Why do people get free credit scores in developed economies?

The origin of credit scores dates back to the 1960s, prior to which when a lender extended a sum of money to a borrower, it was purely a judgment call. Since then however modern credit reporting has come a long way, with multiple credit bureaus operating both globally as well as in India. If you are even slightly curious about your credit score and what it entails, it is entirely possible that you would have availed of a score or credit report from one of the four credit bureaus (CIBIL, Equifax, Experian, CRIF High Mark) in India.

In developed economies such as the United States of America for instance, the scenario is different. With the levels of awareness regarding credit bureaus being high, the usage is also consequently high. The cost of reports being high initially, regulations that have been put into effect have made the availability of credit reports far easier and therefore free for most consumers. In India as of now, a mere 4 percent of the population is aware of credit reports, as per the findings of an exhaustive survey carried out by Credit Sudhaar, India’s premier credit health management company.

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In the United States, the Fair Credit Reporting Act (FCRA) is enacted to promote credit information coverage and dissemination, which includes consumer credit information. An amendment to the FCRA, the Fair and Accurate Credit Transactions Act (FACTA) allows consumers to avail of a free credit report from each of the credit bureaus every twelve months. Hence owing to federal law a consumer is entitled to a free report.

Free scores in developed economies encourage users to keep track of their credit history, which makes managing your credit health significantly easier. This is because the credit history gives the consumer insight into their transactions, both past and present. It can also help reduce the instances of identity theft, as the consumer can report suspicious transactions to the concerned bureau immediately. Typically, most consumers avail of a free report every three months, owing to which they can check their credit report for the entire year basis the availability of these free reports. Currently in India, there is no such regulation and hence bureaus charge a consumer for a credit report.

However, in order to increase awareness and usage, websites such as http://www.freescoreindia.com are making an endeavour to provide free scores, to encourage individuals to understand credit scores better in India.

 

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Self help on credit score improvement

Finding ways to scale up your credit score quickly? The first thing most loan seekers will do to get their applications approved is check their credit scores. A credit score is a definitive rating that every lender and creditor will assess before giving away money.

Here are 6 ways to improve credit score fast, all by your own understanding.

Self Help #1

Keep a close watch on credit card balances

If you have a smaller the percentage of your revolving credit, higher are the chances of improving credit score. You must plan to do a credit check every month to keep the balances at a minimum and pay down the balances before deadline set by the card provider.

Most issuers use the statement against your balance to report it to CIBIL. Checking CIBIL score online for free would reveal an astonishing fact- Irrespective of paying your credit card balances on time every month; you still could end up earning a whopping credit utilization rate.

Tip: Negotiate with the card issuer on terms that will allow you to make multiple payments in the same month.

Self Help #2

Avoid using multiple cards

One of the smartest ways to improve score fast is to eliminate ‘nugget’ balance against your credit card spending. Even a meagre balance across every credit card will reflect negatively in the credit check report.

First, never exceed the credit limit in any of the cards. Secondly, don’t use multiple credit cards to make a single payment. When you Check CIBIL score online for free, you can see how credit utilisation rate inflates with each use.

Tip: Avoid adulterating your credit report with too many sparse balances against multiple cards. Utilise the full credit limit in a card, and only then move to the secondary card.

Self Help # 3

Don’t remove old debts off your report

Most advisors recommend that you should not mention the events of previous debts in the report. As a self help, one of the generous ways to improve credit score fast is to leave the old debt records intact. If you have a respectable debt repayment record, the old debt will serve well in credit check made by lenders while your loan application awaits approval.

Tip:

Just because you paid old debt should not be the reason you remove it from CIBIL report. Check CIBIL score online for free and ensure your older debt records are intact and accurately mentioned.

Self Help # 4

Don’t risk your score before a loan application

One of the worst things to do while improving your score is to make a hasty payment out of frustration. If you are not in a position to make payments in full, talk to the agency to extend the time limit. Do a credit check just after missing the scheduled date of repayment. If your request was processed, you might actually save your score from falling in the coming months.

Tip:

Be on time when it comes to making payments. Use the calendar with reminders set for your payment schedules.

Self Help # 5

Report inaccuracies on your CIBIL Credit report

If you do a regular credit check online, you can easily find the negative information in the CIBIL report. Check CIBIL report online for free to investigate the number of enquiries made against your account and the reporting of bad debts. If you have been a clean borrower, this would help you improve credit score\. Though this is not one of the ways to improve credit score fast, it still saves you from shelling out money in finding legitimate help to safeguard your interests few months down the line.

Tip:

Gather proofs against the incorrect information against your account, and improve your CIBIL report. It can be raised with CIBIL’s dispute platform.

Whether you are an individual or a corporate organization, doing a self-assessment on credit score improvement will help you earn loans quickly and probably at a lower interest rate.

Why Does India need free CIBIL score

In a world that is moving quickly towards simplification and Digital, information is available online very easily. For someone who handles their own finances, it is highly unlikely to have never come across the terms- CIBIL and Credit score rating. There are so many myths and wrong information floating around the concept of CIBIL score calculation which allows financial lenders and credit card issuers to take undue advantage sometimes from their customers.shutterstock_225231568Yes, CIBIL does provide insights into credit history at a fee of INR 550. But one session is not enough to understand why you have been rendered ineligible for loans. Hiring a professional financial advisor to understand concepts on how to correct CIBIL score is again a costly affair, especially for those who are planning to make a purchase shortly.

Here are 7 reasons why India desperately needs a platform for free CIBIL score calculation and consultation very soon.

  1. To understand what CIBIL actually does

CIBIL expands to Credit Information Bureau (India) Limited. Founded in year 2000, it is a ISO 27001:2005 certified organization entrusted with collection and maintenance of personal payment records related to cards and loans. Each month, your bank and loan provider furnish a detailed sheet on your history to the bureau.

Based on the CIBIL score calculation, your eligibility for a loan is decided by the approval agencies.

  1. How others can see your credit history?

A loan debt still hovering around your neck, and you thought other banks won’t come to know! Most loan borrowers who have failed to repay the loan and interest find their applications rejected. Loans for bad score are seldom approved and only way to check your eligibility for a loan is through CIBIL.

Free credit report checking India will definitely serve both customers and bank well.

  1. To know how loans and credit card payments are interlinked

An enquiry in your report is the instance where a bank or a credit issuing company opens your score sheet. Higher the number of enquiries against your account, poorer will be your score. This means, reduced chances of loan approval!

How to correct score in such cases? Make your card payments on time, and avoid opening a new credit card account before applying for a new loan. Your loan eligibility is more strongly connected to your credit card utilization rate than you previously anticipated.

  1. To avoid rejections on loan for bad credit score

If your score is less than 600, most banks will reject your loan application. Some lenders however do accept loan applications, but at a higher interest rate. If consumers get free credit report checking India, there will be reduced cases of loan rejections in the country.

Once you have an idea on how to correct CIBIL score before a loan application, your eligibility automatically improves.

  1. To stay away from business frauds

Are you being approached by a corporate identity to back a loan application as a guarantor? More often than not, business frauds escape the attention of the guarantor due to unavailability of a free report checking India online. If there are no previously known cases of card applications and loan applications, the bank will see no credit history.

  1. To know different cases where your CIBIL score may take a hit

CIBIL does not have any repayment pattern for such borrowers, which means your risk as a guarantor magnifies manifold. Your own chances of taking a loan in the future go for a toss due to unhealthy repayment behaviour reflecting in your CIBIL report, even if you are just a debt guarantor.

In India, both banks and private lenders should be able to see the credit behaviour of a borrower through free cibil score calculation sheet.

There are other benefits too of gaining free access to CIBIL score calculations online like:

  • Whether an unpaid debt is still showing in your report despite being written off
  • Managing disputes with banks and card issuers through CIBIL
  • Understanding how your score actually decided your interest rate for loan, so that you can bargain for a relaxed rate
  • Why you should think twice before pre-closing your loan account
  • Understanding how mixing secured loans with unsecured loans can help you improve CIBIL score

As a fair indicator of your past credit payment behaviour, CIBIL score calculations available online will definitely save you time, money and effort instantly. With free CIBIL score online, doing business will become all the more easy and ethical.

How To Build An Excellent Credit Score Without Borrowing Money?

To enjoy easy credit tomorrow, it is a must that you have a good credit history and score today. But who says you need to borrow to build the score? It is a big myth. You need not fall into the debt trap for building a length of history. You can certainly build an excellent credit score without borrowing money. Here goes a simple 3 step process to build CIBIL score without a loan.

shutterstock_223493974Step 1:

First things first, understand how to check CIBIL Score. You need to fulfil following points:

  1. Pay all your dues on time. Being regular on your payments gives 35 % boost to the score.
  2. Keep your credit utilisation and loan to income ratio low. This adds up to 30 % to score.
  3. Have positive credit history. The age of your credit length also brings positive impact on score. It can help score up to 15 %.
  4. Have a right mix of secured and unsecured debts. It accounts for 10 % of your score.
  5. How frequently and recently you apply for loan also impacts your loan approval decision. This again holds 10 % weightage.

Once you achieve understanding on CIBIL Score calculation, your score tends to reach excellent levels.

 

Step 2:

Now as our goal is to avoid the debt trap, I will share a simple line of credit that will help you build credit history and that too, without borrowing! You can save borrowing decision for the rainy day!

 

If you guessed it, you guessed it right. It is your credit card.

 

Yup, you can use plastic money to your advantage and raise the score. To completely use the advantage, make sure you have a card that doesn’t charge you interest when you pay in full beforehand. Thus second step is to get a no interest credit card for building the score. You can compare credit cards offered by different banks online. As per your needs you can choose one.

 

Step 3:

We all have fixed monthly expenses such as mobile bill, TV connection bill, water bill, electricity bill and many more bills. All you have to do is pay one or more of these expenses through your credit cards month on month.

 

Say, you choose to pay your phone bill with a credit card. If you do so, every month you would build a balance on your credit card statement. By paying out the expenses in full by your card, you would technically repay the monthly outstanding credit on card. It is best to automate the process so that every month a timely transaction is fixed on your card.

 

This way you would build good history every month, without borrowing anything.

 

Next, note another point of advantage here. Say your credit card has limit of Rs 50,000. Your monthly telephone expense is Rs 1000. Now even if you set automatic payment method, every month you are using just Rs 1000 on the limit of Rs 50,000. This factors plays a very strong role in boosting your score.

 

The line of benefits do not end here. Not to forget the cash back and other add on benefits you get on credit cards. So you are not borrowing but getting paid to build your score!

 

Within a year or two, you would be able to reach excellent credit score just by being regular on your payments and not using much of the limit. However keep certain points in mind before you follow the above steps.

  1. Always be regular on your payment. Missing any payment would bring bad history, beware! The whole purpose of this exercise will fail if you miss the payment.
  2. Do not be co guarantor to a friend or relative. Remember you are saving your credit potential for future when you would apply for an auto loan, home loan or personal loan. If your co-applicant delays or defaults it would directly hurt your credit report. So do not take a chance by signing as a guarantor.
  3. As important is your credit score, as is your spouse’s score. It is always advisable to not reply on single member score in the family and ensure to build good score of your partner as well.
  4. Your score is not compulsively everything. Do not over burden yourself for 900 score target. If your score is above 750 it is considered as good score.

 

I hope now you would easily build an excellent score without borrowing money. All the best!