Rajiv Raj, Co-Founder & Director, CreditVidya, CreditVidya | Mumbai | October 10, 2016, 11:58 IST | IndiaInfoline.com
Although, the mainstream banks are now totally relying on the CIBIL scores to give loans to the borrowers, those who have low or no credit score can still have some of the options left.
Having a bad credit score can severely limit your borrowing options. However, it is not necessarily the end of your ability to avail credit when required. Although, the mainstream banks are now totally relying on the CIBIL scores to give loans to the borrowers, those who have low or no credit score can still have some of the options left. Here are seven things you can do where you will not be pulled down by your credit score.
Get a Secured Credit Card
Getting a secured credit card is not only easy, even if you have low credit score; it is also highly effective strategy to rebuild your CIBIL score. The concept of secured credit card is very simple. You make a deposit in the bank and the bank issues you a credit card with the credit limit ranging between fifty to hundred percent of your total deposit. Once you have been issued a secured credit card, you can use it like any other credit card and start paying the dues on a monthly basis to build your credit score.
Get Add On Credit Card
If you do not have a credit score high enough to get a credit card, you can opt for the add-on credit card. Most of the banks offer add-on credit cards for the family members. These credit cards can be issued for spouses, children, parents and siblings. If any of your family members has a good credit score, they can apply for an add-on credit card which you can use. Many banks in India allow the credit card holder to apply for as many as four different add-on credit cards. However, these credit cards are only issued after carefully considering the repayment capacity of the credit card holder. Also, if you default on the credit card, it will hamper the credit score of the family member who has taken the card on your behalf.
Get a Prepaid Credit Card
Another option for those with bad credit score is to get a prepaid credit card. All the major banks in India offers prepaid credit cards to the users. These cards are convenient, flexible and reusable. However, unlike a secured credit card, they will not help you in building your credit score.
Loan against Collateral
Today the credit market has become extremely efficient to cater to the needs of all the borrowers. Even if you do not have a credit score, you can always opt for loan against collateral. The collateral can be gold jewellery, Fixed Deposits, shares, property, home etc. The bank or the financial institution doesn’t check your credit history as the risk is considerably lower. They can always sell off the collateral to recover the loan amount.
Get a Co-Borrower with Good Credit History
If you have a lower credit score, getting a co-borrower with excellent credit score can help you in availing the loan.
Peer to Peer Lending
Peer to Peer lending is an extensively used platform in many foreign countries which caters to the need of borrowers. The peer to peer lending platform allows the creditor and borrower to interact freely with each other without any mediator. The concept is steadily gaining popularity in India. You can avail small personal loans from these peer to peer lending websites.
Find the Financial Services Company that Offers Loan Even on Low Credit Score
Though the mainstream banks may not be so keen to provide you credit if you have a low or no credit score, many non banking financial institutions are more flexible in this regards. These financial institutions check a number of soft data to decide the creditworthiness of the borrower. For instance, if you have previously defaulted on your loan, but now you are working in a big company with steady income, the financial institutions can offer you credit.
Rajiv Raj – CreditVidya | Aug 22, 2016, 02.26 PM | Source: Moneycontrol.com
Your CIBIL score is a measure of your own credit worthiness that does not get merged with your spouse’s after marriage. There are several myths about CIBIL score and some of them are related to marriage.
Marriage is a big decision that brings together two persons for life. Just like two individuals with completely different backgrounds with regards to education, lifestyle and career choices remain the same even after marriage, so does one’s CIBIL score. Your CIBIL score is a measure of your own credit worthiness that does not get merged with your spouse’s after marriage. There are several myths about CIBIL score and some of them are related to marriage. Today we will debunk some of these myths and also tell you when and where your spouse’s credit score matter.
Myth: CIBIL score drops after marriage
If you are marrying someone with a relatively less CIBIL score then it does not bring down your CIBIL score. Of course if you have taken a huge amount of debt on your credit card to fund a lavish wedding or an exotic honeymoon and are unable to repay it as stipulated, your CIBIL score may take a hit after the marriage, but that has to do with your credit behaviour and not with the act of getting married by itself.
Myth: CIBIL records get erased after marriage
If you are a lady who has decided to change your surname and take on your husband’s family name after your marriage, you do not need to worry as your CIBIL records do not get erased automatically if your name changes. Once you have changed your surname officially you make the changes to your official documents and pass on the information about the same to the bank. The bank in turn makes the changes internally and passes it on to CIBIL with your updated record. However, to be sure that the changes have been carried out as per your official documents, do check your CIBIL score and report after about a month or so of having updated your name change information with your lenders.
Myth: All your spouse’s debt becomes yours after marriage
Surely you have taken vows to be with each other through thick and thin, but getting married does not mean that all the debt burden that your husband or wife carries is automatically transferred on to you and you need to share his or her burden as it will impact your CIBIL score otherwise. The loans or credit card debt that your spouse is servicing continues to remain with him or her. Of course you may choose to assist him in meeting his debt commitments, but doing so does not have an impact on your own CIBIL score.
Where your spouse’s CIBIL score really matters
You only need to be concerned about your spouse’s credit score if you are making a joint home loan or any other loan application together. If either of you have a poor CIBIL score, the chances of your getting a loan may get thwarted as the bank will not look favourably upon one person shouldering all the load. Thus it is recommended that you work together to bring up both your scores to the level of 750 and keep it at that by maintaining good credit habits to prevent the rejection of a credit line when you are in need of it.
If you are newly married and have just come to know that the CIBIL score of your partner is not so flattering, do not fret as it has no impact on your own CIBIL score. Nevertheless, put your heads together to find out the problem areas and help each other to come up with solutions that will rectify the situation.
Your financial compatibility will be put to test through trying times. The basic thing is to stay put and work hand in hand to achieve a common goal of bringing up the CIBIL score. Just like with everything in life, being there for each other is what matters the most and that is what you should decide to do.
Source : http://goo.gl/4Xx0SL
By Saloni Shukla, ET Bureau | Jul 07, 2016, 03.37 AM IST | Economic Times
Mumbai: Bank of Baroda for the first time is set to offer rating-based lending to retail mortgage loan seekers, which involves giving loans based on credit scores and not a uniform rate irrespective of the credit quality.
“We have internally switched to scoring-based pricing based on the CIBIL score,” PS Jayakumar, MD, Bank of Baroda, told ET. “With this, we can identify the right kind of borrower, our due diligence becomes easier, and the probability of a default will be minimal.”
Historically, Indian banks charge corporate customers based on their credit rating, but haven’t extended this policy to retail borrowers. Customers with a good loan repayment track record and strong financials may end up availing loans which are at least 50-75 basis points cheaper than a customer with a bad credit score.
The move is expected to improve the quality of bank’s retail portfolio as they will now disburse loans based on the customer’s credit profile. It will also provide an opportunity to the customer to maintain a consistent credit behaviour and increase his credit score to get the benefit of lower rates.
Banks have used credit information companies to reduce risk in their retail loans but failed to pass on the advantage to customers.
Between fiscal 2011 and 2014, while the total gross non-performing assets in the corporate sector grew by 300 basis points, non-performing loans in the retail segment fell by over 170 basis points, indicating that the use of information bureaus were one of the key drivers of retail non-performing assets.
Credit information bureaus such as CIBIL in general assign rating between 300 and 900 points. Low rating is assigned to individuals who are the least trustworthy and high rating is assigned to blue chip customers.
“It will remove subjectivity in decision making because it is a far more objective parameter,” said Jayakumar. “The adjusted pricing that the customer pays is more or less constant because lower scores have higher risk and higher scores have lower risk.” Home loans contributed to nearly 9% of Bank of Baroda’s total advances at Rs 24,975 crore.
Other retail loans, which include personal loans, contributed 7.64% to the total book at Rs 21,463 crore.
Source : http://goo.gl/EOWbLc
ET Bureau | May 30, 2016, 10.01 AM IST | Times Of India
The term ‘social worth’ is changing from one’s standing in society among peers to a figure derived from one’s popularity in social networking sites
MUMBAI: An individual’s social worth may come to mean more than one’s popularity with friends and colleagues. Social worth may become a tool to assess a person’s creditworthiness, especially for those who’ve just started working, and some agencies have already started using it.
Those looking to get a loan application processed quickly or at a lower rate of interest would do well to ensure they have the right contacts on LinkedIn and a good set of friends on Facebook. Just as the income tax department tracks your holiday photos on Facebook, banks and financial companies are increasingly looking at the ‘social worth’ of people to determine if there’s a risk of defaulting on payments.
The term ‘social worth’ is changing from one’s standing in society among peers to a figure derived from one’s social media connections, personal details and bank statements – an indication of how much a person can repay.
“This is becoming the norm mainly for first-time borrowers, for whom there is hardly any credit data available. To be able to lend to this section, banks are using alternative sources of data to decide on creditworthiness,” said Ranjit Punja, cofounder of CreditMantri, which has developed a proprietary software for this purpose. “We already have a public sector bank , a private bank and a large NBFC using our alternative data sources for their loan processing.”
While CreditMantri offers credit analysis, EarlySalary is a lender. This Pune-based startup, which has a non-banking finance company licence, provides instant credit to applicants by judging them on their social media contacts.
In 90 days of operations, EarlySalary processed applications for more than 1,000 borrowers worth Rs 1.4 crore across Pune, Bengaluru and Chennai.
“We are mostly lending to the youth who have just joined the workforce and are credit hungry. To be able to underwrite such advances, we are using the individual’s Facebook, Google Plus and LinkedIn data, which gives us a peek into the kind of person he is,” said Akshay Mehrotra, CEO of EarlySalary.
Mehrotra explained that it is mandatory for someone to have a social media presence to be considered for credit on their platform. They look at ‘mirror customers’ – similar people on the applicant’s contact list who have a credit score.
Source : http://goo.gl/4Re6Ac