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 reports 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.

How To Review Your FREE Credit Score Report? – An Infographic

Credit reports provides information about your credit activity, payment history and the status of your credit accounts based on reporting from creditors and other sources. These reports are crucial because credit card issuers and lenders check them to help determine things like whether you’re a credit risk, what interest rate they’ll offer you, and the amount of your credit limit. With so much information, where do you even start when it comes to reviewing your credit reports? Let’s take a look.

Personal Credit Score

Do’s and Don’t To Improve Your Credit Score – An Infographic

Credit score, a three-digit number that evaluates an individual’s creditworthiness, is an important aspect of financial profile. It is used to determine some of the most important financial factors in life, such as whether you’ll be able to finance a vehicle, qualify for a home loan or even get a credit card. A good credit score ensures easier approvals on loan, better interest rates, bigger credit limits in credit cards and many more such advantages that will not only give you an enhanced financial life but also a better lifestyle.

A good credit score ranges from 700 to 900 when you have streamlined finance with timely payments and repayments and any score below 500 is considered as a bad credit score which usually is an outcome of undisciplined financial behaviour. Following are just some of the key ways to ensure you keep your credit score, well above average

Do's and Dont's Infographic

5 Top Myths About Credit Scores – An Infographic

Today’s goal: To debunk credit myths with credit facts – especially when it comes to your credit Scores. When you hear or read something about credit or finance, how do you know it’s true? How can you be sure it’s not a credit myth – something someone is merely passing along without checking its accuracy? Today we’ll try to reduce the amount of research you may otherwise have to do by pointing out some common credit myths . These are some common statements you might have thought were facts, until today. Let’s start with…

Myths and Facts About Credit Score

Business Credit Score vs. Personal Credit Score

Personal Credit Score vs Business Credit Score, What’s the Difference?
Personal credit score and Business credit score are two different types of scores that show the financial ability. A personal credit score is the depiction of an individual’s credibility while a Business Credit Score is the representation of the business’s credibility. The scores are usually not linked with each other unless the business is a small sized business where the owner’s personal credit score influences too. Let us break down both the scores for you to understand it better.

What is Personal Credit Score?
Personal Credit Score is a three digit number ranging from 300 to 900 representing your financial ability and credibility. A credit score is primarily based on the credit report information that is sourced from RBI regulated credit bureaus like CRIF. The perfect credit score to get a better credit is 750 and above. Higher the score, higher is the credit limit for your credit card, lower are the interest rates and faster is the process of getting the loan as a good credit score is ideally the best way to know one’s financial habits. A score of 650 or lower will hamper your chances to get a credit from trusted financial institutes. Simplest ways to maintain and have a good credit score is to keep a check on your credit report, paying bills on time and being financially consistent and stable.

Who and What Determines Your Personal Credit Score?
Credit Bureaus like CRIF assign your creditworthiness a score, using variations of the CRIF Score algorithm.
Personal credit score is made of five key components:
● Payment history (35%)
● Amounts owed (30%)
● Length of credit history (15%)
● Credit mix (10%)
● New credit (10%)

Tips to Boost Your Personal Credit Score
● Since paying your lenders on time represents 35% of your credit score, sign up for automatic payments for all of your credit accounts.
● Adjust your due dates according to you by requesting the banks or lenders. You don’t have to settle for a due date that is poorly timed with your paycheck.
● Aim for a credit utilization ratio of 30%. Whenever it is possible, pay off your credit cards in full month after month. A credit utilization ratio of under 30% across all cards is a sign for lenders that you’re managing your credit responsibly.
● Handle new credit carefully as opening too many new credit accounts will depict a behaviour that shows instability and every time you open a new credit account your credit score takes a small hit.
● By closing your oldest account, you may dramatically reduce your length of credit history and negatively affect personal credit score.
● Every year you can check your credit score online with RBI regulated and trusted credit bureau like CRIF for free. Keeping a check on the credit score is a habit that you should instil to be aware when the score falls or when it should

Why does an Individual need a credit score?
To have a credit score is mandatory for an individual to make sure that his credibility is not questioned when he seeks credit from the financial institutions. Having a good credit score means escalated loan process, better interest rates, bigger credit limit and faster approvals on loan requests.

What is Business Credit Score?
A Business credit score is a numeric representation of your company’s creditworthiness. It ranges from 300 to 900 in India. The information on your business credit report is used to produce the score, and business lenders use it when they are considering your credit application to predict the financial stability and credit behaviour. A higher score means your business has a history of paying bills on time.

Who and What Determines Your Business Credit Score?
Credit Bureaus like CRIF take into consideration various factors while calculating and determining the credit score for your business. Key Components of the Business Credit Score are:
● The number of years in Business.
● Lines of Credit applied for past 9 months.
● New Lines of Credit opened
● Collections and Liens past 7 years
● On time payment history.

Tips to Boost Your Business Score:
● Check your credit report at all times to keep track of what has a negative and what has a positive effect on your credit score.
● Pay your bills on time to show stable credit behaviour.
● Decrease your credit utilization ratio for reflecting a good credit behaviour of the company.
● Make sure when you pay off the debts the negative account is deleted.
● Add positive payment experiences in the payment history of the business.
● If you have a small sized business then keep your personal credit score on a check too.

Why does your Business need Credit Score?
A business credit score helps in separating business from personal finances. During the application process, your underwriter will take a look at additional documentation, such as bank statements or business credit reports. Keeping your finances separate is important for two key reasons, tax deductions and preventing a creditor from having a stake in your personal assets to satisfy a debt.

What To Do When Interest Rate Goes Up?

As interest rates continue to rise, especially in the past few quarters, opting for a loan has become more and more difficult. According to financial services industry trends, the interest rate is only expected to rise further. In such times, the borrower needs to tighten their wallets and find out ways to reduce the impact. There are ways in which you can save a significant amount of money if only you be a little bit more vigil, well informed and proactive.

What can you do for Home loans?
There could be tough times ahead for home buyers since that is usually the largest loan one has. Many banks today are charging from 8.5% to 10% which is a far cry from a few years back when interest rates were as low as 6%. With such rates, your monthly EMIs won’t be affected but your total payable interest will certainly go up and the tenure of your loan. Following are just some of the key ways in which you can tackle this situation and save more than a few bucks!

1. Increase your EMI instead of tenure
Most of the lenders will extend the loan tenure instead of increasing the EMI itself. A smart borrower should increase the EMI and look out for a tenure deduction to save from paying more than what they had planned for.
For instance, let us take a look at the example below to have a more clear understanding

As you can see, when there is a hike in interest rate and the tenure increases, you end up paying ₹84,978/- more than your actual payable. However, if you only increase the EMI amount by a meagre ₹120/- you must pay only ₹21,294, which is much lesser than the amount you had to pay in case your tenure was increased. This is just an example and you can save depending on your requirement.

2. Pay off a goodly chunk
If you are able to, pay off the loan as much as possible to reduce your tenure. In this way, you will be saving a lot of excess money which would’ve been spent and will also relieve the mental burden. In the above example, you can pre-pay Rs 15000 and keep the EMI and tenure same, neutralizing the impact of interest rate hike. You may know that pre-payment on home loans do not elicit any charges.

3. Review how your interest rate is pegged
Over the years, RBI has issued guidelines to banks and housing finance companies to keep changing the pegging for home loan interest rates. You would have heard terms like PLR, Bank Rate and MCLR. MCLR is the latest reference for lending rate by banks, and it allows better benefits for consumers. Do ensure your home loan interest rate is now pegged to MCLR and not to Bank rate, if you have taken loan from a bank.

4. Switch your lender
As a final option you can also consider switching your lender. While changing lender could result in saving on total payable interest, you should also take into consideration other expenses such as processing charges and documentation fees. If you are saving more in Interest after the payment of a few thousands as processing fees, then that would be a good deal. However, if you are closer to the completion of your loan, it would not make much sense to peep into other schemes. While you’re at it, make sure that your credit score is not hampered or affected due to multiple inquiries.

Ways To Maintain Your Credit Score – An Infographic

If you need to maintain your credit score, it won’t happen overnight.Credit scores take into account years of past behavior you can find on your credit report, and not just your present actions. But there are some steps you can take now to start on the path to better credit, read our infographic to know more..

Benefits Of Having a Good Business Credit Score – An Infographic

Good credit is the lifeline of your business. Sure, it’s a must for obtaining funding for launching or expanding your business. But that’s only the beginning. Here are just a few of the many benefits of good business credit score.

 

Planning to buy that fridge, TV or mobile phone on EMI? 3 Tips to consider for Christmas shopping!

We are in the midst of the festive season and discounts are flashing everywhere you turn your face. As such, you would be tempted to buy that TV or fridge or phone you were ardently longing for, but couldn’t lay your hands on them considering the enormous price. “Not anymore!” — proclaims one of the advertises on a famous online e-commerce website. These concerns no longer exist because of the advent of EMI facilities on expensive online products.

EMI or Easy Monthly Installment actually feels like it was invented keeping the Indian customers in mind. With festivals dotting the Indian calendar all around the year, and a prosperous population a.k.a. ‘Market’ to consume anything and everything the world has to offer, it just makes sense to make buying easier for buyers. This is especially true when you know they will be buying more this way. However, as a customer, you should always be cautious and clever when practicing this seemingly powerful facility to buy things beyond your capacity. Credit cards and EMIs while feasible could prove to be a big headache if dealt with clumsily. Here are a few tips you should remember whenever you plan to buy online, especially electronics on EMI:

Tip 1: Choose The Right EMI Option
When you are looking to buy a phone online on EMI with your Credit card, you have to be mindful of certain payments. While there is a good 12% to 18% interest rate on the EMI, some brands and banks even offer a 0% interest rate. Banks try to mitigate their losses by performing credit risk assessment before allocating you a loan. Most banks such as HDFC, SBI, ICICI etc. offer you with EMIs ranging from a period of 3 to 36 months.

Take the example of an iPhone X which is available at a discounted price of Rs. 79,999/- on Flipkart and which can be purchased using the EMI facility. Here, ICICI bank is offering multiple standard plans from 3 EMIs at 13% PA i.e. 27,247 p.m. to 36 EMIs at 14% PA i.e. 2,735 p.m. Also, you need to do the down payment along with a one-time processing fee (generally 0.5 to 1% of the total amount) and then pay the remaining amount in installments. Which means for an EMI of 3 Months, you will be paying a total of Rs. 81,741 i.e. Rs. 1,742/- extra while for an EMI of 36 months, you’ll end up paying Rs. 98,460/-, which is a whopping Rs. 18,461/- extra. This is an amount in which you can easily buy another decent smartphone.

If you are genuinely looking to buy something without the hassle of interest filled payments , then the best option is to look out for a‘0% interest EMI’ or ‘No cost EMI’. There are only a few banks which provide you with this option compared to the standard EMIs. Hence, you need to ensure your bank provides you with this facility so that you can avail its benefits. There is a certain one-time charge that they accrue though. But it is still a feasible option than standard EMI.

Let not the lure of paying less amount each month fool you into paying much more than the actual price. It is advisable to choose a moderate tenure of EMI where you can pay the monthly dues without much sweat while keeping the interest rates under control.

Tip 2: Buy Only The Essentials
Most e-commerce websites entice you with the option to buy expensive products online using Easy EMI options. The algorithm of the online websites is such that you will be searching for a TV, and a suggestion for a home theater will be displayed on the page end. You would be looking for a mobile phone, and a suggestion for covers and screen guard will pop up. All these fascinating offers are only good to bewitch you and make you spend more than you had initially planned. Whenever spending, you need to analyze and decide whether the amount you are willing to pay is congruent with your current financial situation and needs. Always remember that whether it be a TV or a fridge or a phone, it is just a product and not an asset. Hence, the value will only keep depreciating over its limited lifetime.

Tip 3: Pay Your Dues On Time
An EMI paid from a credit card is deducted wholly at one go. That means If you want to buy a TV worth 50,000, your credit limit should be at least 50,000 or more to deem you eligible. When you purchase anything on EMI, the whole amount is deducted from your credit amount and you are required to repay this amount in EMIs to your credit provider. Pay your dues on time and avoid defaulting. In this way, your credit score will also be maintained.

Hence, if you are planning to buy a TV, fridge or mobile phone this Christmas, always go for an EMI option which does not stretch your finances beyond limits. Keep your heads on your shoulders and do not get carried away in the festive fervor. We at CRIF hope you enjoy Christmas and keep your spirits & credit score high!