Why Do Banks Love To See The 750+ Mark On Your Credit Report?

When you apply for a loan of any kind, irrespective of your background or your ability to pay a lump-sum in your down payment, one important tool that helps the bank trust your ability and your intent to repay is a good credit score. Since the time credit bureaus have come into the picture, a credit report has become a financial bible for the banks.

A credit score is an aggregation of all your loans and credit cards. It reflects your creditworthiness and credit health. A score between 750 and 900 is the equivalent of an A/A+ on your school report card. It implies you’ve been very responsible with your credit, paying your EMIs and dues on time and in full each month. Even if you had a low score at one point, you’ve worked hard over time to reclaim a top spot on the credit score charts. In short, you’re very mindful and responsible when it comes to credit.

Your score also reveals that you’re a relatively safe bet when it comes to borrowing money from a lender or availing credit card facilities. According to credit bureaus, the lowest interest rates tend to go to borrowers with credit scores in the 750-900 range, which means your high score will also help you save money down the road. Besides these advantages, a 750 above score is also loved by banks. Below are the some of the reasons:

1. Judging your reliability becomes easier: The credit bureaus like CRIF are RBI regulated and for scoring an individual they employ sophisticated statistical analysis of your repayment performance on loans and credit cards listed in the credit report. A credit score takes into account many parameters, and helps bank predict future riskiness of a customer. The credit score thus becomes one of the major criteria for the bank.

2. Saves the bank a lot of time: The credit score is a sum of your loan repayment behavior so the bank saves a lot of time in analyzing how your credit behavior is or your ability to repay. The loan sanctioning process is simplified and is a lot faster. As a customer, you get your loan decisions fairly quickly.

3. Accuracy is on point: Initially, the traditional ways were adopted to verify an individual’s credibility which differed as the process depended on varied sources thus making the results volatile in nature. Since the time credit bureaus like CRIF have come into the financial world, the decisions have become more objective, data driven and also standardized. Therefore, the accuracy of the decisions have improved and also more dependable.

A good credit score is the magic wand that does the trick on banks when you apply for your loan to fulfil the most awaited dreams. The banks come across thousands of application for loans and the credit score helps them accept or reject applications in a more organized way and also quite quickly. A bad credit score can make you a risky bet while a strong credit score is encouraging to banks, ensuring you get the best deals out there, which saves you time, money and worry.

How Do Credit Bureaus Get My Information?

For this week, we get into the nitty gritties of understanding how a Credit Bureau works and why you should be trusting only RBI approved bureaus that play a crucial part in generating your credit score.

Credit Bureaus or Credit Information Companies (CICs) are RBI regulated institutions that help determine your creditworthiness. To be precise, Credit Bureaus are institutions that collect information about your loans and credit cards, and create credit reports that help in generating your credit score. To help put your mind at ease, let’s simplify the entire process of how credit bureaus work to make your credit report.

Credit Bureaus, what do they do?
Credit Bureaus are known as Credit Information Companies (CICs) in India. CICs are licensed by the central bank (RBI) since they are a fundamental part of the financial ecosystem. In India, there are four credit information companies – one such is CRIF High Mark. The role of a Credit Bureau is to gather loan account information from various creditors and provide it back in the form of credit report to similar creditors. The vision behind creating such centralized bureaus was to improve the functionality and stability of the Indian financial system by containing non-performing assets (NPAs) and improving credit grantors’ portfolio quality.

The credit bureau collect repayment information of all loans and credit cards of an individual or a business on a periodic basis from all type of lending institutions across India, so as to create an accurate representation of one’s credit history. The data CICs gather is merged across all loans that an individual or business across multiple lenders under one credit report and a credit score is then generated that reflects the data in that credit report. The more negative information you have on your report- like missed payments, debts, etc.- the lower will be your score. This score is then used for various purposes like granting a loan or credit card or make more loan offers.

Creditors, who are they?
Creditors are none other than all lending institutions in India such as Public Sector Banks (SBI, PNB etc), Private Banks (ICICI Bank, HDFC Bank etc), Foreign Banks (Citibank, HSBC etc), Co-operative Banks (Saraswat Bank, TJSB etc), Regional Banks, NBFCs (Bajaj Finance, Tata Capital, CapitalFirst etc), Housing Finance Companies (DHFL, HDFC Ltd) and MFIs (Satin, Arohan etc). RBI mandates all such lending institutions to share data of all the existing loans and credit cards of individuals and businesses with each credit bureau at least once every month. This data also includes personal information about the borrower, details of loan availed (type of loan, sanctioned amount, when was it taken, etc.) and the current position of the loan like its outstanding amount, overdue amount, when was the last payment done and many more details. The data is shared in a standardized format overseen by the RBI.

Credit Reports, what’s in it?
A credit report is an aggregation of all your credit history. It includes information about your credit accounts such as the type of account, the date it was opened, your credit limit or loan amount, your account balance, and payment history as well as any collections that are in your name. Your entire credit history is a record of your borrowing and repayment activity on credit and loan accounts.

Credit Reports, what role does it play?
A Credit report determines your credibility or creditworthiness, which means whether to give you loan or not- for mortgage or automobile or education or for just about anything; interest rates to be levied or credit limit to be allowed on a credit card sanctioned to you; and in cases, employers too can check as part of your application process for a job. In some countries, landlords check whether to rent out their property to you or not. So, theoretically speaking, credit report does affect your life in many ways and more importantly your decisions or desires in life to scale up and grow.

A Credit Bureau is thus a central information platform necessary to create a credit report that may reflect directly on your credit management. So, whether you are financially savvy or not, whether you are looking for loans or not, try keeping your score higher by maintaining good habits regarding your finances and keep checking your credit score at least twice a year from RBI approved credit bureaus, such as CRIF.

What Is In Your Business Credit Report?- An Infographic

Read on our infographic to get a better understanding of the Business Credit score, how it is used and what they may tell your lenders. If you’re a business owner, a good business credit score can help you secure competitive loans, get better interest rates and more – essentials for any business to be successful.

What’s In Your Credit Score?- An Infographic

Check out our infographic to know what affects your credit score and how your actions could improve or hurt your creditworthiness. While various credit scoring models may weigh each factor differently, we’ve listed out the most important ones for you.

Tips to Avoid splurging On Your Diwali Bonus Today For A Better Tomorrow

Besides lighting diyas, exchanging gifts with your family and friends and making a handful of joyous moments, Diwali also brings cheer in the form of bonuses from work. You often make a never-ending shopping list as you have that hefty Diwali bonus to bolster your spending intentions. While it’s okay to splurge a little from it, this money should be wisely used to help you reach your long-term financial objectives. We often forget that the habit of saving and investing smartly lead to wealth creation rather than indulging in extravagance. For those who lack a clear plan on what to do with the bonus money, here are some tips that will help you spend wisely and make the most of your Diwali Bonus:

Prepare a Diwali Shopping List
Diwali is a festival where people tend to overspend or do most of their major shopping because at this time of the year all the exorbitantly priced things are sold at discounted rates. However, before you spend your hard-earned money mindlessly, consider preparing a Diwali shopping list. Every item, that you’re likely to buy for Diwali should be included in your list. Once the list is ready, scrape out the things that you can skip buying and make do with your existing things. Identify the items that you really require in that month and eliminate the ones that seem unimportant. A well-prepared shopping list will help you save money from the bonus and prevent you from being an impulsive shopper.

Pay off high-interest debt
Double-digit interest on a loan can be harsh on your financial stability, especially if you have been trying to clear it for a long time. You should use your bonus at this time to repay any high-interest debts before shopping for frills. Financial experts say that an individual’s priority must be to do away with the debt that has an interest rate more significant than what you could earn on that money elsewhere. Paying off debt can ensure peace of mind and help you clear your finances for other expenses.

Create an emergency fund
It’s a good idea to have an emergency fund that can meet 3-6 months of living expenses. This can ensure a stress-free lifestyle if you were to face an unexpected and costly medical issue, or unable to work for any reason. An emergency fund offers much-needed liquidity in the event of an unanticipated expense. With an emergency fund at hand, you may not have to apply for a high-interest loan to handle a crisis.

Keep an Eye for Festive Loan Offers
On Diwali, people welcome wealth and prosperity into their homes. Therefore, buying gold and other expensive items such as a new house or a car during this festive season is considered to be auspicious. If you’re planning to buy a car or a house, this is the great season to do so as a lot of banks offer great deals on various types of loans such as car loans and home loans. Invest your bonus money in a planned way to get the most out of it.

Avoid hasty decisions that harm your Credit Score
Mindless decisions that affect your credit score and reports should be avoided instead you should always take decisions that will improve your credit score further. Random purchases or loans that are difficult to repay later would refrain you from achieving stability in your finances. Make sure you plan and chalk out the ‘can’ and ‘cannot’ to stay informed and aware.

Keep a check on your credit purchases.
When you purchase on credit it is essential to constantly calculate and set all due dates as a reminder. It is essential to keep your credit card purchases under control as exceeding limits could affect your credit score and credit report directly. Also, to maintain a healthy credit score one must repay the credit card dues on time because any delay would hamper it.

Diwali bonus and the festive discounts will make every deal look very alluring but refrain yourself from buying unnecessary things and pre-plan your expenses during the festivities. Be a smart consumer and get the maximum benefits from the dealers.

How To Maintain A Crackling Credit Score This Diwali

The festival of lights is almost here and preparations are on in full swing. It’s that time of the year when you are allowed, or in fact supported, by your loved ones, to spoil yourself with all good things from clothes, to jewelry, to sweets…just about everything. So while you are basking in the festive mood, we don’t want to dampen your spirit. But being the righteous financial advisers that we are, we would like to, well, advice you! Diwali is celebrated to commemorate the victory of Lord Rama over his Arch-nemesis, Ravana. Likewise, we humans, with our limited competencies, should strive to overcome our financial evils. So here’s a list of simple things that would not just help you have a sparkling Diwali, but will also earn you a bomb of a credit score (or at least save you from ruining an existing one).

1. Give your card a break: Even as Diwali approaches, a number of special offers and schemes start flashing the market. These fancy advertisements combined with the festive fervor, beguile people into spending frantically. At such times, it requires a lot of effort to keep your credit card swipes under control and not give in to consumerism. As a rule, shop what you need rather than what is on offer, and remember to restrict your spending to at the most 50% of your credit card limit.

2. Plan your shopping in advance: Don’t wait to buy new clothes till the Diwali Diya is in your face. Begin shopping much in advance. This way, you get a lot of time in your hands to surf your options. Also, during festivals, the flight tickets touch the sky and you end up spending thrice the amount unless you are heedful enough to book your holidays months in advance. Planning saves you from spending all money at once and spread your spends across a few months. Buy big ticket items such as TV, Fridge, Laptop etc on EMIs instead on credit cards to give you some breather.

3. Stop forgetting due dates: It’s easy to forget the due dates when you have so many other distractions during Diwali. Have a calendar handy and also keep your partner or close ones informed about the same. In this way, you will be reminded of your dues and would be automatically prompted to spend mindfully. If you forget your dues frequently, it will show up in your Credit Score.

4. Protect your family’s future: Just like you would want to protect your kids from the fire crackers, you need to protect your family from the financial demons too. It is important to plan in advance so that you secure their future even when you are not around. The idea is to have a right mix of investments such as in FDs, PPF, PF, Mutual funds, SIPs, Equity or a real estate. Consult the right advisers to obtain a personalized plan for you.

All the above pointers will ensure your family has a great Diwali while you have a crackling credit score! So here’s wishing you a very happy Diwali from CRIF India. Have a sparkling one!

Planning To Buy A Car This Festive Season? Here’s a Checklist Before Signing That Car Loan!

Festive seasons in India come along with a lot of offers and deal on cars, adding more festivity to the season. Be it Diwali or Durga Puja, there will be discounts and offers galore on varied products and it is in your best interest to avail them before it’s gone.

The car is one of the most thoughtful purchases that one has to do. It not only is confusing amidst an enormous number of options but is also a little nerve wrecking when a loan has to be taken for the same. If you are planning to buy a car that you have wished for then we have a list of things that should be on your checklist before you hop on to a decision or before you apply for a car loan, making things uncomplicated.

Did you decide what car you would go for? The first thing is to plan what car you really want to buy and is also a practical option for you and your family. It is wise to decide a car that fits the needs and does not compromise with your dreams too. As a novice driver, you must not invest in a high-end car or for that matter a new one. Choose the car that matches the purpose.These are few parameters that will definitely help you decide the right car model that will suit your needs:

  • Firstly according to your needs to choose a car category, from a hatchback to a sedan to MUV to SUV, there are many options in the market.
  • Fuel-type – To choose which type of fuel the car will be consuming is important as eventually it will become a major part of your monthly expenses. Petrol, diesel or CNG, choose whichever suits your budget.
  • Thirdly, choose between manual and automatic cars according to your comfort.

Have you checked your credit score?
Credit score and history should first be in place before you start planning to apply for your car loan. The foremost step is to visit an RBI-approved credit bureau website like CRIF and check your credit-worthiness. A higher score means a better chance of loan approval and lower will be the interest rates. One will have a greater probability of approval of the loan if he/she has a score above 700.

Have you made a checklist of the documents?
The lenders often check your credibility and a list of documents before granting the loan. The list includes proof of identity, (such as PAN, Driving License Number, Aadhaar etc) your income proof (salary slips for last 3 months, Form 16 for last 2-3 years etc), credit and bank history (bank statements for past 6 months), proof of residence (electricity bill, driving license).

How much down payment can you afford? Now a day’s car dealers tie up with various banks and lenders, bringing in the possibility of 100% finance. Though it may sound very enticing once you start evaluating the options you will know that more the loan, higher the EMI. Make sure you have most of the amount ready as the down payment which eventually helps in the lower loan amount, thus a lower EMI.

What is the tenure of the loan? The repayment through EMI depends on the tenure of the loan. It is feasible to take a longer tenure loan (say for 5 years or more) if your income is on the lower side as it reduces the portion of the EMI as the loan amount is spread over a longer time and a shorter one (3-5 years) if you can afford it.

What are the loan rates? Car loan interest rates start at 8.7% per annum, depending on your car model, repayment capacity, employer, etc. At first check with your bank if they have any offers or any deal that gives lower interest rates. Secondly, visit all the online lending marketplaces and compare carefully all the deals to get the best one. Make sure a detailed inquiry is done by you before you finalise on a deal.

What kind of credit behaviour do you have? Do not make multiple inquiries in the same bank as it indicates that you have credit hungry behavior which eventually does affect your credibility and credit score. When you ask for a loan from a bank and get rejected for the same then you should not go back to the same lender again without fixing the glitches in your application profile.

Have you read the fine print? Lenders charge this fee to cover the cost incurred while evaluating your loan application. This is usually a non-refundable fee. In festive seasons and other offers, many lenders waive off their processing fees to attract business. Ensure that such lenders are not charging a higher interest rate or other charges to offset their loss from the reduction of processing fee.

Finally, did you take the test drive? When you choose to buy a new car or an old one never skip the luxury of getting a free test drive. It will help you take a decision which is often one of the biggest dreams that one fulfills with their hard earned money.

Your dream car is an emotional & financial investment and you would not want to take a hasty decision about it. Hoping that buying your new ride is easy now with all the information assimilated in this article. Out of all the steps, make sure to first check your credit score with CRIF before you apply for your car loan.

Checking My Credit Report Affects My Credit Score? Or Not?

We know how important a credit score is in our everyday lives especially in our ability to take loans. Did you know it is equally important to check your credit score at regular intervals? There are a number of reasons to do so – some of them are to keep a track on your credit standing and take necessary steps to improve or maintain the credit reports and credit score. While we all know that checking your credit score is important, one thing that bothers a lot of consumers is if checking their own credit report will hurt their credit scores. We are breaking down the entire process to give you a crystal-clear view.

What does ‘credit report check’ or credit score check mean?
A credit report check, also known as an inquiry for credit score is either done by you or by the potential lenders of loan or credit cards such as banks, NBFCs and other financial institutions. A bank checks your credit score usually when you apply for a loan or a credit card to know the creditworthiness of the applicant. Further, a bank can also check your credit history and credit score while you are a loan or card customer of the bank to monitor its portfolio of customers.

Credit Report Check shows or not Hard Inquiry Vs Soft Inquiry
A credit report check or a credit inquiry can be classified into a hard inquiry or soft inquiry. Hard inquiries occur when you apply or request for a new credit card or a new loan or a line of credit like increasing the credit limit on a card. Such inquiries leave a footprint on your credit history and show up on your credit reports. Too many hard inquiries over a short duration have a negative impact on your credit score, especially if the credit keeps getting denied.

Hence, it is advisable to limit your applications for credit card or loan. Make sure you’re only applying for credit only when it really is necessary. Select a credit card and a bank after doing research rather than blindly applying for credit with many banks. Want to know about the ways that can positively impact your Credit Score? Read our blog, “4 ways to Build a Great Credit Score.”

On the other hand, soft inquiries occur when an individual checks his own credit report and credit score. These are the type of inquiries that do not show on the reports, no matter how many times you check your credit report. Even if these appear on your credit report, these will never affect your credit score despite you checking five times in a single day.

When you are pre-approved for a special credit card offer or personal loan, it is very likely that the Bank would have carried out a soft inquiry on its existing customer base, such as you. Banks periodically review its existing pool of customers for assessing risk of its loan portfolios and finding out good customers whom to make pre-approved loan offers. Since these are soft inquiries, you do not need to worry on any negative effect of these checks on your credit score.

If you want to still keep a record of the inquiries just to stay more informed about them, CRIF can help you with the annual credit report with details of hard inquiries in your credit report.

Keep a check, always.
Consider your credit scores as a pie that represents your financial being. Your pie is divided into slices, each of which constitutes of different factors. One large slice is your timely payments, another is your length of credit history and yet another is total credit used. And then there is a tiny slice which represents your hard inquiries. It is essential to control your hunger and not to bite this slice. This diet won’t help you to lose weight but can definitely help you gain some points on credit score. It is essential to keep your credit on a check as it gives you an accurate position of your credit standing.

To ease out the hassle of keeping a check on your credit score, you can contact CRIF. It is an RBI-approved credit information bureau that gives trusted and accurate results of the credit score.

7 Surefire Ways To Improve Your credit Score

Your financial health is as important as your physical health. Certainly then, your credit score is a vital indicator of the former. Whether it’s the new apartment you are eyeing or a business that you are planning to set up or simply the medical expenses of your loved ones, a loan could be required anytime. As such, the first thing a bank looks for, before lending money, is whether you qualify with the required credit score for a personal loan or a car loan or a consumer loan. This is to ascertain your risk value to the bank. Following are just some of the key ways to ensure you keep your credit score, well above average.

1. Pay your dues on time: This is the single most important factor which influences your credit score. Clear your outstanding dues on time. When you spend from your credit card, make sure you don’t just pay the minimum amount required to continue the usage but pay in full or the maximum amount which you can afford for that particular month.

2. Cut your Credit Cards: Although there is no restriction on the number of cards one can use, it is better to have only as much as you can pay for. For instance, if you have multiple credit cards, then your total credit increases, but then you may also have to pay a minimum amount to maintain the cards. And It’s easy to lose track of the payment dues especially if they fall on different dates and have a variable amount. A series of defaults is good enough to pull your score down. A better way to increase your credit limit and decrease spend ratio is to have no more than 3 credit cards at a time. If you have only one, and you are paying the dues on time, then nothing like it. One more benefit of minimizing your credit cards is cutting down the probability of identity fraud, by restricting the loopholes leading to your account.

3. Use your Credit Card responsibly: Most of the time, rampant usage of Credit cards is accountable for a low Credit score. It is a good practice to use your Credit card with the thumb rule that you restrict your spending upto 30-35% of your credit limit. If you frequently need more money than that, then you may opt for another Credit card. Think of your Credit Card as a necessity, not as a luxury.

4. Old is gold: A good history of timely payment exhibits responsible behavior. Do not hasten to erase your records from the accounts once you have paid your dues in full, because a trail of paying EMIs on time is actually a score booster. Also, in case of credit cards, if you are planning to discontinue the excess ones, make sure that you retain the older ones and eliminate the newer ones. A credit card with a long history of timely payments indicates a good track record.

5. Limit your loan applications:It could happen that you apply for a loan at a bank, but it gets rejected owing to a low credit score. In such case, do not hasten to re-apply with another bank as they would be able to see your rejection by the previous bank. This could further hurt your credit score & make things worse. In case of Credit cards, applying for multiple cards at a time indicates a credit hungry behavior.

6. Be cautious with inquiries: Whenever you want to buy a new car or a new house, you would want to opt for a loan. And it’s a common practice to enquire with various banks to compare and contrast the interest rates before you crack the perfect deal. However, banks check your credit score everytime you enquire. Such an enquiry is termed as hard enquiry. A number of consecutive hard inquiries is enough to hurt your credit score. In fact, as an immediate consequence, it may even affect the amount of loan that you are entitled to.

7. Keep a track of your Score: Checking your credit score regularly is a good and harmless practice. It helps you keep a check on your financial health and accordingly devise adequate measures to rectify it. You can check your Credit score for FREE and obtain a detailed report by availing CRIF services. You’ll be required to input some basic information and answer a few questions to get to the report. There’s no limit to the number of times you can check as this is a soft enquiry and does not affect your Credit score.

5 Financial Lessons To Learn From Ramayana, This Dussehra!

The festival of Dussehra epitomizes the victory of good over evil. The mythological stories associated with Dussehra teach us to curb our greed and ward off bad intentions that may harm us in the long run. We often draw inferences to conduct our life’s daily routines from our ancient epic saga’s. As you gear up for Dussehra puja this year, we have a suggestion for you! How about taking a new and fresh perspective at your finances in a whole new way? Here we are chalking out a few financial planning lessons that can be acquired from the Ramayana and imbibed for leading a healthy financial life.

1. Destroy the financial evils on your wealth creation journey:

During the Lanka war, Lord Rama along with his army fought with bravery against various hardships to attain victory. Viewing the festival from a finance and investment perspective; the festival imparts a vital lesson of ridding away from all the demons that pose as an obstacle to financial planning and wealth creation journey. Surmounting credit card debts, binge-spending, timing the market, booking losses amongst many other hurdles are the real enemies on our wealth creation journey

2. Lead a disciplined life:
Lord Rama practiced “dharma” meaning one has to be upright, responsible and disciplined in life. The same theory of righteousness can be applied to our finances as well. We must save wisely, spend cautiously and invest smartly to lead a disciplined financial life. It is essential to inculcate good habits like following a financial plan, repayment of EMI’s and bills on time, and many such actions that affect the overall financial health in a crucial way.

3. Protect your hard earned money:
Dussehra teaches us to draw our own “Lakshman Rekha” in order to safeguard our finances. Protecting your money means shunning all the evils that negatively impact your financial well-being. You can always protect your finances by choosing to invest in the right places to save on tax or insure for right cover to protect your family like Lakshman Rekha was there to protect Sita. While you do that, keep a tab of credit scores too as they can paint your financial picture either green or red! CRIF allows you to check your credit score free once a year and what better occasion than Dussehra to do it. Check your FREE credit score now.

4. A life of patience and persistence:
Lord Rama along with Lakshmana and Sita were exiled to the woods for 14 years; he accepted his fate and maintained composure. When the Lanka war broke out; Lord Rama fought with patience and perseverance without giving up or using short-cuts These two incidents in the Ramayana signify the importance of being patient and perseverant in the hardest of times. Irrespective of the ups and lows in the market, as an investor you should be patient enough to let thing start working according to your financial goals.

5. Clean your slate and start fresh:
The Lanka war of 14 days marked the defeat of evil and paved way to newer paths. Undo your bad decisions that you’ve taken in the past related to your finances by making some relevant and good decisions to streamline your financial picture for better money management. The first action you should be taking is improving your credit score as that itself can influence a lot of your decisions. Remember to check your credit score with CRIF, one of the most trusted credit bureau that enables you to keep your financial records straight.

A country, where people know how to spend, will be a country where people will eventually learn to invest intelligently. We are gradually migrating towards financial maturity rather than merely a nation of tight-fisted spenders and savers.