Rachel Chitra | TNN | Updated: May 16, 2018, 09:51 IST | Times of India
BENGALURU : Are banks gearing up to reward you for good behaviour? After Bank of India (BoI) and Bank of Baroda (BoB) announced such measures, IDBI Bank on Tuesday said that it will reward good borrowers by giving them differential pricing on their home loan interest rates based on their Cibil scores.
According to Cibil COO Harshala Chandorkar, this could point to a larger trend of “loan interests more aligned towards a carrot-and-stick policy – where good borrowers can reap the benefits of their financial prudence and bad borrowers get weeded out or have to pay steeper rates”.
With all four credit bureaus in India – Cibil, Equifax, Experian and CRIF Highmark – looking at wider coverage and criteria, from whether you paid your electricity bill on time to whether your parents paid off for the bike they got you in college, this score could affect your loan prospects.
In the last few years, with non-banking financial companies (NBFCs) and micro-finance institutions also sending information on borrowers to credit bureaus, lenders now have a wider and more comprehensive data set to assess. This could further widen as Cibil is currently in talks with telecom regulator Trai for access to data on prepaid recharges, and other agencies for utility bill payment history.
Banking analyst Hemindra Hazari said, “The whole point of Cibil assessing a customer’s data is that at some point it should translate into benefits. Corporates are always being graded on their term loans, unsecured debt and convertibles, AAA or BB++ rating, and that gives a better picture of their credit worthiness.”
In IDBI Bank’s case, it will be offering loans at 5-15bps (1 percentage point = 100 basis points, or bps) cheaper for customers whose Cibil score is above 700. A credit score normally ranges between 300 and 900 – based on credit behaviour and repayment history. Therefore, the higher the score, the more the chances of securing a fresh loan. IDBI Bank ED Jorty Chacko said, “We are keen to provide all aspiring consumers with access to credit. But while doing so, it is important to reward those consumers who have exhibited consistent credit discipline through timely payments and responsible credit management.”
But with many customers unaware of the role credit bureaus play and whether decisions taken earlier in life can come back to haunt one, Hazari said, “I am concerned about the privacy of our data. In India, there is a very low premium on methods employed for data collection and aggregation. And also, many a time, your consent is not required before financial institutions share additional sets of information over and above what is mandated.”
RADHIKA MERWIN Interview with Harshala Chandorkar, COO, TransUnion CIBIL
Published on February 25, 2018 | The Hindu Business Line
Arguably no single data point determines your credit-worthiness, or your prospect as an entity worthy of a consumer loan or a business loan, as your credit score. TransUnion CIBIL is one of four credit bureaus in India that assess you for that. There are currently about 37 crore retail borrowers and about 1.3 crore commercial borrowers on the TransUnion CIBIL Consumer and Commercial bureau. That portfolio also gives it a vantage view of the banking and economic landscape. Excerpts from an interview with Harshala Chandorkar, Chief Operating Officer, Transunion CIBIL:
What is your sense of corporate lending trends, which appear to be recovering?
The NPA woes of the banking industry in the commercial lending space indicate that the mid-corporate and larger SME segments have taken the biggest hit. TransUnion CIBIL Commercial Data analysis highlights a significant chunk of accounts that are bad in one bank but not bad in another. The latest FIBAC report on Productivity in Indian Banking states that a significant part of latent NPAs could slip in the next few quarters. The revenue pool of mid and large corporates will probably stay subdued for the next 4-5 years due to stress in the portfolio.
The banking industry needs to invest in new credit models for commercial customers that rely on commercial credit information from TransUnion CIBIL and analytics to complement banks’ capabilities in credit assessment and detecting early warning signals.
What’s the outlook on retail credit? Consumer loans seem to be driving overall lending.
With the availability of credit information and progressive policies on financial inclusion, retail lending has grown profitably. Over the past five years, there has been an estimated 16 per cent annual growth in disbursement and over 30 per cent annual growth in bureau enquiries. At the same time NPAs and delinquencies on retail lending have been historically low.
The nature of retail credit is changing rapidly in India as the share of products in new accounts opened has evolved, with gold loans and consumer durables gaining significant volumes and accounting for almost 50 per cent of all new accounts opened. This growth has been accompanied by a significant drop in ticket sizes as financial institutions are becoming more and more willing to extend low-value loans. With certain other retail products, the ticket sizes have actually increased, prominent among them being personal loans — indicative of the increasing credit-willingness of the Indian borrower and a supply-side push — and home loans and auto/two-wheeler loans – indicative of the overall increase in the values of the underlying assets funded. In addition, the share of youth in retail credit is growing: millennials’ share of accounts opened has increased to 40 per cent.
How do you see the bureau evolving in the near future?
The next stage of evolution of India’s credit information infrastructure will be the usage of credit information data, insights and solutions for further expanding access to credit, driving credit penetration and financial inclusion.
Demonetisation has paved the way for a cashless and digitised economy. Bureau solutions for instant verification and ‘decisioning’ are paving the path for driving digitised, quick, easy and affordable access to finance. Verification solution enables credit institutions to authenticate the identity of the consumer in real time at the point of application. As a result consumers are able to get the loan approval within minutes of applying. Yet another advantage is cost-effectiveness while establishing a consumer’s identity. Bringing down this cost can help banks and credit institutions make lending decisions quickly, at cheaper KYC costs, and thereby increase business growth and credit penetration.
The potential of alternative data usage for credit decisions is another significant domain. To expand and increase the breadth of information for making lending decisions even more comprehensive, we are in discussions with regulators to allow for contribution of ‘post-paid’ information on telecom customers. Several World Bank studies have indicated that inclusion of reporting of non-financial payment data (alternative data) proves extremely beneficial for making lending decisions, specifically for the segment that does not have access to credit. With access to affordable credit, new credit consumers are able to build assets. Those financially underserved consumers who have a positive payment records in non-financial obligations like telecom will have the ability to access affordable credit.
The extension of the credit information bureau to cover a larger population will enable a majority of Indians who are self-employed, or employed in the unorganised sector, to get a credit history and enhance their eligibility for credit from banks. Incorporation of telecom and electricity bill payment records into the credit information bureau can unleash this enormous potential to extend the penetration of banking in India. There is compelling business logic for utility and telecommunications firms to begin fully reporting customer payment data to credit bureaus.
But only a few banks use credit score to offer differentiated rates to customers.
Risk-based pricing in still at a nascent stage in our country. Both in the commercial as well as retail segments, pricing offers an opportunity to strengthen performance in the short term. Some progressive lenders have initiated a disciplined approach to risk-based pricing and this could improve banking profitability by 20-30 basis points. Further, at the bank level, banks need to deploy models to estimate customer price elasticity to introduce value-based pricing.
Risk-based pricing of loans helps both the lenders and borrowers alike: the lender can assess the risk value of a customer before deciding to offer a loan at a particular rate, while customers with a higher CIBIL score benefit by getting lower rates as compared to customers with a low scores. The benefits thus ensure that customers work towards keeping their scores and credit-worthiness high.
Paytm will give a rating to users on its platform based on their digital transactions online.
M Devan | Monday, February 26, 2018 – 09:04 | The News Minute
The Digital India push may receive a fillip through the efforts by Paytm to launch its own credit score Paytm Score, very much on the lines of the CIBIL credit rating that has been the only parameter on which the Indian banking system has been approving loan applications.
The record of digital transactions users have carried out within the digital payments major’s ecosystem will be the basis on which it will make the evaluation of creditworthiness of an individual. Paytm has its e-wallet, Paytm Mall and also the booking platform across which customers use their digital payment modes to make payments.
These transactions will form the basic data which will be fed into the appraisal system and the ratings given. These ratings can then be shared by Paytm with lending agencies with whom it has already entered into partnerships and it has already added to its stable, a lending vertical Creditmate, which it acquired organically a few months ago.
Apart from this, Paytm has an agreement with ICICI Bank for offering short-term credits on an interest-free basis and these loans are sanctioned without any delay.
The credit rating program may itself become a financial product for Paytm and it is learnt that it has offered this to some online lending agencies and NBFCs interested in moving away from CIBIL.
The demonetization move by the Indian government, in late 2016, has helped Paytm expand its business and that has, in turn, brought in high profile investors, such as SoftBank. With that backing, the company is now able to focus its attention on growing all the verticals under its management.
With Paytm Mall and Paytm Payments Bank already doing well Paytm has expanded into new segments such as insurance, online grocery delivery with BigBasket, online ticket booking, initiatives to set up a money market fund, the partnership with PVR and more. The firm might want to evolve into a large conglomerate of services.
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
Sukanya Kumar, Founder & Director, RetailLending.com | Aug 12, 2016, 10.28 AM | Source: Moneycontrol.com
The more we become ‘social’, the more we tend to show-off. It leads to more bad loans. It is time to shun bad loans and embrace good loans wherever required.
This is a very sensitive subject. Most of us in the financial broking business will shiver thinking what will happen, if this ever comes to of no one borrowing anymore. But let us overcome this superficial personal gain agenda and see what lies beneath.
A man in his late 20-s or early 30-s is bound to have a couple of small loans like credit cards, personal loans etc. here and there. They may be for shorter periods. As he progresses well in life and gains stability in his profession, he wants to settle himself. A big part of this ‘settlement’ is buying a home. And a home loan is generally taken for 20 years by most.
Given the current property prices across the world, buying a home with your own savings and liquidating your financial papers is not a possibility. You are bound to fall short way beyond the market price. Gone are those days when a man used to build a home with his retirement benefits and borrowing only from his provident fund account. He never used to enjoy the home fully as he has spent his hay-days staying at a rental home/company accommodation which never was his ‘own’.
The more we become ‘social’, the more we tend to show-off. If my colleague has got something which he boasts about, we have to get the better ones to overtake him. Our home-maker (to the true sense) spouse wants to buy a home with more number of bedrooms and amenities, her neighbouring friend could afford. Even our teenage children want to buy better gadgets to make sure they have their friends’ groups flocking around them and think they have the ‘latest’ ones.
There is no end to these needs, no end to loaning to purchase these, and hence the terms ‘financial slavery’. A man pays 70% of his net take home salary to pay off his monthly loan EMI-s and needs to survive with the balance 30% only, and with this lean sum pay for his home rent, children’s education and their extra-curricular activities, day-to-day expenses, food, clothing, entertainment, hobbies and also family trips and shopping.
We are afraid to start our own venture; afraid to opt for a better opportunity, if it requires us to take a study-break for a couple of months, we are even afraid to get married these days (I hear it from many 30-somethings frequently), since we are afraid to take more responsibility, given that we are already under so much debt.
Now, all of it is not that bad. There are two clear groups of loans. The good loans and the bad loans. One needs to let go of the bad loans to relieve himself / herself from being miserable, and continue happily with the good loans and feel good to have them.
Any item, bought with loan-money, which depreciates in time, is a bad loan. You never recover the sum you paid, plus you pay the interest on that sum too.
For example, you buy clothes or any electronic gadgets via a consumer durable loan or you buy a car with a car loan, or you buy just some books by swiping your credit card…….. The moment you are walking out of the shop, it depreciates by 30-50% to the least. It becomes a ‘second hand’ item. You never regain the price, unless of course your car becomes a vintage one and pays off (pun intended).
So, a loan on credit card, a personal loan, a consumer durable loan, a car loan- all these are bad loans. It only boosts your ego and gifts you a ‘rich’ lifestyle and only brings momentary joy with no permanent effect on yourself.
A loan which enhances the worth of the purchased product over time and even crosses the mark of it, to give a handsome return over the period, also absorbing the interest cost attached to it.
A home and an education loan are in this category. A home always appreciates in price, if bought wisely with proper research in good location, and will supersede the interest cost too. The percentage of people making a true loss while selling their property is negligible.
The added advantage of taking a home loan is also the tax benefit you get under a couple of sections. There are subsidies available on affordable housing too.
An education loan while taken will be with a moratorium so that it is easy on the pocket of the student. This loan enriches you as a person and helps you get a well-paid job or find a business solution for yourself, after getting trained professionally. The return on this is lifelong. You keep reaping the benefit of you educating yourself, till your last day. The interest you pay while taking this loan is negligible, of course.
Strangely enough, the bad loans are the ones which are more expensive too!
So, to avoid enslaving yourself from paying high monthly debts, please relieve yourself of the high-interest rate loans which are eating away your month’s pay and giving no returns other than being depreciated day by day.
One last thing, many people feel themselves under a ‘burden’ of home loan and tends to close that first. Do not make that mistake ever. If you have spare money, invest in retirement plans, SIP and other low-risk debt-funds to reap the benefit when you are old and retired. By foreclosing your home loan early with the liquid cash and hence not having any money left for investment anywhere, will leave you only with a house post-retirement with no money in hand. And, you can’t eat, enjoy and spend the house for next 20-25 years of your retired life. You need money for that.
Be wise. Live a life without any bad loans. No loans at all may not be financially a good choice for the modern generation, since you want to enjoy yourself when you are young. Ultimately, we live longer now than earlier with all the medial attention we get these days.
Happy Good Loaning! Happy Freedom from Bad Loans!!
Though most of us have heard about CIBIL score, there are so many things many individuals are not aware of.
Rajiv Raj Founder & Director, Creditvidya.com | Aug 01, 2016, 08.06 PM | Source: Moneycontrol.com
Awareness about credit score is quite low in India and the few who know about it also might not be aware of the finer details of the process of ascertaining the credit score or its importance and what impacts the credit score of an individual. As we move towards a more digital world, everything is more linked, which means that soon the importance of a CIBIL score will go up while taking a loan; it may impact employment prospects, insurance premiums and so on. Thus being aware of credit score nitty-gritty can be use full.
Q. Are credit report and credit score the same thing?
The first thing that we need to know is that credit report (CIR: Credit Information Report) and credit score are not synonymous. While the credit score is a three digit number or sometimes it can be NA/NH or -1, the credit report is a much more detailed document. The credit report carries the details of all the loans and credit card one holds, it lists personal information, contact and employment details, status of dues, credit enquiries etc. Lenders look at the report and not only the score to get a comprehensive picture about the debt status of an individual.
Q. Is CIBIL the only credit score company in India?
CIBIL is the oldest credit score agency for individuals in India. Since it was the first one and was the only one for a long time it is the most well known and almost synonymous to credit score in India. Apart from CIBIL there are three more agencies that provide credit score for individuals; they are Equifax Credit Information Services Private Limited, Experian Credit Information Company and High Mark Credit Information Services.
Q. Will my score across agencies be same?
No, the CIBIL score against various credit agencies will not be same. There may be a slight difference due to the scoring model of each agency. While the basics of calculating the credit score remains the same, each agency may use a different algorithm for calculating the score which can cause some variation. However if an individual follows the basic tenets of responsible borrowing then his/her score is expected to be good across all agencies.
Q. What impact does settling an account have on the Credit Score?
If one settles an overdue amount by paying a lesser amount then actually what was originally due then it will be reported in the CIR. How this is reported will impact the score either positively or negatively. If it is simply reported as paid then the impact will be positive as the overdue no longer exists. However if the lender reports it as “settled” then it could lower your score. While negotiating with the lender, make sure you clarify this aspect.
Q. Does checking your own score impact in negatively?
When a financial institution asks for the CIR of an individual it is known as a hard enquiry and impacts the score negatively. However, when an individual seeks his/her report it is known as a soft enquiry and has no impact on the credit score whatsoever.
Q. What does NA or NH mean?
A score of NA or 0 means that the individual has a credit history of less than six months which is not sufficient for a credit score for 300 to 900. NH or no history means there is no credit history so obviously no rating can be provided. Score of NA/NH is not a bad thing but may cause hiccups in trying to get a loan.
Q. At what CIBIL Score can I get a loan?
As per the CIBIL website 79% of the loans get approved for a score of 750 and above. Having said that there may be some flexibility as per the rules of the lender, the kind of loan, special tie-up with corporate and so on. Banks may be willing to consider a lower score for employees of a company with they have tie-up or some co-operative banks may be willing to lend at lowers score at higher interest. While a score of 750 and above is generally considered good, there is still some room for flexibility at lower scores and sometimes a score of 750 may also not be sufficient as the applicant may be overleveraged or there may be some negative comments in the report.
Hopefully the above discussion has helped you in getting better insight into the credit process. As stated earlier the importance of this statistical tool is increasing as we move towards a more credit driven and digital economy.
Source : http://goo.gl/a7sCtz
Currently, an individual has to shell out Rs 550 for a report and a onetime credit score in the PDF format from CIBIL
BS Web Team | Mumbai | July 22, 2016 Last Updated at 10:53 IST | Business Standard
The Credit Information Bureau of India (CIBIL) has decided to provide individuals with one free credit report a year, the Reserve Bank of India chief Raghuram Rajan said.
“Going forward, by the end of the year, the Credit Information Bureau of India will start providing individuals with one free credit report a year, so that they can check their credit rating and petition if they see possible discrepancies,” Rajan said.
Currently, an individual has to shell out Rs 550 for a report and a onetime credit score in the PDF format from CIBIL.
Most Indians are unaware of their credit score and have never bothered to check their credit report either. Consequently, they may not know that there may or may not be issues present in their report.
Financial institutions, including banks, check the credit worthiness of an individual before extending credit or loan, through these credit reports. “When an individual knows that a default will spoil their credit rating and cut off future access to credit, they have strong incentives to make timely payments,” Raghuram Rajan said at a seminar on ‘Transforming Rural India through Financial Inclusion’.
Other than CIBIL, there are two other credit bureaus in India — Experian and Equifax. But at the moment, the governor has only talked about CIBIL providing a free report.
Praising the credit bureaus further, Rajan also said: “Credit information bureaus have helped tremendously in solving both the information and incentive problem in retail credit.”
Rajan also pitched for the need to expand the reach of credit bureaus in rural India, even bringing borrowing under Self Help Groups (SHG) into their ambit.
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
By Munir Kulavoor | 15th Apr 2016 | Mumbai
Over the past decade and more, being in the home loan business the one thing that stands out in my view and experience is that every borrower application is unique. There are set of challenges in 90% of the cases. While every credit team of banks would love to have “clean” cases, more often than not, some or the other deviation/exception is required to be taken by the Bank/HFC. The word Deviation is self explanatory, banker has to deviate or depart from the accepted norm or policy of the bank. Following are the common deviations that Banks have to contend with:
- Employed in unorganised sector/proprietorship/partnership firm: To consider the salary certificate tallying with salary credits reflecting in bank statement
- Incomplete income documents: Form 16 not available for the entire 24 months (usually required); Form 16 Part A or Part B unavailable
- FOIR (Fixed Obligation to Income Ratio): Higher FOIR required to meet the customer requirement
- Rental Income: To consider additional rental income either without registered leave & license agreement OR to consider future rental income
- Pension Income: To consider additional repayment tenure in case of government employees expected to earn pension income post retirement date
- Perquisites: To include Car Hire Receipts provided agreement is executed and some Reimbursements to arrive at eligibility
- Vintage of Business: Shorter tenure in business to be accepted in exceptional cases depending on line of business & profile
- Interest Income from Unsecured Loans: In rare cases (profile based) interest income from unsecured loans may be considered
- Depreciation: Depreciation to be added back to income in some cases
- Provisional Income & Balance Sheet: To accommodate the loan requirement in some cases the provisional income & balance sheet (>6 months) is accepted to arrive at loan amount
- Son with Parents: To avoid any future trouble in ownership issues banks insists on declaration from borrowers on the ownership or exclusion of rights of other siblings.
- Two Brothers: Individual capacity to repay the entire loan may be ascertained for the reason mentioned above
- Daughter with Parents: To avoid any future trouble in ownership issues banks insists on declaration from borrowers on the ownership or exclusion of rights of other siblings.
- More than two DPD: Cases where existing loans have more than two instances of (dishonour of ECS/SI/PDC) Days Payment Due (DPD) in CIBIL OR DPD exceeded 30days in last 6 months with acceptable justification from borrower
- Overdues more than Rs.10000: Cases where the current overdues appearing in CIBIL exceed Rs.10000 with acceptable justification from borrower
- Asset classification as ‘SUB” (Substandard), “DBT (Doubtful), “LSS” (Loss), or “SMA” (Special Mention Account): In all such cases in rare exception with acceptable justification from borrower
- Suit filed (willful default) and/or written-off: In all such cases in rare exception with acceptable justification from borrower
- Occupation Certificate (OC): OC unavailable is the most common exception, provided the Approved Plan & Commencement Certificate is available and construction is as per the same. Age of the property may be a deciding factor.
- Unregistered Development Agreement: In such cases legal opinion from empanelled lawyer is crucial in making a decision
- Unregistered Sale Agreement (in Chain): In such cases legal opinion from empanelled lawyer is crucial in making a decision
- Nomenclature mismatch in CC/OC: Sometimes CC/OC contains the building number, wings etc as per the approved plan and later the same may have been changed by the builder or society, in such a case proper explanation & architect certificate supporting the same should be available.
- Old Property: Structural report from empanelled valuer to determine Residual age required. May be considered for lower repayment tenure
The above listed circumstances are not exhaustive but will give borrowers an idea of areas to watch out for and be prepared for delays in processing their application.
I’m sure there are many more situations that may require credit deviation, readers may want to post such interesting cases at the bottom of this post.
Rachel Chitra | TNN | Feb 15, 2016, 01.08 PM IST | Times of India
CHENNAI: India with more than 380 million internet users has emerged as the third-largest internet user. And nearly 60% of this user base make purchases online – a user base, whose credit history and risk profile is still unknown.
And credit rating agency CIBIL hopes to step into that gap and maintain credit scores for users of e-commerce websites just as it is currently doing for clients of India’s banks, car dealers and non-banking financial institutions. CIBIL said on Wednesday that it is in talks with the Reserve Bank of India (RBI) for bringing e-commerce customers of online payment processors like PayPal, PayTM and Citrus Pay in the loop.
The rating agency, which has been collecting and maintaining records on individual’s payments on credit cards and home, car, corporate, agricultural loans, etc, plans to now profile online customers as e-commerce picks up pace in India. Simply put, if CIBIL succeeds, then Amazon, Flipkart, Ebay and others will know the credit profile of their buyers and can plan their strategy for payment on an instalment basis and payment by cash.
CIBIL currently puts out reports based on the inputs it received from member banks and credit institutions on a monthly basis. The decision to extend its reach to e-commerce sites will bring with it challenges in terms of confidentiality of information and setting up a network with the current players in the online payment space, said Satish Pillai, CEO and MD of CIBIL.
“Thanks to the way we keep a tab on a person’s spending habits and credit history, payments and loan sanctions have become a lot faster. If you are sitting at a car dealer and waiting for the EMI amount to get clearance – real-time clearance will happen if your credit score happens to be good. So CIBIL’s credit scores make for faster risk assessment and less due diligence from the credit giver – making for faster sanctioning on loans. We are now hoping that to add additional layers of information to our existing database,” said M V Nair, chairman, CIBIL.
CIBIL also said that it is in talks with the regulator for extending this facility for customers of utility companies and telecom providers. “We are seeing a real need in this area. Say your postpaid bill with a mobile service provider has a credit limit of Rs 500 – if CIBIL scores come into play in that arena – and say your credit history is good – then it could be instantly raised to Rs 2,000 without any need for a check from the service provider. CIBIL scores would make for seamless transaction with greater ease and smoothness,” said CIBIL’s Pillai.
“The current system of sending a person to come and verify the address, customer profile and authenticity of documents will get outdated. It costs time, labour and money. With CIBIL, the utility or telecom provider would have all the information that they would need a click away,” he added.
Source : http://goo.gl/H06Kss
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 Kumar Shankar Roy | Nov 29 2015 | Kolkata | MyDigitalFC.com
Help available to resolve credit issues, but for a price
Having a bad credit health can be worse than being physically sick. When you are ill, the doctor, the medicines and all-round family support system ensures that things fall into place. However, most often banks and financial institutions tell people that they have a bad credit health when they are in dire need of loans or funds. Having bad credit health means the credit institution will have little or no confidence in your ability to repay the loan and so will either reject your loan application or charge rates of interest that will be exorbitant. This is why every month thousands of individuals are coming to a niche set of companies, started by experienced banking professionals, that can resolve issues impacting credit worthiness for a fee.
Lenders (banks, credit card companies and other financial institutions) report all credit-related activities of an individual borrower to credit bureau. India at present has three credit bureaus — CIBIL, Equifax and Experian. This information includes such details as the amount outstanding, interest rate, any late or missed loan repayments etc. The bureax apply complex statistical analysis to this raw data in order to arrive at an individual’s credit score that reflects their payment behaviour. The credit score is a number (the higher the better your credit health) and lenders use it to determine who is eligible to avail of loans and credit limits.
“At this point in time, the bureaux would have data of roughly about 40 crore individuals. Out of this, about 50 per cent would contain impairments. Impairments do not necessarily mean that they have defaulted. This could contain errors as well. At times, as a result of an error, your credit card/loan details may be inadvertently linked to another person with a similar profile. One out four reports has errors, which would be minor or major in nature. Leaving aside errors, there are numerous cases where individuals with actual bad credit history and health are coming to us for help,” said Credit Sudhaar chief engagement officer Aman Kapoor, who has previously worked for HSBC, Deutsche Bank and Emirates NBD.
Credit Sudhaar, founded in 2010, is promoted by IIM Calcutta alumni and retail banker Arun Ramamurthy and Gaurav Wadhwani, who has previously worked in Standard Chartered Bank and Deutsche Bank.
As per a back of the envelope calculation, an individual with a lower credit score may be asked to pay Rs 15 lakh in additional interest (as per higher interest rate) through the entire tenure for a Rs 50 lakh housing loan. Another individual with good credit score will get the best interest rates. If you are one of those financially aware individuals, you can correct the erroneous info in your credit report and even improve your credit health on your own by taking actions like making timely repayments on your loans and fully closing issues/payments due on your past loans or credit cards to the full satisfaction of your lenders. But not everybody can do it.
“You and I may do it but for a layman it’s an arduous task. Following up with lenders, escalating issues that one can face becomes difficult. Look, we don’t have a magic wand that will improve somebody’s credit score without repaying loans. They have to show their commitment once a negotiated payment has been agreed upon….We are getting thousands of people who are coming to us every month to resolve credit health issues. Depending on the extent of credit issues, it can take up to 6-8 months to reach a stage where you are loan-eligible. Those with relatively minor issues can rebuild their credit in a much shorter time frame,” says CreditMantri, CEO & co-founder, Ranjit Punja, a 23-year veteran with Citibank.
Chennai-based CreditMantri earlier this year raised its first round of funding worth $2.5 million and investors like IDG Ventures India and Elevar Equity were among those who participated.
With credit scores becoming a crucial evaluation tool for creditors, the importance of maintaining a positive score has increased manifold. You can get an Experian report for Rs 138. Equifax charges Rs 138 for basic credit report and Rs 400 for credit score. CIBIL TransUnion Score and Credit Information Report (CIR) can be received by paying Rs 500. Credit health improvement service is far more expensive as one may have to shell out Rs 10,000-20,000 depending on the plan.
Source : http://goo.gl/OD60FL
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
RAJIV RAJ | NOV 23, 2015, 03.13 PM | Business Insider
You have been told time and again that your CIBIL score should be above 750, if you want to access timely credit. But is all this hype about keeping CIBIL score high creating pressure on you, so much so that you are living in fear due to your CIBIL score? If yes, this is just what you need to read today.
You often hear that your loan application may get rejected if you fall short on your CIBIL score. As a result, you are so scared, that despite knowing that you must request for your CIBIL score at least once a year, you keep postponing it. You postpone it because you are scared to find out what you may see and what impact it may have on your plans to avail of home loan or any other credit.
If you are nodding in agreement, here are few things to do to dispel your fears about your CIBIL score.
Catch the bull by its horns
Yes, you heard that right! You need to face your fears, by pulling out your CIBIL report. It is a fairly easy process and you will receive your report right away on your email after you have gone through the steps as mentioned on the CIBIL website and paid the fee required to access your report. Once that is done, you need to take a close look at your CIBIL score. Needless to say, if it is close to 900 mark you have little to worry about. If it is below the satisfactory level of 750, do not panic! You need to keep your head above your shoulders and find out exactly what has been pulling down your CIBIL score.
Chalk out a plan
If your CIBIL score is low because you have not made regular repayments on your credit card or some other loan, fix that immediately. Examine your finances and see where you can cut corners. If possible, try and liquidate some assets to repay your credit card debt first. Credit card debt is the most expensive form of debt that you are servicing and the rate of interest you are paying on it can be as high as 38-40%. Once you have repaid this debt, ensure that you do not repeat the mistake.
Raise a dispute, if necessary
If your CIBIL score is low even after you have maintained an impeccable repayment track record, check if there is something amiss in your CIBIL report. For instance, you may have closed a loan account from your end successfully, but the bank in question has not forwarded the relevant details to CIBIL. As a result, your CIBIL score is taking a beating for no fault of yours. In such cases, raise a dispute with CIBIL right away. CIBIL has an efficient grievance redressal mechanism that will resolve your issue after it has verified the relevant details with the lender in question. Once your dispute has been resolved, your score will be restored to normal within a short while.
Relax! It’s just a number
At the end of the day, your CIBIL score is a yardstick of your financial health. Of course, you must make an attempt to keep it high, but don’t revolve your life around it. Instead try and build up healthy financial habits. First things first, draw up a financial plan, save for emergencies, buy adequate insurance cover and invest your surplus. As far as credit is concerned, don’t reach for the moon right away. Start small with a credit card and make purchases that you can repay in a single billing cycle.
Also inculcate other good credit habits such as keeping your utilization levels under 30%. If you follow these good financial habits, your CIBIL score will automatically get a boost. The moot point we are trying to make here is that your CIBIL score is a reflection of your financial habits, so work on getting them right first.
(Rajiv Raj is the Director and Co-Founder of http://www.creditvidya.com)
Source : http://goo.gl/iVfbMg
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
Arun Ramamurthy | Oct 27, 2015, 09.55 AM | Source: Moneycontrol.com
A good credit score by CIBIL is necessary to gains loans on favorable interest rates. Here’s what those scores reflect and how they can be improved.
The CIBIL score is a 3 digit number which denotes how credit healthy a person is.
This score ranges from 300 to 900. More than 40 crore people in India have a credit score.
There are several misconceptions surrounding the CIBIL score. Some of these are a result of an acute lack of awareness while others are carefully cultivated myths based on a limited understanding of the subject.
With the concept of a score now gaining recognition and usage increasing, there are some myths and misconceptions surrounding it. Here, we give you the lowdown on what separates myth from fact. Read on!
CIBIL is the only credit bureau
There are four credit bureaus in the country today, namely CIBIL, Equifax, Experian and CRIF High Mark that are licensed to operate by the Reserve Bank of India. However, with CIBIL being the oldest of the four, the term CIBIL score/ report is used interchangeably with a credit score/ report. All bureaus provide individual reports.
Help! My loan was declined by the bureau
Credit bureaus do not make the lending decision; it is the lenders who obtain and review credit reports provided by bureaus. In this sense, the bureau only generates information basis data received from financial institutions. Hence, if your application for a loan or card is declined, you need to check with the lender as to the reason.
I’m blacklisted by a credit bureau!
It is important to know that bureaus or credit information companies do not create or maintain blacklists. If your application for a loan is turned down, it could be because of your previous repayment history and how much you already owe by way of existing loans.
Restoring a poor score is impossible
Having a low or a bad score may not have an immediate quick-fix solution. It is advisable to take the assistance of professional credit health management companies should you wish to better your score. However, this does not mean that over time with financial discipline and judicious planning it cannot be restored. Pay your outstanding in time; any delayed or late payments will negatively impact your score.
- Factors that do NOT generally Impact your Credit Score
- Income level
- Education level
- Religion, race, nationality
- Gender or marital status
- Employment or occupation history
- Inquiry made by you to obtain your own credit report
- Location of residence or length of stay at one place
- Wealth levels
- Closing outstanding accounts enhances your score
The best way to maintain a good score is by paying off any outstanding card or loan dues in a timely manner, on or before the due date.
Let us assume you have an auto loan outstanding of Rs. 2.50 lakhs. With an additional inflow of funds by way of a bonus from work, you choose to foreclose the loan. While this will indeed make you more solvent, remember that it may possibly have a negative impact on your score. How so? This is because old ‘good’ debt actually enhances your score! With a longstanding timely payment record, your credit history gets a boost.
Therefore, it may be wise to continue with an old loan, providing you make payments on time.
No loan equals a good score
In fact, this could prove to be just the opposite! Having a healthy credit history is a good indicator of your creditworthiness to a lender, and will in fact enhance your score. Of course, the key to a good repayment record is timely payments and avoiding CIBIL defaults , so do keep that in mind!
A good score guarantees fresh credit
It is important to note that a good score can help you get a new line of credit (be it a loan or card) at competitive interest rates and terms. However, it in no way is a guarantee or confirmation that a loan will indeed be extended to you. This is because while the score is a very important piece of information for a lender, it is not the sole deciding parameter on which a decision of whether to approve a loan is taken. Factors such as your income, repayment capacity and existing debt are also taken into account.
Hence, your score definitely needs to be healthy for the best deals, but getting a loan is not carved in stone as an outcome of the score.
Multiple enquiries do not affect your score
In actuality, applying for multiple new lines of credit can make your score take a nosedive, and fast! This is because each prospective lender will make an enquiry against your report, and each such ‘hit’ brings down your score. What this indicates is credit-hungry behaviour, and the possibility of your being insolvent – which in turn will make lenders stay away, even when you genuinely do require a loan!
I’ve checked my own report and my score went down
While as mentioned above multiple enquiries affect your score, this does not apply to your own requests for a report. Each bureau offers you a copy of your report at a nominal fee, and you are free to obtain reports from any or all of them. In fact, it is a good practice to keep track of your score at regular intervals, to ensure that your report is an accurate record of your credit health.
Knowing the facts behind scores, a good practice would be to obtain a copy of your report at periodic intervals and staying credit healthy. It would also help you to take appropriate measures and rebuild your score, should it need attention.
Written by Arun Ramamurthy , author of Unlock the Power of Your Credit Score : India’s first book on Credit Scores
Source : http://goo.gl/dSniQd
RAJIV RAJ | OCT 12, 2015, 01.21 PM | Business Insider
There is much more to your CIBIL report apart from the score that it reflects. We might focus only on the CIBIL score and know about its importance but a CIBIL report has much more information.
Here are some simple tips that can help you to get a better understanding of CIBIL report.
CIBIL TransUnion Score:
This is the first section of the report. An individual’s score ranges from 300-900 and lenders use this score to decide whether to offer a loan to the concerned person on not. Obviously, higher the score, higher are the chances of lenders accepting your application. This section also indicates the percentage of applicants that are sanctioned loans (in the last one year) based on the particular band that they fall under.
Sometimes the score may not be between 300 and 900; do you what it can mean?
NA or NH means that either you have no credit history or are new to credit system. It also implies that you haven’t had any credit activity in the last few years or you have no credit exposure. This is not a bad indication.
TIP: The information in this section indicates not only your CIBIL score but also the likelihood of your application being accepted.
Personal / Contact/ Employment Information:
This information is given under three separate heads. This is fairly simple; the personal information section contains information as provide by the lenders to CIBIL. Here the name, date of birth, PAN number, passport details, voter ID and driver license details are mentioned. Letter “e” mentioned against any detail indicates that the information has been provided by the lender.
Contact information lists up to four addresses (permanent/temporary/office), email ID and phone numbers of the person as provided by the lenders. Employment information section has details about your employment and income at the time of applying for credit. So in case of two different loans this can be different.
TIP: In this section, there is not much to understand except to make sure that the information mentioned is accurate.
This is by far the most important part of your Credit report. This contains information about all the open loans and credit cards that you have. Details about the lender, type of credit (home loan, auto loan, credit card etc), date when the account was opened, date of last payment, whether the account is held by an individual or jointly, amount of loan, amount of overdue (if any), total outstanding and a monthly payment record for last 36 months. A red band against the information indicates that the particular information is disputed. After a letter is received from the lender (clarifying about the situation), the information may or may not be removed depending on what the lender has to say.
TIP: This section gives a brief summary of your open debt; go through it carefully to find out about any lapses that may have occurred on your or the lender’s part. Try and resolve the dispute ASAP. This section is useful for you also to get an accurate picture of your debt situation.
Enquiry made by any financial institution into your credit score is listed under this head. Details such as name of financial institution, date, loan size and type of loan are mentioned here. This also impacts your final CIBIL Score.
TIP: Only hard enquiries (those made by financial institutions) are mentioned here; enquiries made by the individual for his own score (soft enquiry) are not mentioned here.
Meanwhile, below are few terms that can help you in understanding your credit report better.
DPD: Days Past Due is an indicator of by how many days the payment is late in that month. More Than Standard (STD) or zero “000” is viewed negatively.
CN: This is the Control Number mentioned at the top of the report and is useful if one wants to raise a dispute.
Settlement Amount: If a loan or a credit card payment is disputed, the borrower and the lender may agree at an amount that will be paid by the borrower; the rest is written off by the lender.
Written off Amount: When a loan amount is written off that means the lender has no hopes of recovering this amount from the borrower. Principal or total (principal plus interest) may be written off by the lender.
Source : http://goo.gl/3gIAmZ
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
RAJIV RAJ | SEP 18, 2015, 03.48 PM | BusinessInsider.in
A bad Cibil score can limit your borrowing options. Kaushik Gowda, a Noida-based techie, was in for a rude shock when his home loan application was rejected by a leading Housing Finance Company (HFC). When he pulled out his personalized credit score, he discovered that it was a pathetically low score of 535. But that did not dampen his spirit. Despite lot of discrepancies in his credit score, he went ahead with strong support from his wife who had a healthy score of 790.
“Apart from starting the application process with the concerned bank, I also worked on removing the derogatory information on my credit file and many credit cards against my name weren’t held by me. Thankfully, my wife’s score was good and she had a good history, so we went to the bank and told the manager honestly about our case and requested him to consider our application and he obliged. We are waiting for the sanction letter now,” said Gowda.
However, there are other ways also to get a loan if you have a bad credit score:
Check your spouse’s score: If you are married and your better half has a better credit score, he/she help you out. Get your spouse to be a joint loan holder in that case.
Look for HFCs who offer loans to lower credit score: There are companies that offer loan to people with bad credit score. They may offer it to you at higher interest rate, but it is worth trying. In the long run, it would help you in building credit score. May be in a couple of years’ time, you could transfer your loan to lower interest rates, by then your credit score would have improved drastically.
Peer-to-peer lending: It is a widely established practice abroad. The concept is slowly picking up in India. The interest rates are a tad higher than the market rates and the loan size may be smaller, but there is an option.
Family banks: You will love India for its closely-knit families even more, if you know that many families across the country have a family bank. The members and customers of such banks are families themselves. In some cases, an outsider can get a loan with the guarantee and approval of a member.
Collateral loans: There are many such products available: loan against shares and securities, loan against FDs, gold loan and many others. Banks don’t really go digging into your credit history for such products.
(About the author: Rajiv Raj is the director and co-founder of http://www.creditvidya.com)
Source : http://goo.gl/0lr15Q
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
These scores and checks by credit bureaus can help in weeding out violations of KYC or anti-money laundering norms
Nupur Anand | Mumbai July 14, 2015 Last Updated at 00:48 IST | Business Standard
If you fill in the wrong date of birth in a loan application form or have not filled the correct address, there is a chance now that your application may be rejected or take longer to process. For, apart from checking your credit history, banks and financial institutions have also started checking your identity score as a part of their Know Your Customer (KYC) procedure.
The move comes in the backdrop of rising frauds at banks and as a result, lenders have become more cautious. Retail loans have held up at a time when corporate demand is muted but banks are ensuring they are not caught off guard in their endeavour to push these loans.
“The KYC procedure was always being followed but it is now getting integrated with credit score checks as well. Banks and other institutions are opting to go via credit bureaus because it helps in solving logistical issues for the lenders. Moreover, credit bureaus are coming up as a one-stop shop to do credit and identity checks,” said Nimilita Chatterjee, a senior vice-president — products, analytics and data operations at Equifax, a credit bureau.
Mohan Jayaraman, managing director (MD) of credit bureau Experian, says lenders are taking the help of credit bureaus to ascertain identity parameters. “As part of this, we will check if the address you have provided is correct or not. In addition, suppose in the same house there are other people who have defaulted on loans or don’t have a sound credit history, it can raise a red alert for banks,” he explained.
Also, if you change your house very often, that might ring warning bells for lenders, explains Kalpana Pandey, chief executive officer & MD, CRIF High Mark Credit Information Services.
“The idea is to also verify the address stability. Suppose you have a home loan in another address and for your personal loan you have given another address, then it may be a concern for banks. Or if there are times when in one form a customer has mentioned a different birth date than the actual one, even that can lower the KYC score,” she added.
Experts explain these scores and checks by credit bureaus can help weed out violations of KYC or anti-money laundering (AML) norms. In April, the Reserve Bank of India (RBI) slapped a penalty of Rs 1.5 crore each on three public sector banks — Bank of Maharashtra, Dena Bank and Oriental Bank of Commerce — for violating KYC-AML rules, while asking several others to ensure strict compliance with these.
RBI had pointed out that instances of banks opening fixed deposits and granting overdrafts without due-diligence were detected. The credit bureaus say such instances can be reduced by such identity scores.
“We have a solution to authenticate the identity of the applicant, which is now being used by banks and credit institutions. This is a unique solution that allows banks and credit institutions to authenticate a customer in real time by leveraging CIBIL’s vast credit information database, thereby helping drive process efficiency for faster and smoother on boarding of customers,” said Harshala Chandorkar, senior vice-president — consumer services and communication, CIBIL.
Experian’s Jayaraman also said part from identity checks and location, even the tenure of one’s previous loans will affect these background check scores. He explains if the tenure of a loan a customer has been repaying from a particular address is longer, then it will help in affirming the veracity of his address.
Credit bureaus said that not only banks but even Non Banking Financial Companies, Insurance players and even telecom companies are using these background checks. However, considering that these services are limited the number of players using the score is still limited.
“KYC procedure was always being followed by banks but now it is getting integrated with the credit score checks as well. Banks and other institutions are opting to go via credit bureaus like Equifax because it helps in solving logistical issues for the lenders and more over now credit bureaus are coming up as a one-stop shop to do credit and identity checks,” said Nimilita Chatterjee, Senior VP – Products, Analytics and Data Operations at Equifax.
Harshala Chandorkar | Updated On: June 21, 2015 17:28 (IST) | NDTV Profit
Today almost no loan or credit card application gets approved without checking the applicant’s CIBIL report and CIBIL TransUnion Score. Ever wondered how a person’s credit score is calculated? Here’s a quick glimpse into what goes into the making of a person’s CIBIL TransUnion Score:
What is a CIBIL TransUnion score?
CIBIL calculates an individual’s credit score through advanced analytics and assigns a number between 300 and 900 to a borrower, based on his/her credit history. The closer your score to 900, the more confidence the credit institution will have in your ability to repay the loan and hence, the better the chances of your application getting approved. While each bank will have its own credit scoring cut-off based on the credit sanctioning policies, it has been observed that most banks are lending to consumers with a CIBIL TransUnion Score of 750 and above.
How is the score calculated?
While each credit information company has its own proprietary algorithm to calculate an individual’s credit score, the most important elements of the score composition are centric around the loan payment behavior of the individual. Your CIBIL TransUnion Score is calculated based on the information in the “Accounts” and “Enquiry” section of your CIBIL Report. The score is calculated based on the following factors:
- Credit Utilization: How much credit is the consumer using?
- Defaulting/Delinquency: How many accounts are past due and by how many days?
- Trade Attributes: How old are this consumer’s lines of credit? What type of credit does he have? Does the consumer have a good mix or balance of credit or is it all credit cards?
Here is a breakup of the various factors that impact the CIBIL Transunion Score:
1. Past Performance: Individuals past performance on their debt obligations is the most important criterion and contributes approximately 30 per cent weightage to the score
2. Credit Type & Duration: Type of loan availed whether secured or unsecured loan, and the duration of credit history established contributes an additional 25 per cent to the score.
3. Credit Exposure: The total amount of credit exposure contributes another 25 per cent
4. Other factors: Other factors such as credit utilization, recent credit behavior contribute the remaining 20 per cent to the score.
Your CIBIL Report and CIBIL TransUnion Score not only determine whether or not you qualify for a loan, but it may also have an impact on the terms and conditions on which you can avail the loan. The higher the credit score, the better your chances of availing the loan faster and on favorable terms. It is advisable to check your CIBIL Report and CIBIL TransUnion Score before applying for a loan. Timely payments of loan EMIs is most important for maintaining a good credit history and a healthy credit score.
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.
Source : http://goo.gl/AaBxqj
G NAGA SRIDHAR | HYDERABAD | JUNE 25 2015 | The Hindu Business Line
Some have been denied loans as their CIBIL records paint them as defaulters
Erroneous credit reports with little scope for speedy correction are giving some genuine bank customers nightmares.
Consider the case of N Krishna, who wants to apply for an educational loan for his son. A check on his CIBIL (Credit Information Bureau India Ltd) score gave him a shock. While some regular loan payments are not reflected in his scorecard, there are new loans, which he never took, against his name.
“This is a distorted image and my bank now says it cannot extend the loan, for no fault of mine,” he told Business Line.
There are others who have been shown as credit card defaulters and as having dues on loans that have already been closed.
What it means
About 80 per cent of all approved retail loans for individuals are based on the credit score given by CIBIL, which is seen as sign of credit-worthiness of a loan applicant, based on his financial track record for the previous 36 months.
CIBIL has access to data on 400 million bank customers, which it uses to generate scores ranging from 300 to 900. Loans are generally sanctioned for applicants with scores greater than 750.
However, the fixing of responsibility for wrong scores is not clear. While a dispute resolution mechanism is offered by Cibil, it claims that the real responsibility rests with the customer’s bank, which sends the data. “We need to go back to the bank and ask for updated information if there is dispute on a score,” said Harshala Chandorkar, Vice President – Customer Relations, CIBIL.
She did not reveal the exact number of wrong reports but claimed that only 0.001 per cent of total reports are disputed. She also declined to reveal the total number of reports generated by CIBIL in a given period.
If 80 per cent of total retail loans are sanctioned on the basis of these reports, the number of contested reports could be high even if they account for only a fraction of the total number of reports.
On their part, banks simply ask the customers to approach the rating agency to correct discrepancies, and customers end up shuttling between the two.
Take the case of G Subrahmanyam, a software engineer, who identified a property and applied for a home loan about two months back. “My credit report shows a loan that I never took. My bank asked me to get a fresh report when I explained. But I missed the identified property due to this delay, for no fault of mine,” he says.
No quick fix
CIBIL norms indicate that correction of discrepancies will take at least 35 to 45 days. But in reality it could take longer, particularly if a bank does not respond to CIBIL immediately.
So, what is the solution? “You better check your CIBIL score regularly like you’re doing a regular health check-up,” says Chandorkar.
Source : http://goo.gl/j2onrL
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 Anita Bhoir & Atmadip Ray | ET Bureau | 10 Jun, 2015, 04.22AM IST | Economic Times
When Reliance Industries with its triple-A rating goes to a bank for a loan it is sure to get the best terms possible. A company rated many ranks below may end up paying 5 to 6 percentage points more than Reliance. That reflects the difference between good credit and bad credit.
But when it comes to retail individual borrowers, banks do not provide the same benefit on cost of borrowing even if the applicants have a top credit score. More than 15 years after the credit information bureau, CIBIL, was born, neither are individual borrowers benefiting from good behaviour and sound financials, nor are banks treating retail customers the way they do companies, which are charged based on their financials.
Credit bureaus have helped banks in reducing their bad loans from the retail portfolio, and CIBIL assigns scores ranging from 300 to 900 based on the ability to repay with historical financial behaviour. Still, retail borrowers have continued to pay almost similar interest rates whether their score is 600, 890 or even 900.
All that CIBIL, the biggest credit information bureau, says is, “Higher your credit score, higher your chances of loan approval.” Almost four-fifths of bank loans to retailers are for those with a score of more than 750. This is akin to lending only to companies with triple-A to single-A, and not to those with lower ratings.
“Credit score helps retail customers in getting a loan,” says SBI’s Arundhati Bhattacharya. “We don’t give a loan unless a customer has good credit score. At present, we don’t offer an interest rate benefit to retail borrowers for a good credit score.”
Interest rates on home loans, car loans, or loans against property for investments or starting businesses are almost fixed at banks’ discretion. Home loans are charged between 10% and 13%, but within the bank, there is hardly any difference in interest rates between an individual with a credit score of 600 and the one with 890, or even 900.
In developed countries such as the US, credit information bureaus rank customers as prime, sub-prime and Alt A. Banks charge interest rates based on their rating, and do not just use that as a tool to decide on giving a loan.
“In advanced economies customers that are highly rated demand finer interest rates,” says Romesh Sobti, managing director and CEO, IndusInd Bank. “In India, banks run on the basis of portfolio pricing. Credit score has evolved, but it is being used to decide loan eligibility of an individual.” That retail borrowers are not deriving the benefits for good behaviour is partly attributed to the fact that consumer activism is not prevalent unlike in the West and that the regulator has not been pushing the case for banks to end the discriminatory stance between corporates and individual borrowers.
Furthermore, Indian banks, which are saddled with huge bad loans from lending to companies, partly offset their losses by charging more from retail customers. “Retail customers are paying for corporate clients,” says Ashvin Parekh, managing partner of Ashvin Parekh Advisory Services.
Economic slowdown and bad lending decisions on the part of banks has left them saddled with defaults. While the recovery is a long and difficult process, banks tend to offset their losses by charging other customers.
The banking sector has taken a loss of over Rs 50,000 crore as loans given to companies have turned bad at the end of March 2015. The economic slowdown and volatile recovery has taken a toll on corporate balance sheet.
Banks have restructured debt to the tune of Rs 2,86,405 crore at the end of March 2015 which is up 18.22% from Rs 2,42,259 crore last year. Loan defaulters include Bharati Shipyard, ABG Shipyard, GTL, Essar Steel, Sterling Oil Resources, KS Oil, Deccan Chronicle and Kingfisher Airlines among others, and their debt runs into thousands of crores.
Bad credit calls on the part of banks besides postponing the problem of bad loans will ultimately hurt good borrowers, for whom the cost will go up, Reserve Bank of India governor Raghuram Rajan has said.
“I am not worried as much about losses stemming from business risk as I am about the sharing of those losses — because, ultimately, one consequence of skewed and unfair sharing is to make credit costlier and less available.” Rajan said.
These huge bad loans are one of the reasons banks are reluctant to lower their lending rates even after the Reserve Bank of India reduced its policy rates. Indeed, the RBI governor had to publicly criticise banks for not doing so, after which banks reluctantly reduced the rates.
Although big lenders to retail customers such as SBI, ICICI and HDFC Bank may not be deciding on lending rates based on individuals’ credit score but rather, lend on the fixed-ticket rate, smaller banks such as Federal Bank do so to gain market share and boost their presence.
“We use the Cibil TransUnion Score to give retail customers a finer interest rate on loans,” says R Babu, consumer banking head at Federal Bank. “Credit score of 580 onwards get an interest rate advantage which could be around 200 basis points.”
Lenders like Federal may be few and far between to make a meaningful impact on the lives of retail borrowers in the next few years. But the transformation to credit score-related lending rates like in the West may be possible in the distant future.
“Using credit score to give customers an interest rate advantage is work in progress in India,” says Mohan Jayaraman managing director, Experian Indian Credit. “Very few banks are using this as a tool for rate differentiation. Globally, credit scores are used as an interest rate differentiation tool. This would be the natural progression in India as well but it will take time.”
Harshala Chandorkar | June 4, 2015 18:42 IST | The Hindu
According to CIBIL data, the outstanding education credit, including for study within the country and abroad, stood at Rs. 63,800 crore as on March 31 this year.
Non-repayment of education loan can now affect one’s credit score, a top official of Credit Information Bureau (India) Ltd (CIBIL) has said.
“The education loans have to be paid once one completes his/her course and gains employment. Also, like any other loans and credit cards, education loans are also reported to CIBIL and get reflected in the borrower’s CIBIL Report and impact the CIBIL Trans Union Score,” said CIBIL Senior Vice President Consumer Services and Communications, Harshala Chandorkar.
CIBIL Trans Union Score is a key parameter relied on by banks while processing loan applications.
According to CIBIL data, the outstanding education credit, including for study within the country and abroad, stood at Rs. 63,800 crore as on March 31 this year.
The data released by CIBIL throws significant light on education loan trends in the country.
While the demand for educational loan is need based, the number of new loan accounts opened in calendar year are almost same over the last five years, it said.
Noting that the third and fourth quarters of each calendar year witness a spurt in education loans, the data says about 1,30,000 education loan accounts were opened in the fourth quarter of 2014.
However, the average sanctioned amount continues to grow over time, it added.
“Average sanctioned amount in fourth quarter of 2014 was Rs 6 lakh, while in fourth quarter of 2013 it was about 4.5 lakh. In recent period, loans with amount less than Rs 1 lakh has reduced below 10 per cent of total sanctions while loans with ticket size/amount of more than Rs 5 lakh have gone up to almost 30 per cent of the total sanctions.
“In fourth quarter of 2014, loans of ticket size of more than Rs 5 lakh were around 30 per cent of total sanctions while in fourth quarter of 2012, loans of more than Rs 5 lakh comprised about 22 per cent of total sanctions,” CIBIL said.
It says delinquency on education loans has decreased over the past year.
“Delinquency for 90+ days amount overdue was around 3.50 per cent in fourth quarter of 2013 which has lowered to 2.70 per cent in fourth quarter of 2014,” says the data.
Stating that bad loans from education segment are very high, the Reserve Bank’s Deputy Governor R. Gandhi had asked CIBIL and banks to “counsel” the youth on good credit behaviour during the CIBIL Trans Union Annual Conference in March, CIBIL said in a release.
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.
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 28, 2015, 01.18 PM IST | Source: Moneycontrol.com
It may appear to be an easy way out, but it pulls down your credit score. This may lead to denial of credit in future.
You may have taken a loan with a certain plan for repayment, but life may have thrown a spanner in the works, and you now find yourself unable to meet your repayment commitment. At a time like this, if your bank offers you a one time settlement (OTS), you would probably leap at it, but did you know that it can take a toll on your Cibil score?
State Bank of India, India’s largest commercial bank, is currently holding a “Rin Samadhaan” or a loan resolution week, whereby it is hearing out the cases of genuine borrowers who are having a difficulty repaying their loans. To some of these borrowers, an OTS may also be offered as a solution, the media reports. While this may seem like manna from heaven for such borrowers wilting under a debt pile, it can have quite a damaging effect on their Cibil score. Let’s see how.
What a bank does
If a borrower has turned delinquent for a time frame of six months or more, a bank is likely to offer an OTS if the case is genuine. It may consider things such as a job loss, an accident or a serious medical condition. The bank then sits across the table with the borrower, takes stock of his situation and agrees to “write off” the difference between the amount that has been paid and the amount that is due. In effect, it reports a loss, and the borrower is let off the hook. While the borrower may heave a sigh of relief, because recovery agents wont come after him, he may not be aware of the fact that he pays a heavy price for it elsewhere.
The impact on the Cibil score
When a bank writes off a loan, it reports the same to Cibil. While the relationship between the lender and borrower may have been terminated, Cibil does not record this transaction as a “closure” of the loan account and instead records it as “settled”. This is then considered a negative credit behaviour and the your Cibil score can drop by as much as 75-100 points as a result of a “settled” loan.
What is even worse that this is a record that will remain in your Cibil report for as many as seven years. This means that if you need to avail of a loan facility anytime in the seven years after one loan account has been settled, it is likely that prospective lenders will be wary of lending to you. It is highly likely that banks will reject your loan application when it pulls out your Cibil report, to judge your credit worthiness, because of this one blotch on your Cibil report.
Lack of awareness
Usually people who are bogged down by debt, grab the opportunity of an OTS, but in most cases they are unaware that a pound of flesh is being taken elsewhere. As we explained, a settled account will do more damage to your credit history than you can imagine!
The other way out
If you are struggling with the repayment of your debt and do not know what to do, do not jumpt at the first opportunity of a settlement. Instead, see if you can liquidate a part of your portfolio or some other assets to repay your loan. If that does not work out, reach out to your family and friends for some help. What we are essentially trying to say is that, avoid “settlement” by all means! It is not an easy way out, if you thought so.
That having said, the vagaries of life are difficult to predict, and if all doors are closed you may perhaps have to agree to a settlement. However, do use this as the very last option and try and negotiate with your bank on easier payment terms, such as the extension of the repayment tenure or a waiver of the interest component, at least for some time.
Be clear on where you stand
Whatever your decision may be, make sure you check your Cibil score and your Cibil report after you reach an agreement with your lender, to see where you stand. Once you know what your Cibil score is, concentrate all your efforts in repaying all other loans and maintaining an impeccable credit behavior. While this will not exonerate you completely, it will bring up your Cibil score gradually over a period of 12-24 months.
So, as you can see, a loan settlement is not the best option for a borrower. Whenever you take a loan, make sure you have a contingency plan or some emergency funds that can meet your repayment commitments and you do not have to opt for a settlement that can damage your Cibil score.
Creditvidya.com | Updated On: May 23, 2015 17:10 (IST) | NDTV Profit
Do you have a number of friends or followers on Facebook, and other social media platforms? Do you get a good number of likes on your posts and professional updates? If you are answering in the affirmative, there may be good news for you, as some lenders may assess your credit worthiness based on your social media footprint in the not so very distant future, notwithstanding your CIBIL score.
Though it may sound a bit far fetched at this point of time, especially for us Indians, these methods of alternative scoring may be a reality for us, sooner than we can imagine. In technical parlance this kind of scoring method is reffered to as “big data scoring”. And this is why is it may become popular soon.
Moving beyond the traditional
There is no denying the fact that it is a difficult task for lenders to assess the credit worthiness of an individual. So far, a traditional three digit credit score has been used as a metric for judging how much risk there would be in lending to person. In the Indian context, the CIBIL score that is available with India’s premiere Indian credit bureau, CIBIL, is widely accessed by lenders. This is because it is easily available and inexpensive. In fact, the Reserve Bank of India has now made it mandatory for all banks to base their initial judgment based on the CIBIL score.
Lenders therefore are on an overdrive at the moment to educate the general public at large that in order to maintain a good CIBIL score, one must maintain good financial habits such as re-paying credit card outstanding amounts, keeping overall credit utilization under 30 per cent and re-paying loan installments on time. While there is no undermining the importance of maintaining these good financial habits, the fact remains that the current credit scoring system may “punish the guilty” with a “sentence that may be larger than one’s crime”.
In other words, there may be untoward circumstances in one’s life like a job loss, an accident or a death in the family that may throw one’s finances in a complete state of disarray. This in turn may lead to poor credit score because of his inability to repay his debt on time. On the other hand, these may the times, when he is likely to be in most need of credit. However, under such a situation of duress he will be unable to have any access to credit because of an unflattering CIBIL score.
Betting big on big data
But what if the lenders consider an alternative scoring method instead? In cases where the credit report of a person has a blotch, the bank may consider the person’s personal data that may be found on social networking sites such as Facebook, LinkedIn and Twitter to asses his credit risk in addition to his CIBIL score. A person’s reputation online, his professional contacts and the value of his opinions can be a metric of his social standing and thus can be used to asses his credit risk. In today’s world of increasing digital footprint, this does seem like a viable option, given the fact that big data assessment systems are sophisticated and have a large positive impact across industries.
In fact, this method of “open scoring” as it is now being termed, has already commenced in the west. The Fair Issac Corporation or FICO in the United States of America , that publishes a score based on the consumer credit files based on the data available with three credit bureaus (Exeperian, Equifax and Transunion) is in the process of unveiling a new “alternate scoring model” for proving the credit worthiness of those whose FICO scores are not upto the mark because of bad or non existent credit. This will give a chance to a number of consumers to improve their FICO score.
This new scoring model is likely to use data such as utility bill repayment history, cell phone bills and cable bills and may later extend to social media data as well. As a result, American lenders will get access to a huge untapped market (approximately 15 million people) whose FICO scores are not so flattering at the moment. These are the people who have bad credit because of the impact of a major financial event or those who do not have a credit history because they have not used credit in the past.
Once these methods of alternate scoring become a norm in the developed markets, it is only a matter of time before India adopts such practices. There is enough reason to believe that this may happen soon, given the historical evidence. In the late 90’s when credit bureaus became big in the USA, India understood its merits and the retail banking system began using credit scoring models by mid 2000. And that was the time when social media had not been so rampant, and neither were hand held devices such as smartphones or tablets that popular. Today, the scenario is different. With the improvement in the economy, the aspirations of people are rising and so are the number of internet users.
According to the Internet and Mobile Association of India there are approximately 300 million internet users in India and this number is projected to go up to approximately 600 million by 2018. Out of these approximately 225 million (source: http://www.statista.com) , are projected to be users of social networking sites. Needless to say then, that the scope is huge especially in the Indian context. Indians traditionally have been wary of credit and thus do not have a good credit score for the lack of credit history. Besides, alternative scoring models may prove to be a disruptive when it comes to financial inclusion in India as well.
Long story short, those of you who have scant CIBIL scores and are dreading the fact that you may not get access to credit, there may be hope in the offing for you, if you are an active social media participant. However, this must not be used to have bad financial habits or not making an attempt to maintain a good CIBIL score. At the moment, one still has to maintain a score of 750 and above if one aspires to get a loan product or a credit card in India. And this norm will not change right away.
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.
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