How to Find Your CRIF Credit Score?

A credit report is a testimonial of how well (or unwell) you manage your money. These reports contain a history of balances, payments, accounts, inquiries and other pieces of personal information that are referred by lenders to decide whether to lend you money. Credit scores are calculated from the data contained in your credit report. In India, scores range between 300 and 900. The higher the number, the better the score.

There are four credit bureaus in India from where you can download your credit report and find out your credit score. By law, you are entitled to a free credit report from all the four credit information companies at least once a year. Alternatively, you can also check your credit score either free of cost from online websites which have tied up with one or more of these credit bureaus.

Let’s find out how you can get your CRIF score in the following 3 easy steps from CRIF High Mark’s website:

1. Fill in your Details, Identification Proofs, and Address: You will be asked to provide your email ID first; Post which you will be presented with a form requiring the rest of the details such as Full Name, Mobile Number, Date of Birth, Residence Address & Gender. You will also have to submit your identification details such as PAN number, Voter’s ID, Passport Number, Driving License, or any other ID.

2. Review your Report type:
Here you are presented with two options of downloading credit report; you can either BUY an instant credit report or you can opt for a FREE credit report. An instant credit report can be ready to download within 5 minutes but will cost you around Rs. 400 where as a FREE credit report can take up to 3 working days to get ready for your viewing.

3. Authenticate your inquiry: Once you fill in all the details and select your report type, you will be asked to answer a multiple-choice question to confirm your identity. You will get a set of three questions based on your past loans or credit cards. Upon a successful answer to one of these three questions, you will be presented with your report on your registered email ID.

How often should you check your credit score

You can check your credit score as often as you want to. The common misconception that checking frequently negatively impacts your score is just a myth. A Credit score can affect aspects of your financial life such as the ability to buy a home or car or even get a credit card. Here are a few more reasons you should know your credit score:

• Knowing your financial value: Credit score is an indicator of your financial health. By knowing your credit score, you know financial standing in the market. If you have a low score, you can take corrective measures to improve it. If you have a high score, you can take pride, rejoice and try to maintain it.

• Get better interest rates: A good credit score not just helps you secure a loan, but also reduces your interest rates. A bad score may render you unqualified for a loan or in the least give you a tough time.

• Get rewarded: If you have a credit score, you might well expect occasional rewards in the form of discounts, credit increment and other benefits owing to your clean conduct.

While being aware of your credit score and routinely checking one will keep you well informed and ahead of your counterparts, make sure you don’t make overdo it to the point that it starts causing anxiety!

The Importance of Credit Risk Management in Banking

Banking operations come with the factor of risk; it’s inevitable. In the simplest way possible, risk is an uncertainty of a situation or event that may happen in the future and for banks, it’s the uncertainty of an outcome of business investments. The various types of banking risks may be classified as Strategic risk, Compliance risk, Credit risk, Cyber Security risk, Liquidity risk, Market risk, Operational risk, etc. Out of these ‘Credit Risk’ represents the most important type of risk for commercial banks.

Credit risk is understood simply as the risk a bank takes while lending out money to borrowers. They might default and fail to repay the dues in time and these results in losses to the bank. Loan portfolio management is very important but most times a bank can’t fully assess if it will retrieve the money back because even if the borrowers have been paying their dues on time, the economy might show shift and change the way things have always been. So, what do banks do then? They need to manage their credit risks.

The goal of credit risk management in banks is to maintain credit risk exposure within proper and acceptable parameters. It is the practice of mitigating losses by understanding the adequacy of a bank’s capital and loan loss reserves at any given time. For this, banks not only need to manage the entire portfolio but also individual credits.

How do banks set up a Credit Risk Management system?

Even though every bank may have their own approach to establishing credit risk management models, there are a few basic steps that every Credit Risk Management includes-

• A complete understanding of a bank’s own capital reserve.
• Understanding a bank’s overall credit risk based on individual, customer and portfolio levels.
• Implementing an integrated and quantitative credit risk solution to make an appropriate credit risk environment.
• The business model in place should be such that is ever-evolving, able to achieve real-time scoring to limit monitoring, have data visualization capabilities and business intelligence tools to make it available any time.
• Establishing a sound credit-granting process or criteria that will clearly indicate the bank’s target market. This should include appropriate credit administration, measurement and monitoring process.

These are some principle ways to set up a Credit Risk Management system that will help in minimizing risk and maximizing reputation and productivity. Often, banks do prefer having a consulting agency to look after their Credit Risk Management since managing credit risk is a tricky task due to a lot of recommendations and predictions, thus there shouldn’t be any possibility of loopholes in the process.

What are the advantages and disadvantages of Credit Risk Management?

The advantages-
• It helps in predicting and/ or measuring the risk factor of any transaction.
• It helps in planning ahead with strategies to tackle a negative outcome.
• It helps in setting up credit models which can act as a valuable tool to determine the level of risk while lending.

The disadvantages-
• Prediction is not entirely scientific, so judgement made can go either way.
• Cost and control of operating a credit scoring system are questionable.
• While different models may work, there are no guarantees. For this reason, some banks prefer ‘one model

Finally, …
Whether you’re trying to manage risk at your own company or you’re just trying to manage your credit, the study of credit risk management provides a framework for understanding the true nature of credit risk present in your organization. While profitability is a consideration, credit risk management is about seeing beyond profitability, and more precisely to help the CEO and CFO to develop a quantifiable sixth sense about operational cash flow.

As An Immigrant, Here’s How You Can Build an International Credit Score in the US

If you are planning immigration to the US, credit score is probably one of the last things you would worry about. However, in the US, many of the essential expenses such as renting an apartment, buying a car, signing up for a cellphone plan or applying for a credit card, requires you to have a personal credit score.

Worrying whether it’s possible or not? The great news is that it is possible to establish credit in the U.S. It may take work but with right credit decisions, you can definitely sail your boat. This guide can help you get started with the steps you need take to build your credit in the United States:

Apply for a secured credit card:
The international banks are not likely to provide you any credit card directly, considering they cannot have a credit check on you without a credit history. The only option you have is to apply for a secured credit card (one that is backed up by funds) with a credit union or a local financial institute. If you manage to get yourself a credit card like a Macy’s or an American Express card, it can be used to purchase at the Macy’s retail stores or online, wherever the cards are accepted. Once in possession, try to make minor bills such as $30 to $50 with the card and repay back the full amount immediately. In this way, you will start creating a good credit history.

Subscribe for auto payments: Subscribing yourself for auto deductions ensures that your bill payments are done in a timely manner. The credit information companies in the US consider mobile and utility bill payments while building your credit report.

Use your spouse’s good history: If your spouse happens to be a US citizen with a good credit history, rejoice, for they have won half the game for you. You can apply for a joint account with them or become an authorized user on your spouse’s credit card. You can then buy a car or rent a house together!

Talk to the lender in person: It is always better to talk to the lender in person as then you can better explain your situation. This also helps establish your legitimacy with the lender and they can better analyze you.

Report your rents: Make sure you are paying your house rents electronically as you can now report the rent to the credit bureau. This is one good way to build your history.

Leverage your home bank relations: If you were a credit card owner with an international bank in India, you might be able to call the bank and get them to issue you a U.S. credit card based on your past relationship.

Do not share your SSN: The social security number in the US is like the Aadhar number in India. It is a unique number assigned to each individual and is connected with all your dealings. Your Social security number is required while buying something. Let’s say you share the number with someone who requires a telephone connection on that number. In the case that they were to default on paying their bills on time, it would reflect badly on your credit report and will hamper your credit score.

If you follow the above pointers, you will be smartly prepared for your stay in the US. But wait, there’s more! Always keep an eye on all accounts so you can identify and resolve problems quickly. Check your credit score regularly to track your progress. Pull your credit report at least once a year from any of the approved credit bureaus. It’s free and seeing what is being reported about you is illuminating. All the best!

What Are The Five Cs of Credit?

A bank or any other lender evaluates a potential borrower before granting a loan and handing out the money. This evaluation can be called credit risk assessment as the bank is trying to understand the risk of potential default by the borrower on this line of credit. The Five Cs of credit is a widely popular framework which considers five characteristics of the borrower to helps lenders gauge the creditworthiness of the borrowers.The 5 Cs of credit are Character, Collateral, Conditions Capacity, and Capital in no particular order. Let us understand what these 5 Cs stand for.

1. Character:
Sometimes also referred to as the credit history, a character is the first among the C’s (in our list). If you are one of those who thinks “what has good character got to do with a loan?” then oops! Your character is, in fact, one of the most apparent parameters by which lenders gauge your risk and trustworthiness. In financial terms, the character represents a borrower’s reputation for repaying debts. This information appears on the credit report generated by the credit information companies such as CRIF. Apart from credit score, the credit report also contains information about how much an applicant has borrowed in the past and whether they have repaid loans on time. Information from these reports helps lenders assess the borrower’s credit risk.

Beyond your credit, lenders may also take a literal approach to the word “character” and analyze your personal attributes. They may conduct an interview or require references. Be polite, prompt, and prepared when you approach a lender. That might just make the difference to your loan approval.

2. Capacity:
Every lender must make sure that it is lending money to someone who has the capacity (or simply income or wealth) to repay. It is a measure of the borrower’s ability to repay a loan by comparing income against recurring debts and assessing the borrower’s debt-to-income (DTI) ratio. The DTI is calculated by adding together a borrower’s total monthly debt payments and dividing that by the borrower’s gross monthly income. The lower an borrowers DTI, the better the chance of qualifying for a new loan. Every lender is different, but many lenders prefer an applicant’s DTI to be around 35% or less before approving an application for new financing.

3. Capital:
Lenders consider any capital put by the borrower in their investment, in other words, the own contribution or the down payment. A large contribution by the borrower minimizes the chance of default. Borrowers who can place a down payment on a home, for example, typically find it easier to receive a loan. Down payments indicate the borrower’s level of seriousness and whether the borrower’s goals are realistic and in congruence with the paying potential. Down payment amount can also affect the rates and terms of a borrower’s loan. Larger down payments may result in better interest rates and terms.

4. Collateral:
Collateral is any personal asset that the borrower pledges in order to support the loan. It acts as a lender’s back up in case you abscond or are genuinely unable to repay your loan. After all, it’s a business and none of the two parties would want to be at a loss. In the case of a loan default, the lender will have to liquidate your assets which have been put as security against the loan. The collateral can be your house property, land, equipment, inventory, real estate, accounts receivable, or any other item holding monetary value in the market. Banks measure collateral quantitatively by its value and qualitatively by its ease of liquidation. The simple formula is; Risky collateral = difficult to liquidate = more expensive loan. Most obvious examples of collateral include houses, cars, stocks, bonds, and cash, basically, all things that are readily convertible into cash to repay the loan.

5. Conditions
The conditions of the loan, such as its interest rate and amount of principal, influence the lender’s decision to finance the borrower. Conditions can refer to how a borrower plans to use the money. For instance, if a borrower applies for a car loan or a house loan the lender is more likely to approve the loan because the intent is specific and clear. Additionally, lenders may also consider factors such as the state of the economy, the trends in your business’s industry current environmental conditions, and even geographic or political events. The point is that, for conditions, lenders look for factors beyond your business alone that might affect whether you can make good on your debt.

Understanding what your lenders are looking for will help you prepare a better loan application. And, hopefully, this carefully-crafted application will help secure a better loan for your personal or business use. CRIF is a consumer credit bureau providing free credit report & credit score for both persons and businesses.