Tagged: Loans

ATM :: What does your credit score say about you?

Your credit score indicates your financial health, thereby determining your creditworthiness. Credit scores are provided by institutions such as CIBIL, Experian etc., among which, CIBIL is the most popularly used mechanism for lending. Credit bureaus assign a score to you on the basis of evaluation of your loan repayment habits and credit card history.
By: Adhil Shetty | Published: March 24, 2017 12:46 PM | NDTV Profit

ATM

Your credit score indicates your financial health, thereby determining your creditworthiness. Credit scores are provided by institutions such as CIBIL, Experian etc., among which, CIBIL is the most popularly used mechanism for lending. Credit bureaus assign a score to you on the basis of evaluation of your loan repayment habits and credit card history.

How to read your credit score
The credit score is typically represented in a triple-digit number ranging between 300 and 900 points. While higher points reflect financial discipline and a good credit standing, lower credit scores reflect poor repayment habits—which, in turn, could reveal poor money management skills. Banks and lending institutions usually prefer a credit score of 750 and above for issuing a loan or credit card. A high credit score could help you get loans at the best interest rates available. For people who do not have a credit history, the credit score reflects to be -1.

What does your credit score say about you?
Let’s look at the various aspects of your financial life that your credit score throws light on.

Timeliness: A crucial component in computing your credit score is timeliness in repaying loans and credit card bills. CIBIL, for instance, gives timely repayment about 35% weightage in calculation of credit scores. If you pay your bills on time, you are considered to be disciplined and committed towards the repayment of your dues. While a one-off case of delay may be ignored by the credit card company, repeated delays would earn negative scores.

Trustworthiness: Banks and financial institutions consider you to be an eligible borrower if your credit score is robust, as it reflects trustworthiness. A poor score indicates increased dependence on credit and lack of timeliness in repayment, which after a point may reflect lack of integrity and therefore intent to pay back.

Credit hungriness: A credit report also indicates your dependence on credit. This is assessed in terms of your credit utilization ratio, which refers to the percentage of credit you use from what’s available. A high credit utilization ratio shows credit hungriness irrespective of when you repay it.

What if you don’t have a credit score?
It may be great to never have to take a loan. But from the point of view of developing a credit history, it’s important to have some form of credit, be it loans, credit cards, or EMI store purchases.

If you have never availed any form of credit, the credit bureaus and banks wouldn’t have a credit history to analyse you with. This could make things tricky for you if you approach a bank for loan in future.

So, how do you show a history of timely repayment? You can start with taking a secured loan or credit card and maintain a record of timely repayment to be on the good books of the banks.
(The writer is CEO, BankBazaar.com)

Source : https://goo.gl/RiZa4E

ATM :: When does your spouse’s CIBIL score matter?

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.

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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

ATM :: Credit Score: What you don’t know about it?

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

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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

NTH :: CIBIL to provide one free credit report a year: Raghuram Rajan

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

NTH

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.

Source: http://goo.gl/2GHs8Z

NTH :: Bank of Baroda plans rating-based lending

By Saloni Shukla, ET Bureau | Jul 07, 2016, 03.37 AM IST | Economic Times

NTH

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

ATM :: When should you break some financial rules? Find out

By Chandralekha Mukerji | ET Bureau|Jul 04, 2016, 09.25 AM IST | Economic Times

ATM

BENGALURU: A rulebook guides the inexperienced to make rational decisions. This is true for money management too. Money rules help you keep your finances on track. But rule of thumb that do not fit your situation can be a waste of time, or worse, actually worsen your finances. They may be oversimplifying a complex issue which can harm long-term prospects and be a poor substitute for analysis. Here are five personal finance rules that based on your circumstances, you can consider breaking.

Rule 1: Young should have equity-heavy portfolio
Risk appetite is independent of age. A young person usually has higher risk tolerance and a longer investment horizon and therefore advised to keep a heavier chunk of portfolio in equities. However, historical data shows that equity investment requires a commitment of four to five years for good returns. Even if you are 20-something, equities are not for you if you have a lot of debt and many dependents or are saving for short-term (read: 2-3 years) goals.

If there is an ailing family member and a medical emergency can arise unannounced, you should have your savings in debt as chances of capital corrosion are less while the penalty for early exit is not high. On the other hand, you may be 60 and retired, but have enough liquidity to manage your short-term expenses. Then, you must consider allocating a portion towards equities. “The first step to asset allocation is therefore knowing your risk appetite through a risk profiling exercise, step two is understanding the constraints in life and decide your equity-debt investment ratio,” says Vivek Rege, CEO, VR Wealth Advisors.

Rule 2: The key to financial success is cutting expenses
The key to financial success is not in cutting your expenses. It is in creating a surplus that can be invested, which can be done by reducing your costs or increasing your income.

While budgeting is a must, however, some costs can’t be snipped beyond a point. Your financial planner may then advise you to either reduce your goals or push back the target dates or re-prioritise your financial needs. However, what if the financial need can’t be compromised. Take the case of 35-year-old Pravin Kumar, who works for an IT company.

“Although his earnings were enough to meet his present needs, he wanted an overseas education for his 10-year-old daughter, which was not possible considering he had already taken a huge home loan,” says Mimi Partha Sarathy, MD, Sinhasi Consultants and Kumar’s financial planner. One of the constraints for Kumar to earn more was his qualification, so he decided to take up an executive MBA in marketing from a top B-school. “With this new addition to his resume, he negotiated not only a promotion but a 40% increase in his salary with an increased role,” Partha Sarathy. It was then easy to allocate the necessary funds for the child’s future needs.

Rule 3: Debt is bad. Try to avoid debt at all cost
Debt is not always bad but you shouldn’t borrow beyond your repayment limits. Loans can help you lead a lifestyle that you desire by drawing from current and future income. “While in the previous generation, our parents had to wait till they saved up enough to buy a house, we are able to do that easily today through a home loan. Loans give us a lot of flexibility to enjoy a lifestyle today rather than in the future,” says Priya Sunder, director, PeakAlpha Investment Services. However, in case of financial distress, you lose all flexibility since EMIs will have to be paid, with very adverse consequences in case of default.

“Hence it is prudent to create a Plan B in case of a loan default such as hrough insurance covers or collaterals,” adds Sunder. Having an open credit card limit with sufficient insurances is a great emergency planning. “It is a much better idea than building huge emergency corpus,”adds Bhuvana Shreeram, a Mumbai-based Certified Financial Planner. If you are a good borrower, even credit cards are not bad. “Apart from using credit wisely, you can use debt to create appreciating assets like a home not only to gain through appreciation but also tax savings,” says Manish Shah, CEO, Bigdecisions.com.

Rule 4: Realty is the best asset
Too much of anything is bad, especially an unpredictable and illiquid asset like real estate. However, most Indians have a portfolio terribly skewed towards real estate. “They overestimate the returns real estate gives. If they did the math, they would know better,” says says Shreeram. “Even when real estate had a good bull run in the last 10-12 years (2002 to 2014), most investors have made about 9% to 10% after accounting for interest repayment on loans, tax benefit, cost of maintenance etc., which may be better than bank deposit but not worth taking 20-year loans at 10%,”adds Shreeram. Also, the bull run does not last long. So, the investment is not as safe or liquid as bank deposits. The time during 2011 to mid-2014 was a very challenging time for those who had invested in the stock markets. “Many HNIs moved to real estate during this time and at high levels which is now close to impossible to liquidate,” says Partha Sarathy. Sunder of PeakAlpha Investments doesn’t recommend holding more than 60% of portfolio in real estate.

Rule 5: Re-evaluate your portfolio regularly

Yes, there is a need to regularly rebalance and evaluate your portfolio. However, too much tinkering is not good either. “There are people who have long-term goals but have a habit of tracking their investments on a daily basis and get carried away by the emotions of the market,” says Anil Rego,CEO, Right Horizons. Tinkering is either motivated by the need to earn more (greed) or by the need to save whatever is there (fear). “Jumping in and out of investments is the single-most wealth destroyer, followed by waiting in the sidelines and losing precious time,” says the expert. Every investment has a time horizon for it to achieve its expected returns and this must be respected and adhered to.

Source: http://goo.gl/YtV8bL

NTH :: Need loan? Just raise your popularity level on Facebook, LinkedIn

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

NTH

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