Credit Monitoring and Age: Are They Related?

With a significant rise in the cases relating to data breaches, data theft and identity theft there is a pressing need to take precaution and protect one’s credit record from such malignant activities. Credit monitoring is a defensive mechanism that aims to prevent, detect and resolve such kind of credit frauds.

Credit Monitoring essentially implies keeping track of an individual’s credit history and identifying any suspicious changes or activities. There are many companies that offer credit monitoring services and also provide you with a free credit score and report.

They notify the person whenever there is any new information in any of the credit reports like a credit inquiry, addition of a new loan account or delinquency. Such alerts enable the person to verify whether the changes made are genuine and accurate or not. If such developments are not initiated or authorized by the person then he can take necessary action right away to sort the issue before it becomes out of control. It reduces the chances of identity theft or any other kind of fraudulent activity.  It is an easy way of keeping a check on one’s credit health and score. These services also help in resolving and mitigating the damage if your account is breached. They also come handy if one is trying to improve credit score. Many credit monitoring companies offer an additional service of providing loans for low CIBIL score. Investing in such services is surely worth it as protection from fraud gives one peace of mind.

But should you think of signing up for such services at a particular age. Well ask yourself; at what age do you think you will be vulnerable to become a target of identity theft. It could in fact be at any age. Young and old, both are equally susceptible to become victims of identity theft. Thieves do not have any age preference. They are only concerned with making profit by using someone else’s personal information. Hence monitoring credit is extremely important irrespective of one’s age. It will alert you if there are any signs of your personal information being compromised.

Let’s see how credit monitoring helps in the young age when you start building your credit. Credit reporting errors like incorrect spelling of name, address, incorrect payment transactions are very common. These errors can do a big damage to your credit score. It is necessary that you get these errors corrected. But without proper monitoring, you will not even know that such errors exist.

Credit monitoring services also help in credit repair. They grade you on each of the factors that determine your credit rating. This helps you to identify your weak areas so that you can work upon them and improve your credit score. They guide you about what financial approach you should take so as to improve your rating. They also provide you with free credit score , so that you can track your progress on a regular basis. So if you wish to take a loan in the near future you should definitely think about approaching a credit monitoring firm, whatever be your age.

In old age financial aspects start taking a backseat, and people become less worried about their credit standing. But beware, the older generation is an easy target for the identity thieves. With high savings, big assets and excellent credit scores the senior adults become the perfect targets for criminals. So they too need a protection from such crimes. Lackadaisical attitude can destroy their impeccable credit history that took years to build. If a thief opens a fake credit card account in their name and starts charging purchases to the card without making the payments their score will plummet. Without proper monitoring, they may not even notice such activities for many months or years. With credit monitoring one can be alerted each time a new account is opened in one’s name. This way one can sort out things before they go out of hand.

Maintaining a good credit standing will give you better access to loans in times of need. You can obtain the best credit card reward offers and interest rates. Hiring a credit monitoring company can also save you from becoming a victim of identity theft. Hence monitor your credit reports and scores on a consistent basis whatever be your age.

Importance of good credit score for Home loan

Buying a dream home is a dream every man cherishes till it becomes a reality. However the escalating cost of property calls for huge financial planning and investment. Most of us indeed opt for a fund lender in order to materialize this dream. Herein your credit score plays a pivotal role.

Your credit score is the score of your financial worth. In order to seek a hassle free home loan in India you need to have a good credit score by Credit Information Bureau of India Limited (CIBIL). Besides, other factors such as your age, salary and job also play a key role in the backfield. You would be required to submit documents for each of these factors to become authorized for raising the loan.

Role of CIBIL score in home loan approval:
Your CIBIL rating helps lender to evaluate your credit worthiness and repayment ability before approving a Home Loan. That’s why a good CIBIL score is a must to get a loan approved.

The CIBIL score is the summation of the credit history of a person. Factors such as your earlier loan payment history, outstanding loan amounts, credit enquired, payment history of credit card bills and more build your credit history. When you apply for a loan the first thing that the bank will check is your cibil rating.

The lender always want to cover the risk they are taking by lending you loan. So by checking your CIBIL score they assess your repayment track record. The low score reflects bad financial decisions including excess use of credit limit, non-repayment or late payment of loans and more. Thus with low score, there is a high possibility of rejection of your loan application. Similarly with a good score your loan application becomes attractive and lender shows confidence in your application by offering loan.

What does a good CIBIL score actually signify? 

A good CIBIL score to be eligible for a home loan is 700 and above. The nearer you are towards 900 the higher is the chance of getting the approval. Furthermore, an upper credit score means that you can bargain for attractive offers like lower interest rates, higher loan amount, simpler documentation, discount in related fees and longer repayment periods. The lender might approve up to 80% of the total cost of the property.

If you have a low CIBIL Score are you still eligible for a home loan?

While it is not easy to get home loans for bad credit score, you can still take some steps to roll the dice in your favour. You can either use professional help or credit improvement counseling or take some steps to improve your score.

  1. The first step should be to pull out your free credit report from CIBIL.
  2. Next mark all the weak points that have hurt your CIBIL score. You can take small steps to boost your score. The better the score the better rate you can expect.
  3. Now you can list all small, high cost loans and try to repay them at the earliest. This will substantially improve your score.
  4. If your spouse has a good credit score then you can apply for the home loan jointly. This way you will have better chance of having your loan approved.
  5. If you have defaulted the payment of a loan or credit card bill then negotiate with the financial institution, clear the dues and get a no objection certificate from the financial institution. This will bring a good appreciation to your score.
  6. If you have a poor score then try to get the loan from the bank with which you have your savings account and FD’s.

 

Using these points you can raise your chances for loan approval. However getting loans with bad credit score has its own advantages and disadvantages. The biggest advantage is that it will make you take constructive steps to improve your CIBIL score. It will inspire you to close the earlier loan and repay the entire amount in a one go. The biggest disadvantage however, is that you will have to pay high interest rates and even the fees and charges that are associated with the loan approval will be higher for you. But as you would learn to protect your credit score, you would soon become credit ready for lifetime.

Things You Must Know About Top-Up Loans

Mr. Arora took a home loan with a 15-year tenure at an attractive interest rate. However, after 7 years he realized he felt the need of renovating his house. So, just like most people he thought a personal loan would be a good idea to cover the expenses and started looking for a good deal. Unfortunately, he couldn’t find a personal loan with an affordable interest rate even though he didn’t have a problem of a bad CIBIL score or bad credit history.

With the burden of this loan already on his shoulders, Mr. Arora desperately needed to arrange the funds for his home renovation in a way that it didn’t burn a hole in his pocket. This is when his friend told him about it.

What’s a Top Up Loan?

A top-up loan is a small loan you get on top of your primary loan- mainly a housing loan. The interest rate on a these loan is usually smaller than a full-fledged personal loan. Moreover, you can also enjoy tax benefits with a top-up loan.

The following are some of the things you must know about top-up loans:

  1. Qualification

These loans have their benefits, but just because you are repaying a house loan, it doesn’t mean that you automatically qualify for them. Your lender will inquire about your reason for a it and will make a decision at their discretion.

The following are some of the good reasons:

  • Medical expenses
  • Home renovation
  • Land purchasing
  • Education expenses
  • Business Expansion
  1. Collateral

Since a top-up loan is provided on the basis of a primary loan i.e. a house loan you don’t need to provide security for the same. The bank uses the house as collateral. However, this means that even after you have repaid your loan you have to wait until you have repaid the top up loan as well to get back the rights to your house from your bank.

  1. Interest Rate

The interest rate on a top-up loan is 1% to 2% higher than the housing loan. However, it’s still lower than most personal loans available. You may also get to pay a smaller processing fee.

  1. Tax Benefits

If you are using it for acquire/renew/construct/ or repair a property then you are eligible for tax deductions on the amount paid for the principal amount and the amount paid for the interest on the loan as per Section 80C and Section 24 respectively.

Top-up Loans Conditions

Although the eligibility criteria for a varies from one bank to another, the following are some general conditions:

  • You should be availing a home loan from the bank/ financial institution.
  • Most banks require you to repay the home loan for 6 months to 12 months, or even more before you can apply. They do this to assess your repayment habits. Thus, you should not have a low CIBIL score or bad credit report. If that’s the case, you must take measures to CIBIL score before sending an application.
  • The usual permissible loan amount is calculated on the following basis:

permissible amount= 70% to 80% of the market value of the property- loan balance

So, if your house is worth Rs. 50 lakhs in the market and the pending debt is Rs. 25 lakhs, then you can only get a maximum of Rs. 10- 12 lakhs through it.

  • Many banks limit the tenure according to the outstanding term of your current loan. So, if your loan term ends in 9 years, then the maximum length of top up loan tenure would be 9 years.

If your credit history is good and you don’t need to improve CIBIL score then availing a top-up loan is an excellent option over others such as personal loans, etc. This is because the process of a top up loan is simple and easy. Moreover, you don’t have to offer another property as collateral with them.

Denied credit based on credit report? Here’s why

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Did you ever try to opt for a loan or a credit card and have been denied? Your credit history is recorded and filed as cibil report with credit bureaus. When you apply for a loan or a credit card the bank is likely to request for a credit record by the credit bureaus to understand if you have any default payments or unpaid debts. It also indicates whether you have filed for bankruptcy or arrested by to loan defaults. The reasons for denial of credit can be varied and different in every situation.

Here are some reasons why your credit can be denied:

High Debts

Any lender or creditor would like to see how you spend your earnings, if you have high debts or used maximum limit of your credit card could be a reason why your application can get rejected. Always try not to overspend from your credit card, many banks and organizations prefer people with people at least having 50% of limit available in their credit cards.

No credit history

A no credit history means you don’t have anything on your cibil report. This means you have never applied for any credit in your lifetime, which is a good thing. Many individuals prefer buying things in cash or without any line of credit which leads to a no credit history. In such cases many banks face hard time to sanction loans or credit cards without knowing the individual’s pattern of repayments. You can show your rent receipts if you are a tenant just to prove your reliability in making payments.

No credit activity 

When you have active accounts with banks it’s important to make small transactions with those accounts. If you have not made any transactions with such accounts it’s hard for a score to get generated. It’s suggested to make small payments or transactions to keep the scores activated and going.

Frequent credit report inquiries

If you have too many inquiries on your credit report and not many loans reflected on your report, the lender will come to a conclusion that you are trying for loans with multiple banks and organizations and there is something wrong with your current financial status.

 

Fraud cases

If you have done a fraud in terms of repayment, bad debts or you have been approached by an agency for money collection. This will severely damage your cibil report and will lead to a low cibil score. Always pay your debts on time and adhere to the EMIs so that you don’t face such circumstances. The collection agency approaches a customer if the credit balance has not been paid and its more than 6 months for the same.

If your application for a loan or a credit card is rejected, you may ask for the reasons why your application was rejected. If the information provided to you is inaccurate or false, you can file a dispute and the credit bureau has to correct the errors found.

It feels when you face such situations where you are denied for credit on the basis of a bad credit report but do not lose hopes, there is always a plan B. you will be able to find a lot of private lenders who will not consider you cibil rating. Start building your credit ratings from scratch and try maintaining a good score so that when time comes you can get easy access to loans. As we were told “small steps will lead to a bigger and better you”.

How lenders estimate credit for mortgage loan requests?

Are you facing a financial crunch? Are you in need of urgent funding? You may approach a bank with a mortgage loan request.

Financial crisis is a very common problem. Your existing property can however take care of your crisis. A mortgage loan helps you to raise funds to meet financial shortage. This is a Secured Loan in which you keep your immovable property (home) as a deposit and take money from the lender. The borrower needs to repay the loan via regular monthly installments within a particular period of time.

But before you do that, you must know how lenders estimate credit for mortgage loan requests.

Mortgage Loan Eligibility   

Both salaried as well as self-Employed individuals can apply for a Mortgage Loan.

To avail a mortgage credit, you need to carry out certain minimum eligibility conditions. The following are some of the factors considered by the lenders while determining your eligibility for a mortgage loan:

  • Minimum age: You should be minimum of 21 years of age at the time of the loan application.
  • Annual income: What income is required to qualify for a mortgage loan depends on the lender.
  • Existing liabilities (if any): Your monthly liabilities are taken into consideration (say living expenses, other EMIs and bills)
  • The valuation of your property (to be mortgaged): The lender generally approves 80% of the registered value of your property as the loan.
  • Number of dependents: If you are responsible for the livelihood or upkeep of some members in the family; they are your dependents (spouse, kids, and parents).
  • Total work experience and stability in current job: How long you have been in the current organization or business, your qualification definitely play a vital role in assessing your loan eligibility. Lenders prefer stability of job and prefer those who are employed for at least two years.
  • Proper financial documents: You should have proper and relevant financial documents (pay slips, ITR, bank statements) to avail the loan.

Basically after gathering information about your income and debts the lender assesses your credit profile. They determine how much you could afford to borrow. Before prequalifying, they adjudge your ability and willingness to repay the loan.

For ability check, the emphasis is put on your income and job stability. However to check willingness to repay they would ask you the purpose of property use. They would check your credit report to closely study your previous history of meeting any such commitments.

Your credit report speaks volumes about your credit repayment history. Looking into your report if the lender finds the report is plagued with derogatory remarks and red flags, it might reject the loan application. The red flags indicate that you didn’t make timely payment of loans in the past or settled with the bank (that is again did not pay in full). In case there is any delinquency, then a valid reason for the same has to be given with proper evidences. All in all, low CIBIL score literally could scupper your mortgage application.

You are usually entitled to get a Loan Against Property (LAP) up to 80% of the registered value depending on your repayment capacity. It is important to keep in mind that every bank has its own set policy to evaluate your property and assess the borrower’s eligibility to repay the loan.

If you have a good monthly in-hand and you are not servicing any other loan, you are eligible to get 60 times your monthly net income as a loan. However if you seek bigger amount you can use home equity to raise the funds.

So whether you are looking for additional funds to meet educational expenses, marriage expenses, medical expenses or even business reasons you need not worry! If you have a property in your name you can use LAP from any of the banks such as HDFC home loan and meet the financial obligations.

It is important to understand here that there are no fixed rules to estimate the eligibility for mortgage. Each lender would consider an application on individual basis.

Being a borrower however you should do a proper homework and know the amount of loan you seek. You should negotiate as much as possible on loan duration and rate of interest. You should ask the lender if there are any prepayment charges. With a home equity at stake you should not leave any stone unturned to ensure the affordability of the loan.