Why does the credit score differ between credit bureau?

What is a credit bureau? How does that work? Does that affect my day-to-day life? We are here to give you a proper insight on credit bureaus and their different styles of credit score ratings.

When you apply for a loan, the bank or the non-banking financial firm will try to pull up your credit report. The credit report will have all that is needed to understand you’re past financial history, your current debts. By having a thorough research on the same the bank then considers giving you a loan or any financial product like a credit card. But from where do the banks get the credit report?

There are four major credit bureaus in India; they are Equifax, CIBIL, Experian and Highmark. Majority of banks and Non-banking financial companies in India take assistance of CIBIL in terms of credit report of the customer.

CIBIL was established in the year 2000, Equifax, Experian and Highmark was granted a license in the year 2010 to enter Indian market and help with the credit rating system.

The scoring styles used by all these bureaus are different as they practice differently and do not want to collude with other bureaus.

 The Scoring System

CIBIL- the score ranges from 300 to 900, 300 being the lowest and 900 being the best. You can opt for a free cibil score from various Internet websites, but if you want a detailed report it will cost you INR 500.  It is not necessary to have a perfect 900 to get the loans sanctioned, every bank have their own protocols and you can avail a loan with a low CIBIL score as well but with a high interest rate. You can get the report within 7 working days once applied.

EQUIFAX- Equifax has a different approach when it comes to scores. Their score ranges from 1 to 999, on that 1 being the lowest and 999 being the highest, they more incline on the corporate side rather than individuals, the major services provided by them are Credit risk and fraud, industry diagnostics, etc. They take 10 days to generate the report. You can get it for INR 400.

EXPERIAN- Experian credit ranges just like CIBIL that is between 300 and 900, 900 being the highest and 300 the lowest. Experian on the other hand and more inclined to collection and money recovery, data analysis and customer acquisition. Usually they take 20 days, but with you a speedy process you can get it within 15 days. This will cost you INR 399 + Taxes.

HIGHMARK- the credit range in case of Highmark is a bit complicated, the score ranges from 300 to 850, but the scores are considered poor, if they are below 640 and are excellent when above 720. They specialize in verification, credit assist, data quality management etc.

The reserve bank of India has mandated all the financial institutions to access the credit scores to analyze if the individual is credit worthy.

You can increase your cibil score by fair practicing, pay your bills on time, do not hand on bad debts. With the perfect CIBIL score you can avail a lot of financial benefits, these credit bureaus also help you analyze how you could improve your credit scores. It only used to happen when credit report is used to determine loans, but now we are taking steps towards using it for every little transactions some sited like,

Screening for postpaid SIM card connections, Credit reports for online sellers, fixing insurance premiums, using the report to analyze prospective tenants, etc.

The credit score awareness is less among Indian people, hence they lack in credit discipline. Many people are unaware of the poor credit score and are denied loans. The bureaus play a vital role for banks for determining the credit worthiness of an individual.

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.

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

why.

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.

Elements that Decide Approval of Personal Loan for Self-employed

When a self-employed individual applies for a Personal Loan to a bank or NBFC; the lender considers a few factors before approving the finance. The consideration for loan approval depends on the financial eligibility factors including age of the borrower, the reason for the advance and alike. Well, there is no denying the fact that credit score of the individual is one of the most important factors considered by the banks.

Critical Factors that Define Approval of Personal Loan for a Self-employed:

  • Income Tax Returns:

First of all the bank would consider if you have filed your income tax returns on time or not. Lenders are exceedingly particular when it comes to Income Tax Returns (ITR) for a minimum of last three years of individuals approaching for a PL.

  • Existence of the Business:

The time span of a business assures the lender about the reliability and sustainability. Your business duration actually ensures if you can pay back the loan in time. The stability of the business and your source of income is truly essential.

  • Income and Profits:

If you are able to repay without defaulting is the primary concern of the lender. Your disposable earnings as a self-employed professional would help the lender to assess your capacity to repay the loan.

  • Nature of the Business:

Some businesses could be unstable or rather seasonal. This definitely won’t give adequate assurance to the bank about your repayment ability every month. The kind of business, therefore, does play a vital role when you apply for a personal loan as a self-employed individual.

  • End use of the fund

You need to declare the purpose of availing the loan. The bank judges if it is your actual need or just self-indulgence.

When you approach a bank as a self-employed individual for personal loan they need to ensure if you are worthy of receiving credit or not. This worthiness depends on how good you are with your finances. If you have serviced loans successfully earlier; it confirms that you would be repaying the loan on time without missing payments. The process that banks and other financial institutions follow to know your credit worthiness is through your CIBIL (Credit Information Bureau Limited) score.

  • Your age:

On age the factor, consideration may differ from lender to lender. A self-employed person should be within 25 to 65 years of age.

  • Right Documents:

Never submit fake documents to the bank when you apply for a personal loan.

Now, while all these factors play a noteworthy role, whether a PL would be approved for a self employed, Cibil score (Credit History) turns out to be the crucial one.

So before applying for the loan it is important that you ensure that you have a good score.

What factors lower CIBIL Score?

  • Too many Personal loans
  • Missing loan installments
  • Coming too close to the limit on credit cards
  • Not paying credit cards back on time
  • Not paying credit cards in full
  • Too many rejected applications for loans/credit cards
  • Settling credit cards

However if you have a low CIBIL score, you need to know how to get Personal loan for Low CIBIL score.

While the CIBIL data says 80 per cent of the loans that get sanctioned have a score higher than 750; nevertheless, the CIBIL score is not the only factor which lenders take into consideration while deciding and approving a Personal loan to a self-employed individual. A mainstream bank may ignore a credit card default in the past if you have a regular good income flow.  Your future financial prospects, demographics, education, socio-economic conditions may help you in getting a PL despite your low CIBIL score.

NBFCs (Non-banking financial Institutions) are relatively flexible with credit scores and the cut-offs as compared to banks. If you have a low credit score, you are advised to approach a NBFC instead of a mainstream bank.

You may choose to approach a Peer-to-peer (P2P) lending website. You may get a personal loan regardless of your low credit score.

If the cause for your low score is a failure to pay, it is suggested to clarify the lender why you had failed to pay. In case it was not an intentional default; lenders at times might excuse. If you have a convincing explanation with evidence say, you had a sudden loss in business or there was a medical emergency for which you couldn’t afford to pay back; put across clearly. If found authentic; the lender might consider.

All in all if you make plan thoughtfully you could easily grab the best deal!

The Bad Credit Score Survival Advice

A red flag in the credit information report is like a fire in the jungle. You do not know how much damage it would make until it eases off. Surviving bad score is thus not easy. A lot of people might share the tricks of restoring credit score however the truth is, it is easier said than done.

Once ruined it would at least take six months to rebound the low CIBIL score. Many a times the damage stays on your report for years to come. All you can do is pacify the bad history with good history.

Let’s find out how you can cope with bad score and roll over the financial dice in your favor once again.

Seek professional advice on bad credit score survival.
After you come to know about your low score, the first step should be to seek a professional help. When you contact a Credit Improvement Agency, it would assess your credit report and guide accordingly the ways to improve the score.

If however you choose to do it yourself, go for free CIBIL check online and study your report. It will help you understand the gravity of the problem. After studying the report, if you find any errors eliminate them without a delay.

Make a budget and organize your finances
With bad score, your credit worthiness is hurt very badly. You need to take charge of financial conditional and analyze your expenses and incomes. Calculate your net income and know how much you actually have in hands to pay out the debts and installments. You should try to close the expensive cards and accounts first and try to save as much as possible.

Not to mention, you should try to add as much income avenues as possible and try to have some surplus every month. Your sole aim should be to become take your debt utilization ratio to 30% of the limit being granted to you.

Contact your creditors and make a repayment plan
When you have too many debts to manage, you should consider contacting your creditors in a hope to find an option to survive the bad account. Speaking with your lenders may help you find a middle path with lowered interest rate or a new repayment plan.

Raise additional loans to pay off loans / credit cards
After you limit the pressure of debts by closing expensive cards and refinancing of the loans, consider applying for new secured loan to survive the bad credit. You can use the amount to manage your finances and repay diligently all the installments. This would build a good history and gradually improve the score.

Use a co-signor or guarantor to avail low interest loan
When you have bad credit score with red flags in the credit report, it is unlikely that banks would offer you loans at low rate. With bad score you become a risky prospect for the bank and they want to lend only with a certain degree of security. Besides rejection of a loan application further ruins the score. Keeping both the facts in view, you should apply for loans with a co-signor or guarantor.

You can ask your friend, spouse or blood relative with high credit score to become a co applicant or guarantor for you. This would raise the chances of loan approval and that too at normal interest rate.

Use a high worth asset as collateral
With bad CIBIL score each unplanned financial activity would hurt your score further. Besides loan repayment and credit utilization ratio, the mix of loans and length of loans also affect your score. If you have home equity or other high value assets such as Gold, you can use these assets as collateral and raise a secured loan.

Consolidate your debt
When you have too many debts to pay and manage every month, you can consider consolidating them into a big umbrella loan that helps you close all accounts into one. You can consolidate loans as a long term personal loan using your home as collateral. The goal of consolidating loans is to make your monthly repayment affordable and save some surplus every month.

Rent a home/property
Last but not the least you can consider renting your home or part of your home to raise some extra funds and save some amount every month.

Using all these steps you can gradually improve your credit health.

How to enhance your loan eligibility

Every bank follows a credit appraisal process in order to determine a borrower’s loan eligibility. It checks the CIBIL score of an individual, and assesses the CIBIL report, income and other documents to determine whether the borrower is capable of repaying the loan on time or not. By working on the credit profile and improving credit score one can increase the chances of approval.

Here are some ways that can help you increase your loan eligibility.

Longer tenure of loan– Repayment capacity of the borrower is a major factor that banks consider before sanctioning a loan. If the monthly instalment is higher than what the bank thinks you can afford to pay, then your eligibility will be affected. Opting for a longer tenure will reduce your EMI liability and enhance your eligibility. Though a longer tenure will increase your net interest outgo it will at least make you eligible for the loan. 

Additional income-Showcasing that you have a high steady income helps to increase your loan eligibility. Keep a record of the variable perks or performance linked pay that you earn from your job and add them to your income. Mention the other sources of income such as high interest fixed deposits or rental income on the property that you own. Such additional sources of income will enhance your repayment capacity and increase the amount that you are eligible for. You may need to furnish supporting documents as proof of the additional income. So keep them handy.

Step-Up Loans- Step-Up loans are a great way to increase the loan eligibility. For people who are in a profession where there is struggle in the initial years, but surety of a good financial status going forward, this is an easy way to borrow funds. Here an individual pays a lower EMI in the initial years. The EMI progressively increases with the tenure of the loan. Here the eligibility increases as the future income is expected to increase as the borrower establishes himself in his profession.

Prepay-existing loans- If you are considering taking a home loan, then prepaying your outstanding loans like a car loan or a personal loan, is a good way to enhance your eligibility. The EMI that you are already paying on the existing loans reduces your monthly repayment capacity and impacts the home loan amount that you may be eligible for. For example if your monthly income is Rs 1 lakh, the bank may consider your repayment capability as Rs 50,000 as EMI. But if you already have a personal loan where the EMI is Rs 20,000 this will be deducted from the amount that you can afford. So to arrive at the eligible amount, the bank will consider your affordability as Rs 30,000. Hence it is advisable to prepay these loans before making a home loan commitment.

Co-borrower-The assessment of the repayment capacity of the borrower largely depends on his income.  The EMI is generally half the take home salary. But if it falls short of the required limit you can bring in a co-applicant. If your spouse is earning, then it is a good idea to make a joint application. Pooling two incomes together enhances the loan eligibility amount to a great extent. This also means that the liability of repaying rests on both the applicants.

 Work on your CIBIL score- CIBIL score is an important factor that determines loan eligibility. Hence you should make all efforts to improve credit score. Check your CIBIL report and score regularly. If you notice an errors then dispute them immediately. Pay your monthly instalments and credit card bills on time. Use your credit card wisely. By keeping the utilization levels below 30% of available credit limit you will ensure that you improve credit score.

When you work on the important aspects (like income and credit score) that the bank evaluates in order to make an assessment, you can surely enhance your loan eligibility.

 

Reasons why errors on your CIBIL Report can be Destructive

Priya wanted to gift a new card to her parents on their anniversary. She chose the car, model and color keeping her parent’s choice and requirements in mind. She then applied for a loan, she knew it would not be difficult to get a loan as she had all the required documents and she had also maintained a good credit history. Her loan was rejected due to a low credit score and she was almost shocked as she had always been a responsible borrower. On going through her Credit Information Report she was shocked to see that there were delayed payments reported in it. She had never missed a payment and it turned out it was a reporting error by the lender.

So Priya missed a chance to gift her loved ones at the right occasion, this could have been avoided if she had been pre-emptive and had applied for a free CIBIL Score and checked if the score is acceptable to the lending agency. Despite being meticulous in her credit habits she had to face some problems.

How can errors in your CIBIL Report be Destructive?

While for Priya it was disappointment, a low CIBIL score can cause bigger problems too. It can result in financial loss, missed opportunities and a lot of wasted time and effort for no fault of yours. Being credit healthy is important and it could be doubly distressing if despite being a careful borrower your score is low due to an error in the report. While these errors can be rectified and once they are removed from your report they will enhance credit score but sometimes the delay can cause a lot of trouble and loss too. These errors could be wrong reporting of a default in payment, a loan or credit card that does not belong to you being reported under your name which will reduce your borrowing capacity and if there have been any defaults on that loan they will also be include in your score calculation.  Here are a few ways in which these errors can be destructive:

  • Cause Loan Rejection: If a lender reports that you have missed a payment or the loan is reported as settled erroneously then this could cause some serious trouble for you. Not only your credit rating will take a hit, a look at the CIR will scare away the lenders. No lender wants to lend to a person who does not pay on time or is a default risk. Thus the lender will not know that the reporting in the CIR is erroneous and they will reject your loan application without a second though whatsoever.
  • Harm your Job Prospects: This may not seem like the most obvious impact of an error in the CIR but could be more harmful then getting a loan rejected. Imagine not getting the dream job or losing out to a competitor in the final round of interviewing due to an error on your report which can cause you to appear like an untrustworthy candidate or somebody who is debt ridden. Increasing number of employers are seeking credit check of prospective employees along with a background check and a health check. This is to ensure that the employee that they hire is trustworthy and will not get into legal trouble due to unpaid dues. Thus an error could cost you dearly at a job interview.
  • Credit Card Application Rejection: An error in the CIR could also cause a new credit card application to be rejected. If your CIR show you have a high utilization ratio, missed payments or have a “settled” status account in your report even erroneously it could lead to the card company rejecting your application. While you can certainly apply for the card again after rectifying the error but sometimes the delay can cause more than expected trouble.
  • Make a loan more expensive: Errors on the CIR can lower your scores which can cause lenders to assume you to be a high risk borrower. This can make them charge you higher interest rates on loans then they would have charged otherwise. Higher the risk, higher the interest you are charged so you can end up paying more interest on a loan for no fault of yours.

The best way to avoid getting into a situation like this is to get your credit report from time to time so that you are aware of any errors in it and get sufficient time to rectify it. This will ensure that you do not suffer any losses because of these errors.

 

Does a change in the spelling of your name or surname impact CIBIL Score

Consider the following three situations:

  • Vikas has a three credit cards and he is late in paying the bill by a few days on almost all three of them since the last few months.
  • Priya is getting married next month and is planning to change her name and adopt her husband’s surname post marriage.
  • Ayesha has a home loan which she plans to prepay in the coming few months using the performance bonus she is expecting.

Which of the above three situations is likely to impact your credit score and in what way?

  • Delayed payments by Vikas are harmful for his credit score, the more frequently he does it the worse it is. He will have to remedy his ways and will have to figure out bad credit fix soon to rectify this situation.
  • Priya changing her name or surname or both post marriage or otherwise will have no impact on her credit score whatsoever.
  • Ayesha pre-paying her loan will give a temporary jolt to her credit score but it not something that will have a lasting negative impact on the credit rating.

Name Change and Its Impact on the Credit Score:

As we said above changing the name or the spelling, adopting a new name, adding a surname etc have no impact whatsoever on the CIBIL score. The credit rating calculation is based on five parameters which are as follow: repayment history, credit mix, utilization ratio, credit inquiries and age of credit. Personal details like name, age, sex or contact details etc are not taken into account when calculating this score. Another aspect that needs to be kept in mind is that the income levels of an individual also have no impact on the calculation of the score; however lenders may want to have a look at the debt to income ratio or length of service etc before deciding whether they will lend to an individual or not.

When one changes their name all the details about various loans, credit cards and their repayment etc are carried forward in the new name. Past history whether good or bad is not erased so the score remains whatever it is without any impact on it due to name change.

Since CIBIL gets all data from lenders you need to inform the lenders as well as the rating agency about the name change so that the necessary changes can be made in the records. You will have to update the records with all the lenders from where you have running loans and also with credit card companies. They will make the necessary changes and the records are carried forward in the changed name.

You need not close or surrender your cards due to a name change; you can just inform the credit card company and get a new card issued with the changed name spelling without the need to close or surrender a card. This will ensure that older accounts remain in your credit trail which is good for the overall credit rating.  Women when getting married and changing their name/surname or adding their spouses name need to be especially careful. They should make sure that they get the necessary changes made so that their credit history is carried forward. Failing to do so, they may find it difficult to get a loan or credit card sanctioned in future in absence of any credit trail. It is also important to keep old accounts active and running to have a deep credit trail which gives a better picture of one’s credit behavior.

Though change in name does not directly impact the credit score it may cause delay or hassles if one is looking at applying for a card or a loan in the ensuing period. Change in the records of CIBIL does not happen immediately so they find themselves in a tricky situation when applying for new credit. This can be avoided to an extent by writing to CIBIL directly rather than waiting for the lenders to do so. Also ensure that you have sufficient time lag between the name change process and apllying for any fresh credit.