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Get answers to commonly asked questions related to Credit score
Approaching a bank or Non-Banking Financial Company (NBFC) or an online lender for a loan or a credit card may become unavoidable for everyone at some time in time for various purposes. It could be for a business loan, credit card, loan for education, wedding, financial emergency, home loan, etc. When you apply for a loan, the lender pulls your credit score and report to see your past credit activities whether you are an eligible borrower. The three-digit credit score plays an important role in getting you the credit you want at better rates. Credit score in India is provided four credit bureaus namely, Equifax, Experian™, CIBIL™ and CRIF Highmark™ which ranges between 300 to 900.
The awareness about the concept of ‘Credit Score’ is on rise in recent times as more and more Indian population look up to banks for financial assistance. Let’s take a look at what credit score is, its importance and much more.
About Credit Score
The popular definition of a credit score is as such “A credit score is a statistical number that evaluates a consumer's creditworthiness and is based on credit history. Lenders use credit scores to evaluate the probability that an individual will repay his or her debts. A person's credit score ranges from 300 to 900, and the higher the score, the more financially trustworthy a person is considered to be”.
Let’s make it even simpler, consider a class 12th student who has 5 subjects, in which he needs to get good scores to get into a good college. Now the average of the students score is what colleges look at before deciding on giving admission.
Credit score is exactly the same for a person which is a 3-digit number which is a got based on how you managed your past loans and credit cards dues. Just as a student will get into a good college if his score is good, a person with good credit score will get better offers when they apply for any type of credit.
Percentage wise Credit Score Distribution in India*:
*These figures are calculated by using the information in our database
Before we explore this section answer this simple question - “Will you lend money to a complete stranger?” Most of you will be nodding your head saying “No”. The only way you will think of owing money to a stranger if you know the person or one you know vouches for them.
To put it in layman’s terms, banks were having the same problem in lending money because of the lack of parameters to make a lending decision. This lack of data also explains why loans were predominantly given to existing account holders or would take a lot of time to approve loans for new customers as it will take a lot of time to verify the given documents.
A person’s credit score is that friend vouching for another person. The credit bureaus have all the information on you based on your credit history and provide a background about a potential borrower to the lender (Bank or NBFC). So, high credit score indicates that you have managed your credit better and this increases the chance of your loan or credit card approved and get better offers in the future.
In India the credit score of individuals is the domain of 4 credit bureaus – Equifax, CIBIL™, Experian™ and CRIF High Mark™. From lenders they collect the data of individuals who have taken any of credit compiling them in the form of a credit report based on which they calculate the credit score using their own proprietary algorithm.
Credit scores used to be an alien topic in India but not anymore. A survey found that 3 out of 4 Indians check their credit score twice a year. Many Indians check their credit score to improve it while others check it to get a credit card or loan.
Even though many check their credit score to improve it, 3 out of 6 Indians were shocked to know that credit score is checked by lenders before approval of loan and that some mobile service providers check credit score before finalizing post-paid credit limit. This indicates that there is enough scope to educate Indians about credit score and its importance.
Another factor is that Indians with income higher than Rs.5 lakhs check their credit score at least twice in a year compared to people with lower income.
Checking your credit score frequently helps you take smart financial decisions. Based on the score, you can approach a bank to apply for a loan or credit card and bargain for better terms. Even a small reduction in the interest rate of big-ticket loans can save you a lot of money in the long run. You may wonder how and where you can check your credit score for free. Following are the ways to check your credit score at various platforms.
Credit Bureaus: As per the RBI mandate, each credit bureau should give your credit report and score for free once a year. You can check it online at their official website or by mailing them.
Third-Party Financial Portals: Third party financial sites provide credit score for free round the year. You can check it anytime from anywhere and it’s completely free. Checking your credit score does not hurt it, and you can check it for any number of times.
Banks: These days some of the banks also provide credit score. Some lenders charge a fee while some provide it for free.
To check your credit score online for free, you may need to enter the details of your Name, Date of Birth, PAN, employment, etc. After submitting the details, your credit score and report will be fetched from the credit bureau for your view. It just takes minimum of 2 minutes to check your credit score for free.
Checking your credit score for free is easy and it will require certain information to fetch your score. Following are the information that are generally needed to check your credit score at third-party financial websites.
Although, you can get your credit score from all the 4 four credit bureaus, checking it on third-party websites makes it easier as the process is minimal and hassle-free. Moreover, the credit bureaus provide your credit score and report for free only once a year. If you want to access your credit report multiple times from credit bureaus, you may have to pay a fee of certain amount. But third-party financial websites provide your score for free round the year.
While it’s a third-party, you may be apprehensive about the safety of your personal details and also wonder how they fetch your credit score from the bureau. Each website has tie-up with any one of the 4 bureaus and fetch your credit score from their records. The third-party websites ensure that it’s completely safe and you can check multiple times for free.
Some are sceptical if checking credit score from these sites will reduce it. Your credit score gets affected only if the lender checks it while you apply for a loan or credit card. When you check your score on these platforms, it is considered a soft enquiry, and it does not have any impact on your credit score. it’s indeed good to check your credit score multiple times to keep a track of your credit health.
As mentioned earlier, the credit bureaus use data from your credit history to calculate or arrive at your credit score.
The factors that affect your credit score are
If you have obtained your credit score from different bureaus you would have noticed that your score varies from bureau to bureau.
This is because
1. Each bureau has its own method to calculate credit score. Thus, the score will vary from bureau to bureau.
2. Your lender might not have reported your recent data to a credit bureau or might not be reporting to a particular bureau at all. If you check your score with said bureau it might be low.
Though your score may vary the lender knows the different parameters used by various bureaus and weigh the scores equally.
Good Vs Bad Vs No Credit Score
Every individual invariably falls under the following three categories when it comes to credit score. One may have a good, bad or no credit score. Following table will help you analyse the importance of credit score and its benefits.
You can check your credit score any number of times, and you can be certain that it does not affect it anyway. When you check your credit score on your own, it is called soft enquiry which does not have bearing on your credit score in any way. But when the lender checks your credit score when you apply for a loan or credit score, it can affect it slightly. It’s called hard enquiry. When you apply for a loan with multiple lenders simultaneously, multiple hard enquires are made which can have a negative impact on your credit score.
Maintaining a good credit score can be done easily by doing the following:
1. Pay your bills on time
Regular and on time bill payment has the highest weightage when calculating your credit score. So always pay your credit card bill or loan EMI on time. Make sure you have set up an alert to remind you about payments or opt for automatic payment where the lender withdraws the money owed on the day already decided by you.
2. Keep your credit utilization low
Keep your overall credit utilization low, i.e. say you have 2 credit cards which have Rs. 50,000 and Rs.40,000 as their respective credit limits which adds up to a total credit limit of Rs.90,000. The recommended credit utilization ratio is 30% i.e. Rs. 27,000. If a person keeps using a lot of credit especially maxing out their credit limit will negatively affect their credit score.
3. Don’t close old credit cards
When you close old credit cards the card issuer stops sending updates to the credit bureaus. The credit bureaus also give less weightage to closed accounts. This could bring about reduction in your credit score. Also, your overall credit limit reduces which means your spending capacity and staying below the ideal credit utilization ratio is difficult. You must remember that after 10 years the closed credit card account will be removed from your credit report which could bring down your score when your really don’t want it to happen.
4. Limit new credit application
It is best to limit new credit application within a short time period as each hard enquiry will be listed on your credit report, which brings down your credit score. Also, if lenders see a lot of enquiries listed on your credit report, they will get the impression that you are desperate for credit and don’t know how to manage your finances.
5. Monitor your credit report regularly
Check your credit report on a regular basis. RBI has mandated that all credit bureaus provide one free credit report each year to customers. But we suggest that you have a look at your credit report at least twice each year.
This is important because there could be mistakes on your report. Th mistakes could occur if the lender makes a mistake or due to identity theft or credit card fraud, which could bring down your credit score.
Having a good credit score can help you secure loans and credit cards with ease. Lenders prefer applicants with good credit score as they show positive track record of repayments. Following are some of the benefits of having a good credit score.
To err is human. Poor credit score is the result of poor credit behaviour. It’s important you identify those poor financial behaviour to make things right.
Following are the reasons why most people may have poor credit score.
1: Late Repayments
You must remember that even one or two delayed credit card bill or loan repayments can affect credit score negatively. The more the number of delayed payments, the greater is the negative impact on your credit history and credit score. Though you may repay the amount later with a penalty to the lender, it gets reported by the lender as delayed payment to the credit bureaus.
2: Missed payments
As major chunk of weightage in credit score calculation depends on repayment history, hence it is vital you do not miss a single payment on your credit card or loan EMI. Even a single default can hurt your credit score, making it difficult to avail credit in the future.
3: Poor Credit Card Utilisation
Maxing out credit card limit implies you are credit hungry which could impact your credit score negatively. Experts recommend that having a credit utilisation ratio of 30% and below is good for your credit score. In case you use your credit card often, you can request for a higher credit limit on your credit card or get another card to balance the credit utilisation ratio.
4: Multiple Loan Applications
As we already know that a hard enquiry can negatively impact your credit score, you must keep tabs on your loan applications. Applying for the same loan with multiple lenders can work against you as multiple enquiries are made. Hence, apply with the lender only where the approval chances are higher. You can check your eligibility for free for all loans on financial portal like CreditMantri which can avoid a potential rejection.
5: Administrative Error
Occasionally, there may be an administrative error that results in wrong information being recorded on your credit report. Sometimes, this might be the result of fraudulent activity as well. For no fault of yours, these errors could lead to a lower credit score, signalling to future lenders that you have bad credit.
Foreclosure: It happens in secured loans, wherein the lender sells the property through auctions and retrieve the outstanding loan amount. It can significantly reduce your credit score.
Written-off: The lender writes off your loan or credit card account if you have continuously defaulted on repayments for 180 days. This gets reported to the credit bureaus by the lender, and your credit report shows written-off status. This can affect your credit score negatively and make you ineligible to avail loans.
Settled: When you are unable to repay the loan, the lender allows you to settle the loan account for a mutually agreed amount which would be lower than the outstanding loan amount. This is a negative issue which will impact your credit score negatively.
There could be people who have never taken loans or credit cards due to which they will not have a credit history and hence no credit score. Also, there are people who might have lower credit score as they could not manage their finances properly. For such people it will be difficult to get a loan and even if they do, the terms for the loan or credit card will not be good. These people need to improve their credit score which can be done by using any one of the following steps
Step 1: Understand your earnings and spending
Know how much you make, understand all the deductions, the reasons behind it and track where you spend your money. This will give you knowledge of your income and expense. You can also take the help of technology like mobile apps or online tools to track your spending, inflows and outflows. This can be a great help in your efforts to improve your finances.
Step 2: Plan your finances
Write down your financial problems and goals. Writing them down gives you clarity and finality, rather than constantly thinking and worrying about your finances without having a clear idea of what the issues are. After which you need to plan what you want to do for example, do you want to pay of your credit card debt in 3 months (or) save a certain amount of money before a certain time (or) pay the down payment for a new house. Decide on what you want to achieve. This will be your goal and mantra which your focus must be on and planning along this goal will help with you stay on course to complete the goal.
Step 3: Implement your plan
This is the most difficult part – doing. People will do all the above steps but almost always let go in this step. Implementation of your plan should include
Do not spend more than what you have. Even better decide a cut-off point and save the rest. Try to keep your spending below your cut-off point. Credit card holders need to pay off their debts on time and keep their credit limited to 30% below credit utilization ratio.
Find alternate sources of earning income like freelance article writing, part time jobs in retail shops or any other means which you are comfortable with. Use this fund wisely or save it for emergency purposes.
Pay off your existing credit card, education loan, car loan etc. This needs to be your priority. This is eating away at your salary every month and needs to be closed as soon as possible. Aggressive payment of debts is what is required here.
Step 4: Review, Monitor and Adjust
After implementation review your actuals with plan. If there is deviation, adjust it accordingly. Continuously review your results on a weekly basis. This way you will know what you are earning and how much you are spending and if you are on track with your goal.
After you have identified you have a low credit score, you can subscribe for credit improvement services offered by various financial services companies or approach the lender to pay off your past dues. The first thing you need to do is to get your outstanding dues from the lender and pay them back in full. After having made the repayment, get a ‘No Due Certificate’ which confirms that you have cleared all the dues.
After making the payment, the lender will report your payment details to the credit bureaus who keep a record of your credit activities. Upon receiving the information from the lender, the bureaus will remove the negative issues from your account and update the latest payment details on your record. You have now successfully moved away from having bad credit. However, this is just the beginning.
For example, if you have a credit score of 480 at the time of removing your negative account, your credit score will remain the same in the future unless you have an active loan or credit card. On repaying the current loan and credit card bill consistently, you can improve your credit score considerably. A steady increase can be witnessed on being regular with repayment.
Your credit score is the reflection of your credit health. Just like taking care of your physical well-being, it’s vital you take care of your credit health to get attractive terms and quick approval on your loans.
A personal loan is a loan taken by an individual to fund personal expenses like a wedding, make renovations to the home or even for a vacation. Unlike a home loan or business loan, there is no restriction on how the borrowed amount is used – the borrower has full freedom to use the money for any purpose they want.
It is an ‘unsecured loan’ and you are not required to provide any security in the form of cash, shares or any other assets. Complete flexibility of end-use and the lack of collateral makes personal loan one of the most sought-after loans in India.
Personal loans are unsecured loans. They are based on the borrower’s ability to pay the money back. Thus, unlike a home loan or auto loan where the loan is secured against the property or vehicle, the bank bears the entire risk in the case of a personal loan. Hence, you need to have a really good credit score if you want to land a personal loan at the best interest rates. Naturally, the higher your credit score, the better are your chance of being approved for the loan, as the lender is loaning you the amount purely on the basis of your creditworthiness.
If you’re looking to apply for a personal loan, one of the first things you will want to do is check your credit score. A credit score helps determine whether you will get approved for the loan and how much you will pay in interest.
Your credit score is a number that banks and other financial institutions use to gauge your creditworthiness when making a lending decision. The higher the number, the lower the perceived risk. Generally, there is no minimum credit score required for a personal loan—but a healthy number is recommended if you want to get the best rates and avoid rejections. Having said that, if you are looking to apply for a personal loan, you will want a credit score of at least 750 or higher.
Your credit score is calculated taking several factors into account:
Your payment history is the most important aspect which is taken into account while calculating your credit score. Your credit history shows whether you have been paying your bills on time. If you make even one late payment, your credit score could take a hit.
The amount of credit you use based on your approved credit limit is vital when it comes to calculating your credit score. To keep your credit score at a healthy high number, it is recommended you use no more than 30% of your total credit allotment. Your payment history and credit utilization together make up the bulk of your credit score rating.
Start building credit as soon as possible. The longer the history of credit you have, the better your credit score can be. Do not close old accounts for this reason.
Having a mix of different types of credit (like car loans, personal loans, mortgages and credit cards) can help boost your credit score. Lenders like to see that you can manage more than one account.
It is important to note that opening several lines of credit at once can indicate greater risk and hurt your credit score, especially if you have a short credit history.
A simple, three-digit number can rule your entire financial life. Credit score can affect a lot of things. If you want to borrow money—whether it is a personal loan, credit card or a mortgage—your credit score will be a part of the whole approval process. Financial institutions rely heavily on your credit score to determine your creditworthiness and evaluate your ability to pay. A low credit score indicates that you are a risk and your application could be in jeopardy.
Having a good credit score can have a positive effect on your financial life. It can help save you money in the way of reduced interest rates, and better terms and conditions including discounts and fee waiver. Not only does it speed up your personal loan approval, but also get you the best rates.
A credit score of at least 650 is considered good, while anything above the 750 range is considered excellent. If your score is the 700–800 range, your chances of being approved for a loan are quite good. A score below 660 indicates a poor credit habit and it could restrict your options.
If you have a good credit score, you could qualify easily for a personal loan and that too with a lower interest rate. This is because you are seen as a creditworthy borrower who poses a lower risk. Your credit history is evaluated while making a lending decision, and if your payment behavior is consistent with on-time payments, then you will most probably be approved for a loan. You are seen as a trustworthy borrower who is likely to pay back what you borrowed.
Once you have decided that you need a personal loan, obtain a copy of your credit report from the Credit Bureaus. Typically, you need to have a credit score of 750 and above to qualify for a personal loan. You may be accepted for a loan below this number as well, but at very unattractive terms like a high-interest rate.
If your credit score is low, make a commitment to improving it before applying for a loan. It can take anywhere from a couple of months to a year to improve your credit score, depending on the severity of your credit situation. If you have a score that’s considered poor, your loan application could be rejected. Lenders are wary of those with a poor credit score. If your credit score is low, it is better to apply for a score builder product rather than a personal loan. This would help rectify your score (provided you follow healthy credit habits). CreditMantri can help you apply for score building products and building your credit score.
If you need a personal loan and you have a low credit score, it makes you difficult to qualify. But it’s still possible to get low credit score personal loans.
Shop around for the best solution! Look for a loan offer that suits your budget and needs. Simultaneously, shop around for the best interest rate possible. This is extremely important, as even a 0.05% reduction in the interest rate could mean savings of a significant amount of money in interest costs. Thoroughly research the various loan offers available in the market. Be sure of all the fees and charges associated with the loan (that is usually in the fine print)—it might put a considerable dent in your pocket. Compare the features and benefits to determine which loan offer best fits your income and credit profile.
Last but not the least, watch out for predatory lending. Do not sign up for a predatory loan just because you need the cash now. You will get stuck with high-interest costs that will potentially put you in a financial rut. This will only worsen your situation and could even hurt your credit. Take your time, research your options and don’t borrow more money than you can afford.
Looking for a personal loan at better interest rates? We have the right loans that are perfect for your credit profile. Check your eligibility here for the personal loan.
In simple terms, a home loan is when you take a loan for financing your house. You sign a legal document when you opt for a home loan that gives the lender the sole right to take the property if you don’t repay the loan. It is also known as a mortgage, as it is a loan secured by a property. You receive funds to buy a property or a home, in exchange the lender gets the promise that you will pay back the funds within a certain time frame with a certain interest. A home loan is something that is legally binding and gives the lender the right to have a legal claim against your home if you default on the payment terms of the loan. Basically, you have possession of the property, but the lender is the one who owns it supremely it until the loan is completely paid off.
The loan is usually to be paid back in the form of monthly payments that consist of interest and a principle. Generally, the interest amount will make for the bulk of the monthly payments in the beginning. The principal is repayment of the original amount borrowed, which reduces the balance as the years go by. Keep in mind that a monthly home loan payment includes taxes, insurance, interest, and the principal.
The process of applying for a home loan is simple enough nowadays but the process can be stressful. The first thing you should do before going to your bank to apply for the loan is to get a copy of your credit report and check it for errors. If there is any incorrect information, it needs to be disputed as egregious data can cause a home loan application to be rejected or lead banks to charge a higher rate of interest. This is not good for your bottom line, as you would end up paying more over the years.
The borrower should know what kind of house falls in their budget, how much they qualify for and how much down payment they can afford. Those things can determine the home loan type and term.
The lender receives an evaluation of the property and this document determines the market value of the home. Accordingly, this data is used calculating the collateral in the loan. The borrower is charged a fee for the evaluation service and is usually included in the additional costs of the application.
When the home loan application is complete, the borrower will be asked to submit a considerable amount of information. That is why you should be prepared to give the lender the following information:
Once the application is completed, the lender will review the application and arrive at a lending decision. The lender will carefully go through the details provided by you and decide whether to approve or deny it. If approved, the last step in the process is the in-person meeting in which documentation is completed, signed and sealed, and the deal is closed. If denied, you can talk to the lender in order to understand why your application was rejected.
So what credit score is needed to buy a house? The simple answer is, it varies. However, generally having a credit score of 700 and above is recommended for higher approval chances.
Your credit score is the first thing a lender will check when assessing your profile to see if you qualify for a home loan. While there are many factors involved in qualifying for a loan apart from having a good credit score, this three-digit number is often the most important. The minimum credit score you need to buy a home will depend on the type of loan you qualify for.
Banks and Non-Banking Financial Institutions are becoming better at finding out about the borrower’s ability to repay a loan. They don’t just see if you have a good credit rating. They will look at your debt portfolio to have an understanding of what kind of a borrower you are. They will look at your payments history to arrive at a lending decision. One thing is that if you have missed just a couple of payments, it could cause your credit score to drop drastically. Lenders know that. Hence, they carefully look at your payment history and if you have defaulted on your payment, then how many times and how late you have defaulted.
If you have bad credit, it will help if you can show that you have re-established your creditworthiness. If there was an event that caused the bad credit, then you can even try requesting a meeting with the lender to discuss your option. You can say there were hardships and provide documentation that you have since recovered from the financial hardship.
Lenders will also look at your current debt. If you don’t have much debt, then this could become a strong factor in your loan application as lenders will view you favorably if you have a low debt-to-income ratio. Lenders will also want to see a recent solid repayment history with no late payments or collection accounts in the past 12 months. A low debt-to-income ratio and solid employment history is a winner in the eyes of the lender.
This is an oft-asked question by first time homebuyers – what is a good credit score to buy a house? Well, just having a good credit score doesn’t mean you will get approved. And just having a bad credit score doesn’t mean you will get rejected. It all depends on your payment history. Getting approved for a home loan with a great credit score does not mean you are going to get a great deal. Your credit score will affect the interest rate you get. Poor credit score often leads to higher interest rates and increased closing costs leading to a higher monthly payment. Naturally, the higher your credit score the lower your interest rate will be. You will also get more favorable terms and conditions.
The first thing you need to do before applying for a home loan is to check your credit score. You can check your free credit score on our website and get a free credit health check.
No one who has been through the process of getting a business loan would never call it a simple process. You will have to meet a number of different business loan requirements with different lenders, which vary depending on the loan product you seek. Among those factors, probably the most important factors are your credit score and credit history. These are the minimum requirements for business loan eligibility.
If you have ever searched for business loans, you will know that all lenders have different requirements. A loan that might seem perfect for you may have a different requirement while another wants you to have been in business for at least two years. Following are the minimum criteria that lenders look for:
Your credit score and history are the important criteria that are taken into account while making arriving at a sanctioning decision.
For the vast majority of business loans, the lender will at least take your credit score into account. Credit scores are a crucial factor in the loan sanctioning process since they help determine your creditworthiness. The healthier your credit history is, the less risk you pose to the lender. On the other hand, business owners with lower credit scores might have a tougher time securing business loans for their enterprise. Those who are unfortunate are shut out of certain loan types entirely.
There is no minimum credit score requirement for a business loan. But for specific types of loans, lenders strongly prefer to see your credit score. There are no hard and fast rules for having a particular credit score number. Each and every lender will have a different range for determining your creditworthiness. Hence, there are no specific credit score numbers that you really need to have. But it helps to have a good credit score.
Every loan application is evaluated on a case-by-case basis, and every borrower is approved or denied based on a combination of aspects they have mentioned in their application. But assuming your other credentials meet the lender’s other standard requirements—such as, for instance, annual profits and time in business—then possibilities are that you could be approved even if you don’t have a favorable credit score.
Having said that, there are minimum credit scores you should aim to have in order to make your chances of approval high.
Let’s get back to credit score 101. There are two types of credit scores: your personal credit score and your business credit score. They are vastly different from each other—and as a business owner, you might have both of these numbers up your sleeve.
Your Personal Credit Score
For the most part, when you apply for a loan product that is not a business loan, your personal credit score and history is taken into account. Your personal credit score is one of the best indications of your fiscal responsibility. As a business owner, when you apply for a business loan, however, your personal, as well as business credit scores, might be considered.
About your credit score
There are four major credit bureaus in India that calculate your personal credit score based on the data given to them by your lender. Equifax, CIBILTM, Experian and CRIF High Mark. The most common method of evaluating credit and arriving at a number is with the credit score, which takes into account a few different aspects in your credit profile to come up with a number.
Each credit bureau uses its complex algorithm to arrive at a number. Ever credit bureau weighs those factors differently. That means that your credit score will vary across all four of these bureaus.
The following factors are into consideration while calculating your score:
A personal credit score is a number that usually ranges between 300 and 900. Coming to the main question: what is the credit score required to qualify for (most kinds of) business loans? The answer is that you will most likely need a credit score of at least 550.
Business credit scores
For businesses that are already operating, there is something called the business credit score. Businesses receive credit scores as do individuals. The company is assessed, and the business credit score is arrived at based on most of the same criteria as for a personal credit score. Some of the aspects that go into a business credit profile include how diligent you are with your payments, delinquencies, the age of your credit history, available credit and credit utilization. There are no particular cutoff scores when it comes to a business credit score. Most lenders look for an individual and company that pays their dues on time on a consistent basis.
It is always recommended to keep your personal and business credit separate from each other. Business owners should avoid mixing their credit and business credit histories, mainly because of business loan inquiries considerably lower personal credit score. In addition to lowering your individual credit score, using personal information instead of business information means your business does not build up a business credit history. There will be no company credit profile for future references where it might come in handy if you apply for a larger business loan or other business loan products like a short-term loan.
If you really must apply for a loan and have bad credit, then consider alternative providers. If you are experiencing difficulty in securing a business loan, consider a community or local bank over a nationwide one. Local banks are more likely to pardon a poor personal credit score if your business has a good rating. Also, there are some lending institutions that exist specifically to lend money to people with poor credit.
The above is not advisable of course as it comes with unfavorable terms like a high-interest rate, etc. the best course of action would be to improve your credit score.
Improve your credit score using the following tips and get access to a variety of loan offers when you apply for a loan!
Pay your bills on time: Making even a single late or partial payment or skipping a payment altogether, has a negative effect on your credit score. Paying off all your bills on time and in full is a major contributor to a good credit score.
Keep your credit balances low: Make sure that you don’t exceed more than 30% of your credit limit. This helps you to keep your credit utilization ratio (the proportion between your actual spending and your credit limit) at a lower rate and has a positive impact on your score.
Apply for new accounts only when needed: Make sure that you don’t open too many new credit accounts at the same time. Multiple inquiries in your credit report reflect that you are credit ‘hungry’ and may not be able to fulfill your debt obligations.
Pay your dues in full rather than paying the minimum amount for your credit cards.
Personal credit scores work for business loans the same way as with other loans. Anything less than the 600 mark means you probably cannot find a lender; at least any of the large financial institutions won’t lend to you. A score of 700, however, gives you a much better chance at landing a loan offer most lending institutions and at reasonable rates. This is for personal loans for business. If you apply for a business loan, you may want close be as close to 800 as possible, as business loans mean stricter lending standards.
If you do not have a perfect credit score, it likely won’t disqualify you for a car loan. But it can affect the loan terms and interest rates, and not in the best way. Generally, the lower your credit score, the higher your interest rate. But there are several ways you can help reduce the interest you pay over time.
While there is no minimum credit score requirement when it comes to a car loan, having a good credit score will get you favorable loan terms. If your score is on the lower side it can significantly affect your ability to get approved for the loan and also affect the loan terms.
Having a credit score that is on the lower side could result in fewer loan offers and exorbitantly high-interest rates. But that doesn’t necessarily mean that you shouldn’t apply for a car loan. Read on to better understand the potential barriers when you have a low credit score, ways you can increase your chances of loan approval, and the score favorable for a loan thereby receiving better offers.
Before you begin car loan shopping— or any loan for that matter—it is generally a good idea to get a copy of your credit report and check it. Check your credit scores to understand how they can influence your car loan terms. This also doubles up as an opportunity to check your credit report for errors and discrepancy, which could bring your credit score down.
Your credit scores can have an impact on your car loan in two ways:
While you may be able to get approved with a lower credit score, a majority of lenders look for a high credit rating before approving any kind of loan. Hence, the pool of possible lenders will be smaller if your score is low. If you are rejected from multiple lenders, it will only affect your credit rating further.
If you are approved for a car loan with a low credit score, chances are that you will be offered a higher interest rate. You will also be offered term conditions that are generally unfavorable. This is because someone with a low credit score is considered a high-risk candidate. To offset the risk, the lender will often extend a higher interest rate.
Getting offered a loan with a 16% interest rate might not seem to be a huge deal, and even seem to be a better idea at that point, but it could rack up a significant sum over the years.
Taking steps to improve your credit score before applying for a loan could result in increased loan approvals with better offers like a reduced interest rate and keeping more money in your pocket in the long run.
If you are not in a hurry to buy a car, then there are a couple of ways you may be able to save on your car loan.
If you have a low credit score, taking time to improve it is actually a good idea. Making payments on time in full consistently without missing the due date could help raise your credit score. Your credit score is largely dictated by how much debt you have and whether you pay your bills on time in a consistent manner. Focusing on these two factors could be a huge help in improving your credit.
On the other hand, if you have no credit history, you can opt for score building credit cards and make small purchases on it that you could pay off in full every month. This will help build a credit history. When you apply for a loan, lenders apply to the credit bureaus to take out your credit history. They do this to study your risk as a borrower. They can only do so if you have a credit history in the first place. If you don’t have a credit history, they cannot judge you as a borrower and hence, offer you high rates or reject your loan application outright.
Working on your credit scores could unlock lower interest rates and preapprovals by more lenders. You could play this to your advantage as it gives you a wider pool of lenders from which you could choose the best deal. There is no fast road to an excellent credit score but building responsible financial habits can go a long way toward boosting your credit health.
Here are a few dos and don’t to building a good credit score:
Paying a larger down payment upfront will decrease the amount you need to borrow, hence helping you pay less interest. Paying zero down payment will only increase the interest rate.
If you haven’t found a loan that works for you, continue looking. Check with different lenders to see which offer works best. We can also help with this by showing your estimated loan term, interest rate and monthly payment amount across lenders.
Your credit score can impact your chances for loan approval, as well as the interest rate and terms you are able to get on an auto loan. If you are not in a hurry to buy a car, it is best to wait and buy. Use the time to build your credit health. If you don’t have a credit history, focus on building credit. Your hard work would pay off in the way of reduced interest and better repayment terms. But if you must buy now, focus on paying bills in full and on time to boost your credit score and put yourself on the road to better loan rates and financial success.
Being declined for a new credit card can be frustrating. Improve your chances of approval by increasing your creditworthiness and then applying for a card.
If you’re looking to be approved for a credit card, then you will need to meet all of the card issuer’s criteria for approval. This includes demonstrating your creditworthiness and income. Following criteria will make your approval process faster:
The less debt you have as compared to your overall available credit and the longer you have been making timely payments, the more likely it is you will be approved for credit cards with the lowest rates and best rewards program.
Being a responsible credit user can be a great way to build credit and take advantage of cash back and other rebates on your credit cards. But, what kind of credit score is good enough to get a credit card? Read on to know more.
Typically, there is no general minimum credit score requirement to get a credit card. You can get a score builder credit card having no credit score at all. However, some credit cards, particularly those having an excellent reward and cashback program, do have a very high minimum credit score requirement. Other lenders will approve you for a credit card even if your credit score is very low.
As with any other types of credit, when it comes to getting a credit card, a higher credit score means that you will have more options like a better interest rate and a better rewards program. If you have a credit score say around 750, then you can apply for premium credit cards with a higher credit limit and benefits, as opposed to having a credit score of around 500 where you can be rejected or offered a credit card with high-interest rates and low credit limit.
But it doesn’t mean that you are out of your luck if you have low credit score. Many lenders offer credit cards specifically for those with bad credit. The rewards may not be as great, and you may be offered a lower credit limit, but this type of score builder card can be a great way to build your credit history or rebuild your credit score.
Always check your credit score before applying for any kind of credit if you don’t know what your credit score is. You may want to check your credit report too for inconsistencies. This way, if you catch an error, you will be able to contest and get it rectified, leading to a rise in your credit score. Naturally, this will lead to better credit card offers as well. That is why it makes for a good habit to periodically check your credit score.
Knowing your credit score will also give you some idea of the types of cards that you can apply for. You can check your credit score online through our website, as well as get a free credit report.
Once you know your credit score, start shopping around for credit cards within your credit score range. You can enter your details on our websites and check which cards you qualify for to avoid unwanted rejections which may affect your credit score.
Other factors taken into account while applying for a credit card are:
It’s important to keep in mind that credit score is just one way that banks asses you. Your income is also taken into account and so is your current debt levels while assessing your application. Just because you may have a lower credit score doesn’t mean that you will be straightaway rejected. For instance, if you have a lower credit score but a higher income, your application may be accepted. This is because your repayment strength is higher, and the lender may view you favorably.
There’s no magic credit score when applying for a credit card. You may be rejected even if you have a high credit score if your credit report shows a history of delinquencies. You may be accepted for a credit card even if your credit score is low if your current income is high. Sometimes, a bank takes the company you work for into account as well while approving a credit card application. This is usually because they have a tie-up with the company or being in a particular company means that you probably have a stable job.
A lender considers several key factors when you apply for credit. These may include:
One of your credit scores: Note that not all scores are equal. Your CIBILTM score is different from your Equifax score. Your Equifax score is different from your Experian score. The lender may use one credit score to screen out people with bad credit. But it is not the only factor in the decision process.
Your credit history: While a credit score might be considered, lenders will look at other aspects of your credit report while arriving at a decision. This includes your payment history. This is one of the most important factors that lenders consider. If you have a consistent habit of missing payments, then it is likely that your application will get rejected. That is why it is always stressed that missing payments will adversely affect your credit history. The lender may also want to look at the age of your credit history, i.e., how long you have been a credit user. Depending on the card you are applying for, the issuing bank may want to see several years of on-time payments. Looking at a credit report gives the lender a more detailed picture of you as a credit customer. Your credit history will paint a much better picture than a single credit score.
Your income: When you apply for credit cards, your credit score is not the only thing that is considered. They will also ask for your income statements to make sure that you can make payments on time. Credit applications always ask how much you make each year. The lender wants to make sure you have a steady income before extending you a line of credit. Depending on the type of card you apply for, the bank will ask for additional documents like income tax returns to support the annual income you write on the application. Your income can be a big influencer in the credit limit you are granted by the credit card issuer.
The company you work for: Also, an important factor. If you work at established companies, the credit card issuer will be more confident in issuing a line of credit to you. It shows that you have a stable job with a steady income.
Before applying for a credit card, it is important that you check your eligibility at CreditMantri. It can help you find out the chances of approval and avoid a hard enquiry as well if not eligible. If you are eligible for the card, it will have higher chances of approval wherein the credit score does not get affected.
If you build credit responsibly, you will maximize your chances of getting approved for credit. For help with improving your credit score, including finding the right credit card for you, check out our website.
Are your monthly bills coming due and you just don’t have the money to pay for all of them? This is a fairly common scenario and likely, you make a decision to forgo one or more of the bills. This ends up affecting your credit score in a negative way.
In order to understand how skipping bill payments can affect your credit score, you need to understand how your credit score is calculated. Before that, get to know about the impact of skipping monthly payments on your credit score.
Whenever you miss a payment, you will be charged a late fee. Making continuously late payments, even if it is the day after the due date, could seriously damage your credit score. When your next bill is due, you will have to make two months of payments plus the late fee. Because of that, catching up can be difficult and it is more difficult the higher your monthly payments are. For that reason, mortgage and auto loan payments are often the most difficult to get caught up on. Try to avoid skipping payments altogether by planning ahead and living within your means.
Also, whenever you apply for a credit product, a creditor looks at your payment history first. So, making continuous partial or late payments could end up becoming costly to you. You will likely have your future loan applications rejected which again will lead to a downward spiral of your credit score. In the end, your credit health will be damaged.
The good news is, damaged credit health can be repaired. You can start by making your payments on time. Check your credit report to see that everything is reported correctly. If you find any error, correct it immediately.
If you find you can’t make a payment, it is better to make a partial payment at least. It will still hurt your score, but not as much when you skip a payment altogether. Just don’t just skip a payment. Call your lender or service provider and let them know you will have difficulty making your monthly payment. See if you can have the due date extended or the late fees waived. If you are out of a job and tight on fiscal resources, see if you can work out a new payment plan. Make every effort to pay your lenders on time, every time. Otherwise, your credit score will be hurt every time you miss a payment. Note that all overdue payments can eventually wind up on your credit report if they go into a default status or are passed along to a collection agency.
A credit score is a number computed by an approved credit rating agency and it provides a hint of the creditworthiness of an individual. An individual's credit score provides the lender with an idea of the "probability of default" of the individual, based on their credit history. Your credit score tells a lender how likely you are to pay back a loan based on your past pattern of credit usage and loan repayment behavior.
Your credit score is important for reasons well beyond simply getting a loan. Qualifying for the dream house you want and even getting good insurance rates can depend on having good credit. It is therefore critical to know whether decisions like choosing to skip a loan payment will affect your credit score. Read on to know what goes into your credit score and how a delay in your loan payment can affect it.
In order to determine your credit score, credit rating institutions look at five basic factors:
Of all these factors, the most important aspect is paying on time, which makes up to 35% of your credit score. If you cannot make one payment and you have a history of paying on time, it probably won’t hurt your credit score much. A few late payments won't necessarily hurt your score a lot but having a regular history of missing payments will generate a lower score than someone who makes payment consistently.
When you don't make a payment to your lender on time, you are violating the terms and conditions of your loan. When you do so, your lender will levy a late payment fee and report the violation to credit agencies, which, in turn, adjust your score accordingly. Your interest rates will also increase, leading to you making larger payments in the future.
For instance, if you miss your mortgage payment, most likely your lender begins the foreclosure process (as per your terms and conditions). Some lenders start the process after a single missed payment while others wait till a previously agreed upon period of time elapses. In either case, the late payment is reported to the credit bureau which in turn affects your credit score. Next month, you'll have to pay two mortgage payments plus the late fee. Making a late payment could seriously dent your pocket.
If you miss your credit card payment, it is a whole different ball game. After your payment is 30 days late, your lender will report the late payment to the credit bureaus. Obviously, this will hurt your credit score. On top of that, a late fee would be levied on you and it will go up if you miss any additional payments. If your credit card has a rewards program, you might not be able to use those until you catch up on your payments. Depending on the lender, once you miss two payments, your interest rate is likely to increase, and you may lose any promotional offers on purchases or balance transfers.
Debt can be beaten but skipping payments won’t help!
Regardless of whether you ordinarily pay your bills right on schedule, an unforeseen budgetary crisis, a lost job, or even a simple mistake could cause you to fall behind on your installments.
Keep in mind that most credit card issuers charge interest on a daily basis, so you’ll be charged interest for each day you carry over your credit card balance. That means it is important to clear your payments as soon as you have money on your hands and take steps to remedy your credit score. Make sure you don’t miss another credit card payment in the future.
On the off chance that you miss an installment on one of your credit accounts, be it a credit card, personal loan, loan against property, or any other kinds of credit, you could see your credit rating drop. Hence, banks and NBFC’s may see you as a customer who defaults on payments.
Banks and NBFC’s utilize the data on your credit report to check your risk as a borrower. It is important to note that your payment history has the most important effect on your credit rating. While a background marked by on-time payments suggests that you are a responsible borrower and will likely repay your loan on time, a credit history filled with late payments could send a red flag to the lender that you are a risky borrower.
In case you have an installment that is over 30 days late, your lender has all the rights to report it to the credit reporting organization and send it for collections. Needless to say, this will have a detrimental effect on your credit score. The late installment can appear on your credit report and be considered into your overall creditworthiness. Late installments will be recorded on your credit report on the condition how late they are: 30 days late, 60 days late, 90 days late, 120 days late, 150 days late, or charged off.
But how much of an effect does one late credit card payment have on your credit score? Read on to know more.
How much a late installment may influence your credit score can rely upon a few different aspects. With regards to your credit score, for instance, a late installment will be assessed depending on how late the payment is, and the recurrence of late payments.
Each credit reporting organization has its own model for assessing your data and allotting you a credit score accordingly, so your credit score will differ between different credit rating organization.
However, the longer an installment goes unpaid, and the more repeated the behavior is, the more damaging it is on your credit score. For example, a payment that is ninety days late can have a more negative impact on your credit scorethan a payment that is just thirty days late. Besides, the more recent the late payment, the more negative of an impact it could have on your overall credit score.
Also, one late payment could have a damaging impact on your credit score, particularly if it is high. If your score is already low, one late payment won’t hurt it as much but still does some critical damage. For instance, if you have a credit score of 800, and you make one 30-day late payment on your credit card, it can lead to credit score drop of as much as 90 to 100 points. For a consumer who has never missed a payment on any credit account, this can be very damaging indeed.
It is important to note that if you miss a payment (even just one small installment) on one of your credit card accounts, the late payment could remain on your credit report for up to seven years. After seven years, you can have it removed. So, if you fall in the costly habit of paying your installments late, your account could be charged off or sent to collection agencies, which could further dent your credit score negatively.
A late payment not only lowers your credit score, but also costs you in the form of late fees and higher interest rates. For instance, you could be charged a late fee even if you pay your credit card bill just one day late. Your lender will certainly raise your interest rate if you fall into the habit of regularly missing your credit card payments, which would mean you would have to pay more money to carry a balance.
When you can’t afford the minimum amount due or the regular monthly payment, making a partial payment can feel like a good-faith effort. But partial payments aren’t always a way to avoid being reported late or sent to collections. It can help if you have only one single missed payment. But if you do it on a regular basis, it can have a detrimental defect on your credit score.
Make it a point to improve your credit score. Be mindful of your spending. Try to bring your account current as soon as possible. Thirty days late is bad, but it’s not as bad as being 60 days late. The sooner you can catch up, the less damage to your credit health. Your credit score will start to recover as soon as you catch up to your payments.
Once you have stopped making late payments, you can save on your late fees and additional charges. Start focusing on preventing additional late payments. Follow the tips below to keep your credit score at a healthy number:
You must remember that even a single payment gets reported to the credit bureaus which will make a dent in your credit history though you make repay the credit card bill with penalty. Hence, use your credit card diligently and make on-time payment to avoid any negative issue.
Having a good credit score is the best way to save money on your mortgage, car loan, credit cards, and other interest rates. But how do you get there? All it takes is responsible financial choices with money, credit, and debt to achieve that. it may sound hard, but if you consistently follow the habits listed, then you can get your credit score up. It is important to understand these habits that will not only improve your finances but also increase your credit score over time.
The stepping stone to building a great credit score is setting correct habits with the rest of your finances. Overspending can lead you to have scrambled finances and you will struggle when it comes to making monthly payments for your bills. The best way to overcome this bad spending habit is to document what you spend every month, eliminate the waste, and then set a monthly budget: and not just make a monthly budget but stick to it as well. That should also include putting money in savings—ideally set up an autopay out of your salary account if possible. This is your safety net, plan and keep all of your financial paperwork organized and up-to-date.
This is a crucial aspect of maintaining a healthy credit score—pay balances down and but not off. Your credit utilization ratio—how much credit you utilize as opposed to your debt—is a major factor when it comes to calculating the credit score. A rule of the thumb is that you should keep that ratio at or ideally below 30%). In fact, credit experts are at the opinion that less than 20% is ideal to boost your score to the top. However, it is important to not go all the way to 0% because it won’t show an established payment history they can base their calculations on. Credit bureaus base a bulk of their scoring model by the overall money you owe and how close you are to the limits on your credit cards. Hence, a low balance and a healthy credit utilization ratio are the keys to a good score.
Make it a rule to pay your bills on time (or before!). Always pay by or before the due date and make sure that the payment was received. Since payment history makes up for the bulk of the bureau’s scoring model, paying on time is crucial. It may seem like basic advice, but even one late payment or negative remark on your credit report can hurt your score on a long-term basis. Negative remarks remain on your credit report for seven years, after which you can have them removed if they still show. A majority of the people with a healthy credit score have no late payments on their credit reports. Strive to have a spotless payment history if you want the perfect number.
Take your good payment habits a step further by paying your bills by the report date. Make payments well before you receive your bill and the due date. Try paying off your purchases at the end of every week—at least every 15 days—for the best credit score.
A considerable part of the scoring is calculated in regard to your history of credit. Attention is given to well-seasoned accounts that have been open and in good standing longer. Any credit account older than 2 to 4 years is a huge boost to your credit score. Be choosy about what kind of credit you apply for and keep it open for as long as possible, and don’t close your oldest line of credit unless you absolutely have to.
It is absolutely vital to monitor your credit report every quarter and dispute any inconstancies. Even a small error will cost you dearly and you might not qualify for that home you are trying to buy. Or you might end up paying hundreds of thousands of rupees more in higher interest rates—all for no mistake of yours—but the bureau’s errors. Also, identity theft is prevalent these days. It is easy for someone to lay hands on your personal information and take advantage of that. So, it’s essential you review all three credit reports thoroughly and address any errors. If you don’t know exactly what’s hurting you and what needs improvement, you can opt for a professional credit repair service. That’s an investment worth making.
If you notice that there is something incorrect listed on your credit report, you should have it corrected or removed by filing a dispute with the credit bureaus. We can help you dispute and remove negative and inaccurate items.
It is important that you keep the right mix of cards, and other credit instruments. A small percentage of your score is calculated by what mix of different kinds of credit you keep. If you are serious about your credit score, it is good to keep a mix of revolving accounts, mortgage, and installment debt, if possible. It’s also important that you do not become imbalanced with the kind of credit you are opening/using—for instance, using too many credit cards—because it may hurt your score. Find that delicate balance, try to use only one or two cards with high balances on a regular basis. A strong mix of credit use improves your score.
One way to try to increase your credit score is by increasing your debt to total credit ratio. Check with your lenders for better interest rates, offers, and higher credit limits. These days, credit card companies often offer cards with higher limits and other programs/benefits based on good practices which helps expand your available debt. But, do not use the added debt. By keeping the same low balance with a higher total credit limit, your ratios look much better, thus leading to a higher score.
It is never too late to begin, and these habits will help you achieve a good rating. Of course, there is no “get a good credit score overnight” scheme. Rather, it’s important to establish these credit habits over time. The good news is that it is never too late to improve your credit health. While negative notes may stay on your credit report for years, recent good behavior with credit usually outweighs old bad habits.
A healthy credit score can be your financial passport to a loan or credit card approval, so it is important to know what kind of behaviors can help you build excellent credit. There is no shortcut to establishing excellent credit: it is simply a matter of learning good credit habits and practicing them.
A credit report contains the history of your credit behavior and contains detailed information on all your loan and credit-related transactions with banks, credit card companies, and other lenders. It can contain details of your credit activity from 7-10 years before. It is issued by one of the four credit bureaus, or credit rating agencies, in operation in India – CIBILTM, Equifax, Experian, and CRIF High Mark.
Lenders use the data in the reports to evaluate your ability to make loan repayments and to decide whether you are creditworthy. If they approve your loan, the information in your report also helps them determine how much to lend, at what rates, and for what period of time.
Your credit report contains vital personal information on your credit health. It includes the payment behavior, number of credit lines open and total credit limit, amount of credit utilized, age of credit accounts and your credit score. It is important to obtain a copy of your credit report periodically and review it.
Once you get your credit report, it is important to review it carefully. Do not skip this step, as your credit report contains vital information on your credit health. It may contain errors, which can do more damage than good. Spotting these errors can prevent you from costly interest rates and getting rejected for loans in the future. So, what do you do if your credit report has mistakes? How do you get it corrected? Read on to know more.
You can apply with the credit bureaus for a copy of your credit report. You can even get a copy of your credit report through your lender. You may have to pay a small fee. Check with your lender to know what the fee is and to get a copy of your credit report.
Once you get your hand on your credit report, you will want to review it carefully. Just requesting a copy is not enough. You have to read it through carefully. Credit reports may have mistakes, and if there is any, you are the only one who is likely to find them as you know what kind of credit you have taken and when.
Your credit report contains a lot of personal information about you as well as your financial information. Making sure this information of yours is vital. Be sure to keep any hard copies of your credit reports in a safe and secure place if you want it for reference in the future. If you do not want to have a copy of your credit report with you, be very sure to shred them before getting rid of them. This part is important. You should handle your credit report as you would any important document.
Following is a list of questions which will help you review each section of your credit report.
If you find something wrong with your credit report, you should dispute it immediately. You can contact both the credit bureau and the creditor or institution that provided false information. Explain in writing what you think is wrong and why. To correct the mistakes, it is always advisable to contact both the credit reporting company and the source of the mistake. Contact the source of the mistake and file a dispute with the lender. Get the information corrected and then check your credit report to see if the mistakes have been rectified. The lender should send the corrected information to the credit bureaus as soon as possible so that the credit bureaus can rectify it.
File a dispute with both the credit reporting company and the lender including the same supporting documentation. You may file your dispute online at each credit reporting company’s website. You can also choose to file a dispute by mail. In that case, your dispute letter should include Your complete name, address, and telephone number, and the account number for any account you may be disputing.
In your letter, you must clearly identify each mistake, state the facts in a clear manner, explain why you are disputing the information in your report, and request that it be removed or rectified. You may want to enclose a copy of the portion of your report that contains the disputed items. Circle or highlight the disputed items to make the whole process easier. Include copies of documents to support your stance. Send your letter of dispute to credit reporting companies by certified mail so that you know it will reach the authority within time.
If the error is with a specific account, you can also choose to start the process by contacting the creditor to resolve the dispute. Whether you file your dispute directly with the lender or the credit bureau, they generally have 30 to 45 days to investigate your claim and send you written notice once their investigation is over. If the dispute results in changing the information, the lender must notify the credit reporting agencies.
The whole process could be cumbersome and tedious. Resolving disputes may take away a lot of your valuable time. That is why CreditMantri can help coordinate with credit bureaus and file a dispute on your behalf. We also follow-up directly with the lenders, under authorization from you. We have a transparent, customer-focused proposition which helps individuals make better credit decisions.
Regarding how long credit improvement takes, there is no fixed time for your score to improve. You have to demonstrate consistent, responsible credit behavior in order to re-build your credit score. Since this is a behavioral score based on sustained credit performance, you will need to give yourself a minimum of six months for your score to show significant improvement. Check your free credit report today!
It doesn’t cost anything to dispute mistakes or report outdated items on your credit report. What we do know is that, if you don’t do anything about errors in your report, it will likely cost you thousands of rupees in high interest rates and loan rejections. Both the credit reporting company and the information provider are responsible for correcting inaccurate or incomplete information in your report. Here are a few steps on how to fix problems in your credit report.
Pull out your credit report from the credit bureaus and carefully read through it. Carefully read through the sections containing your personal information and account information. If you find any error, like a duplicate account, or an account that isn’t yours, you must take immediate step to get it corrected.
Tell the credit reporting company, in writing, what information you think is inaccurate. Include copies of any documents that support your claim. In addition to including your complete name and address, your letter should identify each item in your report that you dispute, state the reasons why you disagree with the information on the report and ask that it be removed or corrected. It makes good sense to enclose a copy of your report, with the items in question highlighted. Send your letter by certified mail and keep copies of your dispute letter and enclosures.
Credit reporting agencies must investigate the items you dispute and provide you with an answer within 30 days of receipt of your letter—unless they consider your dispute to be based on no evidence. They must also forward all the relevant data you provide about the inaccuracy in your credit report to the organization that provided the information. After the creditor or the information provider gets notice of a dispute from the bureau, it must launch an investigation into the items in question, review the relevant information, and report the results back to the credit bureau. If the investigation reveals that the information on your credit report is inaccurate, the lender has to notify all the credit bureaus, so they can correct it in your file.
When the investigation is complete, the credit agency must give you the results in writing. You should also get a copy of your credit report if the dispute results in a change.
If an investigation doesn’t resolve your dispute with the credit reporting company, you can ask that a statement of the dispute be included in your file and in future reports.
Finding an error on your credit report isn’t uncommon. While some of those errors might be relatively harmless, such as a misspelled name or an old address, others can hurt your credit score terribly, and in some case, can cause irreparable damage. That damage can potentially cost you lakhs of rupees over your lifetime in higher interest rates. Errors in a credit report impact your day-to-day life. Credit reporting bureaus have the responsibility to provide accurate information about you and are required to dispute the error in question, so you can get your credit reports corrected.
According to the law, if you dispute an item on your credit report and the bureau can’t verify the item’s accuracy or if the item is proven to be inaccurate, the item must be removed from your credit report.
When filing a dispute, make sure to clearly identify each mistake and clearly state down the fact to explain your reasoning behind the dispute. Furnish them with supporting evidence. The more evidence you have, the stronger your case will be. Evidence is best in the form of supporting documentation. However, in some cases, it is hard to determine what kinds of evidence are needed. For example, if you have been the victim of identity theft, then it can be hard to provide documentation. You never signed up for an account in the first place! If you have reason to believe that you are the victim of identity theft—worrying signs include addresses that you don’t know about and accounts you never signed up for—fight back and don’t give up. To make the whole process much easier, CreditMantri can help you.
On the other hand, what do you do about information that is negative? Let us take a look.
When any negative information in your report is correct, there is only so much you can do. Correct negative information cannot be disputed. Only time can make it go away. A credit agency can report most correct negative information (like missed payments and other delinquencies) for seven years and bankruptcy information for up to 10 years. Information about an unpaid judgment against you can be reported until the statute of limitations runs out or up to 7 years, whichever is longer. Note that the seven-year reporting period starts from the date the delinquency took place.
Just because you have a poor credit history doesn’t mean it is the end of the road if you want credit. Every lender has their own standards—not all look at your credit history the same way. Some may look at only the recent payment history in order to evaluate you: they may extend you a line of credit if your payment behavior has improved. It may be worthwhile to contact your lender informally to discuss your options.
If you want your credit health to be in top shape, you must be disciplined enough to create a budget and stick to it. If you cannot make the monthly payments, then you must work out a repayment plan with your creditors, or to keep track of your bills. Create healthy credit habits to solve your financial problems.
Credit repair involves fixing your bad credit. It refers to the process of disputing errors on credit reports. You can go through the dispute process for free with each of the credit bureaus on your own. As mentioned in this article, this involves filing a formal dispute with the credit bureau and lender in question either online or by mail. Provide a detailed explanation of the error in your formal dispute and include any supporting documentation you have along with it. Many people don’t have the time to do their own credit repair or don’t understand the process. That’s why we are there for you. We can dispute errors for you and get you back on track. There are times when the extra help could be valuable to you. For instance, if you have multiple errors across credit reports or you’ve been the victim of identity theft, we can help you dispute the error and lead you through the whole process in a hassle-free manner.
Are you looking to invest in fixed deposits or bonds with the highest interest rates? Do you know how safe they are as an instrument of investment?
Given the many investment options available in the market today, you should always see ways to minimize risk while pursuing high return investments. This is where credit rating agencies such as CRISIL, CARE, and ICRA come into play. They assess the credit risk on these products and tell you how safe they really are.
A credit rating agency provides a rating of the “credit” taken by any company. For instance, if any company wants to take out a loan, they hire a credit rating agency to rate their loan. This is so that the intended lender has a fair idea about the risk associated with the loan they are providing to the company. Companies that have credit ratings in the AAA, AA+, AA, and AA- category have a very high capacity to repay their loans, with AAA rated companies having the highest capacity to repay.
When any company wants to issue any bonds or securities into the market, they rate this debt instrument in order to attract more customers. The reasoning is that the higher the rating of the debt, the lower the risk associated with that debt and vice-versa. The intended buyer of the debt instrument makes their decision about buying the instrument by having a look at the credit rating of the instrument before investing their funds so that they can have a fair idea about the risk associated with their investments.
The credit rating agencies have a few parameters in place to evaluate and rate the debt instrument of a company. These are:
The rating scale for deposits and bonds range from AAA which denotes ‘very high safety’ to D which denotes potential ‘default’ grade. According to financial experts, any bond which is given a rating below BBB, which denotes moderate safety, is non-investment grade and not safe to invest. However, it is important to note that there may be minor variations in rating symbols between agencies.
It is also important to note that the ratings can change. In addition to rating debt instruments, credit rating agencies also provide an outlook on the rating. This indicates the likely direction of change in the company’s rating: whether it is headed towards a AAA or a D. For instance, a fixed deposit with BBB rating and a negative outlook may mean a higher probability of demotion to a BB grade. So, the instrument is possibly as risky as a BB-rated deposit, which implies a moderate default risk. Hence, in addition to the credit rating agencies’ rating, it is important to understand the rating outlook on the instrument you intend to invest in. It is practical to avoid any kind of instrument below an A grade rating, considering the safety of the principal invested.
Understanding the rating process will help you know about these ratings better. Credit rating agencies examine and thoroughly analyze the various risks associated with business before rating their deposits and bonds. Some risks may be characteristic to the industry the company works in. To put it in perspective, while evaluating a commercial vehicle company, credit rating agencies analyze the trend rate and level of economic activity in freight rates. But that is not to say that amid an adverse trend a company may not have a strong foothold. Even amid an unfavorable industry trend, there may be companies with a strong balance and sound fundamentals. Hence, credit rating agencies majorly look at company-specific aspects to assess the comparative standing of the company within an industrial and economic trend.
To explain this with an example—while assessing a car loan company, a credit rating agency may look into the credit profile of the promoter, their track records, and shareholding pattern. These can impact the company’s profitability, success and capability to organize funds. Investors matter too, as companies backed by a strong investor or parent company may tide over the most trying times. Rating agencies also take into account aspects such as the size of the franchise and capability to grow in the current economic conditions and market while computing the rating for a company.
The parameters used to measure risks also vary from industry to industry. For instance, while evaluating a company which manufactures sugar—a commodity whose distribution and pricing is controlled by the government, causing high fluctuations in supply and demand conditions—these agencies look into the risks connected with any opposing policy move by the government. For such companies, those better placed to withstand delayed subsidy payments and those which have a diversified non-subsidy business will be viewed favorably by the credit rating agency. This is due to the companies’ dependence on the government for subsidy.
Ratings are divided into the following categories:
However, there can be other grading categories adopted by different agencies. But the essentials remain the same. The rating denotes – Highest – High – Moderate – Weak – Poor – Default.
The rating given to a company known as an investment grade. An investment grade is the rating that indicates that a public or corporate bond has a relatively low risk of default. Credit rating firms, also known as Bond rating firms, use different designations consisting of upper- and lower-case letters 'A' and 'B' to identify a bond's credit quality rating with AAA and AA being high credit quality and A and BBB being medium credit quality. AAA, AA, A, and BBB are considered investment grade. Credit ratings for bonds below these designations such as BB, B, CCC, etc. are considered poor credit quality, also commonly referred to as "junk bonds." Companies having such ratings (especially BBB+, BBB and BBB-) are considered "speculative grade" and are exposed to changing economic conditions and could face big setbacks if economic conditions weaken. However, these companies have demonstrated both the capacity and capability to meet their debt payment obligations.
Your credit score is calculated on the basis of your past credit behavior. Weight is attached to all actions pertaining to your credit behavior right from submitting an application to credit to its approval or rejection and further on to repayment or default on a credit product. Everything has a bearing on your credit score.
While actions like prompt repayment of EMIs and clearing of credit card bills will add to your credit score and take it higher. On the other hand, actions, like missing your payments or totally stopping your EMIs or settlement of debt, bears a negative impact on your credit score. The other factors that bear an effect on your credit scores are the length of your credit history, mix of secured and unsecured credit in your portfolio and your credit utilization ratio.
Your credit report is a private document and is not available for anyone in the public domain. The only people who can access your report is you and the lender to whom you apply for credit.
Your lender can access your credit report only when you have submitted an application to credit like a loan or a credit card. In no other circumstances can the lenders gain access to your credit report.
Also if you take up Credit Improvement Service, the authorized agent may access your credit report but again it will be needed to be authorized by you.
Off late, some employers also ask for credit reports to be submitted for verification, however, these will have to be provided by you. Your employer would not have access to your Credit report.
Your credit score is broadly based on your past and current credit behavior. The factors that make up your credit score are
Repayment History : Prompt repayment on your past and existing credit products is the key to a good credit score.
Positive Credit Accounts : A credit score calculation takes into account your credit accounts and if they are positive (regularly repaid) or negative (defaults and delinquencies).
Credit Utilization Ratio : This ratio takes into account your spending on credit card to the overall credit limit on your credit card. A high ratio negatively affects your credit score.
Credit Mix : There are two types of credit, secured and unsecured. A judicious mix of both is one of the factors beneficial for your credit account.
Hard Inquiries : These inquiries get created each time you apply for credit. Many hard inquiries over a short period of time is not good.
Credit History : A long history of responsible behavior with credit is appreciated and contributes towards a good credit score.
When you apply for a loan or a credit card, your lender wants to ascertain if you will be able to repay the amount that you are borrowing. Credit score is a measure of your creditworthiness that is assigned based on your past and present credit behavior. It is one of the factors based on which a lender makes a decision to approve or reject your application for loans or credit cards.
A high credit score represents higher levels of creditworthiness and may earn you some brownie points in terms of lower interest or better terms for loans. On the other hand, a low score would mean rejected loan applications or approved on higher rates of interest.
All this makes a credit score important for any individual to be able to avail credit.
When you make an application for a loan, banks do a thorough check of your application to ensure your creditworthiness and ability to pay back the loan on time. This is done with the help of a credit score.
An individual with high credit score presents a lesser risk to the bank or financial institutions as he/she comes across as a creditworthy person. When the risk is lesser, lenders are fine with allowing lower rates of interest to those individuals. But when the credit score is lesser, the risk on the part of the bank is higher, hence higher interest rates.
A credit report is nothing but a reflection of the credit history of an individual. Therefore, a credit report contains details on all the aspects that affect a credit score.
A credit report would contain details of all your credit, present and past and their status. It also contains details of your repayment. Your detailed credit utilization report also makes a part of your credit report. The number of secured loans against unsecured loans can also be found in the report. The other details in the credit report would be the longest period for which you have held any credit account and the number of hard inquiries in the past 1 year against your PAN.
A credit report will also contain your basic information like name, PAN, address, phone number, etc.
Errors are possible in a credit report. This may be due to oversight, where your name or PAN does not match correctly. Further, there can be errors where right credit accounts are not shown under your name or the amounts are not shown correctly. Some closed credit accounts might be erroneously shown as open.
Further, there can be grave errors like that of identity theft, where your PAN and details might have been used for obtaining credit cards or loans fraudulently.
To correct errors on your credit report, you would need to fill up the Dispute Resolution Form and attach clear copies of any documentary evidence you may have to prove that there is an error on your credit report.
The credit bureau will not make changes in your credit report, instead, they will direct your dispute with the evidence to the bank from where the error data had originated. Once the response is received from the bank's end, appropriate changes will be made in your report. The entire process may take 30-45 days.
An individual can get a credit report once a year from any of the credit bureaus free of cost. This is as per the mandate of RBI. Further, there are memberships allowed by these bureaus at a payment of fee which allows you to access your credit reports during the period of memberships.
You could also check your credit score for free as frequently as you like on our website. In addition, you could also request for a credit report from us where we would provide you with all the details of your credit history and the areas where you need improvement. Credit Mantri will also provide you with easy actionable points that you can put into action to better your credit score.
When it comes to checking your Credit Score there are two kinds of inquiries. One is the hard inquiry which is caused when banks or financial institutions check your credit score with the credit bureaus. This is done only when you submit an application for credit ie., a loan or a credit card.
The other form of inquiry is called a soft inquiry when gets created when you check your own credit score at websites like ours or with the credit bureau. This method of checking your credit score is completely safe and causes no harm to your credit score.
In fact, our experts advise that you check your scores as frequently as possible to ensure that you have a good credit score.
Banks take a risk in lending to their customers. When a loan is lent, the lender wants to be sure that the amount is paid back with interest promptly. Therefore, lenders would like to ensure that they are lending only to the creditworthy or those who will pay back the amount responsibly. For banks or any other financial institutions, the only way to determine the creditworthiness of an individual is through his/her credit score.
Therefore any application for any form of credit is not approved without carrying out a credit check from the credit bureaus. Currently, banks have also started pricing the loans depending upon the credit scores.
Can Equifax delete or change my credit information on its own?
No, Equifax or any credit bureau cannot delete or change any information on its own.
The generation of the credit data is done at the lender's end according to your credit actions. The same is reported to the credit bureau by the lenders. Your credit score is calculated based on the data shared by the lenders. So the credit bureaus have no role to play when it comes to data, it makes the calculations based on the information provided by the lenders.
In case of any errors in your credit information, you would need to raise a concern with the credit bureau who would then forward it to the lender for making necessarily corrections.Only when the corrected data is sent by the lender, will the Credit Bureau makes changes to your credit information.
Equifax is one of the credit bureaus operating in India based on the mandate of the RBI. The credit score assigned by Equifax is as valid as credit score assigned by any other credit bureaus like CIBIL ™, Experian and CRIF High Mark.
A good Equifax credit score increases your chances of getting a loan or credit card, while on the other hand, a bad score can negatively affect your prospects. To maintain a good credit score, always remain responsible towards your credit and be prompt in your payments.
It’s a common misconception that paid off or closed accounts should be removed from the Credit Report. It takes up to 8 to 10 years for your credit activities to be removed from your Credit Report. Moreover, having a good credit history is vital factor for having a good credit score.
If your credit card account that you have closed late payments, defaults or any other negative remarks, it takes up to 7 years to get it removed from the Credit Report. However, it won’t have much bearing on your credit score if your current credit accounts have 100% positive payment records.
Credit Scores are assigned in the range of 300-900. While many of you may be aware that higher numbers on the scale translate to good credit scores, the exact ranges of what constitutes a good or a bad score may not be clear.
Any score of 800 or above on the Equifax Credit Score is considered as excellent. The individuals in this range of scores would have shown extremely responsible behavior towards credit and will be in a good position to bargain on rates and terms for future credit.
The scores in the range of 700-800 is considered as good. These individuals might have had one odd instance of missed or delayed payment. They are also very likely to get good bargains on the interest rate but the terms may not be as favorable as the ones given to those with Excellent Credit Score.
You can contact Equifax Customer Care through phone or email. The email id on which you could write is ecisupport(at)equifax(dot)com. You could also call them on the toll-free number 1-800-209-3247.
You could also approach the Grievance Officer to register complaints, if any.
Borrowers who have availed the EMI Moratorium Surprised by Drop in Credit Scores10 Sep 2020
Several borrowers who availed the EMI moratorium offered as part of the Covid-19 relief package are in shock as their credit scores have dropped. It's standard practice for credit agencies to revise scores due to delay in EMI payments or defaults. Ho...
Several borrowers who availed the EMI moratorium offered as part of the Covid-19 relief package are in shock as their credit scores have dropped. It's standard practice for credit agencies to revise scores due to delay in EMI payments or defaults. However, with the RBI assuring that credit scores will not be impacted by the moratorium, this drop in scores comes as a huge shock for dozens of borrowers. If you're worried that your credit scores may be affected due to the moratorium, you can check your latest score for free on CreditMantri.
Credit scores are lower as the scoring process has changed5 Jun 2020
TransUnion CIBIL™, a credit information company, introduced a new scoring process for borrowers and card users. With digital transactions becoming a norm, there will be a heavy flow of information to enable these transactions. Credit score parameters...
TransUnion CIBIL™, a credit information company, introduced a new scoring process for borrowers and card users. With digital transactions becoming a norm, there will be a heavy flow of information to enable these transactions. Credit score parameters will keep evolving with access to new data and better technology. The new scoring mechanism uses more variables and most banks and NBFCs, around 4000 members, have moved to the new CIBIL™ score, called CreditVision score. As the growth of consumption has changed, the latest version of the score was launched to benefit lenders and customers. More people now have a lower credit score compared to January due to this change. Members have accordingly changed their lending policies to decide what should be the minimum score at which they will lend and the interest rates that will be charged.
Insurance companies now rely on Credit Score to sell life and health schemes15 Apr 2020
COVID 19 pandemic has made the Government to impose a nationwide lock down. The situation has reinforced the importance of getting a life and health insurance. Insurance companies are using alternative methods of underwriting to bring in more custome...
COVID 19 pandemic has made the Government to impose a nationwide lock down. The situation has reinforced the importance of getting a life and health insurance. Insurance companies are using alternative methods of underwriting to bring in more customers. Credit scores and health declaration of the applicants are mainly used as alternatives for the underwriting process. After the customer fills up the online application form, there will be a tele-underwriting process. Under this, a doctor from the insurance company will call up and enquire the health status of the applicant. Henceforth, applicants, who are below 60, need not undergo physical examination by visiting a hospital.
Mumbai based startup SalaryDost uses mobile data to assess credit score12 Mar 2020
SalaryDost, an emerging consumer lending platform based in Mumbai, uses smart phone’s opt-in metadata to assess credit score. Joining hands with CredoLab, a singapore based AI company, SalaryDost uses CredoSDK, a technology that seamlessly integrates...
SalaryDost, an emerging consumer lending platform based in Mumbai, uses smart phone’s opt-in metadata to assess credit score. Joining hands with CredoLab, a singapore based AI company, SalaryDost uses CredoSDK, a technology that seamlessly integrates into mobile application and crunches over 18 million smartphone’s opt-in metadata to find the most predictive behavioural pattern before converting them into credit scores. Deploying this method has successfully reduced non-performing loans by 15% and fraud rate by 20%. Using this scoring mechanism, lenders can get a better understanding of customers’ behaviour and take informed decisions.
Yes Bank customers are at risk of spoiling their credit score11 Mar 2020
Yes Bank customers are at risk of defaulting on payment obligations, given that they can only withdraw Rs. 50,000 of their savings until the moratorium is lifted. Customers of PMC bank saw their credit scores falling, as the lack of accessing funds d...
Yes Bank customers are at risk of defaulting on payment obligations, given that they can only withdraw Rs. 50,000 of their savings until the moratorium is lifted. Customers of PMC bank saw their credit scores falling, as the lack of accessing funds damaged their track records. SBI had stated that the bank will be revived within 30 days and this has given hope that the RBI-imposed moratorium would be lifted soon. If this doesn’t happen, depositors might default on their obligations. Credit card late payments can come with severe penalties, apart from bad credit scores. With every day that passes, the interest due can accumulate to astronomical sums.
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