by the rules!
There is no better way to influence your CIBIL score than imbibing financial discipline. Make sure you pay off your credit card due amount every month. This will not only shield you from high interest rates applicable on credit card money but also impact the CIBIL scores positively. Obviously, the more the number of credit cards, the more discipline you require. Tracking and paying off on time is important. Secondly, keeping a check on the credit utilization ratio with too many cards in the hand is difficult. With fewer cards and planned spending this tracking can be a cake walk. And of course, one that will ensure sweet CIBIL scores.
So what’s the magical number?
That is up to each one of us to figure out after considering all the factors mentioned above. If we had to give a number, it should be something between three to five. Two card which you can use regularly and an additional one for emergencies will do just fine. Also, managing 3 cards is relatively simple. All you have to do is establish the 30% spending limit and use the cards accordingly. Needless to say while making timely payments. Two additional cards can be availed if you travel for work or have a particular expense on which you spend frequently like flights, fuel etc. These cards can be specifically used for the determined purpose.
Now that you are equipped with all the insights on credit cards, it’s time to say goodbye to the stack and hello to fewer cards and effectively utilization. Use plastic money to make your life easier and your bank balance heavier. Planning and discipline is the key.