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.

 

Is all the hype on credit score justified?

If one had applied for a loan a decade or so back, they would have required the relevant documents, knowing the bank manager or knowing somebody who knew the bank manager and could “introduce” the applicant. Knowing the manager or being introduced to the manager ensured that the lender knew about you being a reliable borrower or a trustworthy person which could not be established by simply looking at the documents. Lenders want to give money to those who can be trusted and this judgment was made in a subjective way in the past and often backfired. Things in today’s times have changed; now this “trustworthiness” or “creditworthiness” can be established in a more objective way; with the help of the credit score.

So What is a Credit Score?

Before focusing on the hype that surround the credit score and if it is justified or not we will try and understand what the credit score is. The credit score is a three digit number that reflects the creditworthiness and also the credit health of the individual. This rating is calculated based on the credit history of the individual; this history must be at least six months old and includes various aspects related to loans, credit cards and other credit behavior.

Based on five main parameters that are namely the repayment history, credit mix, credit utilization, inquiries and loan tenure the credit score is calculated. Amongst the five the repayment history is the most important parameter followed by credit utilization. These aspects are used to arrive at the credit score of the individual. The Credit Information Report which is a detailed contains a lot of information related to loans and the individual apart from the credit score.

Why is it Important?

So now we know how the score is calculated. So, why is it important? The score is important as it lets the prospective lender judge if the prospective borrower can be trusted or not. Let us start from the beginning. When an applicant applies for a loan, he/she submits an application along with the required documents. A financial institute will get hundreds of applications, they want to be sure that they lend the money to the right candidate, a person who can be trusted and is credit worthy. So how do they do this? This cannot be judged by simply look at the documents and the application form. This is what brings us to the credit rating.

The prospective lender will ask for the CIR of the applicant and based on the CIR the lender will decide whether to go on to the next step or not. The score is calculated based on the past credit behavior of an individual, thus the lender can make an assessment whether a person is likely to be a responsible borrower or not or is likely to default based on his past behavior and his current debt obligations.

Each financial institution will have its own set of rules and requirements when it comes to accepting a loan application or not. One of the criterions that the applicant has to comply with also concerns the credit rating of an individual. Thus those who have a score that is less than what is acceptable to the lender will not be sanctioned a loan, their application is likely to be rejected at the first step only. The acceptable credit score varies not only with the lender but also may differ depending on the loan type.

Generally a score of 750 is considered to be good enough to get a loan sanctioned. As per the statistics by CIBIL 79% of all loans sanctioned are to those people who have a score of 750 plus. If you are looking for a loan and have a score below this, it is a good idea to improve CIBIL score before you apply for a loan.

So is thy Hype Justified……

To clarify CIBIL or any other rating agency does not specify who should be given a loan or not, they just collect the data from various lenders and arrive at a score based on it. However, having said that almost all lenders look at an individual’s credit score before deciding whether to lend to him/her or not. Thus getting a loan or a credit card is heavily dependent on a healthy credit rating else your chances of getting a loan approved go down. Even if one were to get a loan with a low score it would be at higher interest rates. So yes the credit score is important and one must focus on keeping it healthy, not for the hype but for your own sake.

 

What you must do if there are errors on your credit report

Financial advisors always suggest that one must review the credit report periodically. The information in the credit report has a direct impact on your credit score. It determines whether you can get loans in future and how much interest you need to pay. Hence it is imperative to make sure that the data in the report is accurate, complete and up to date. A periodic check also helps guard against identity theft. You can quickly find out if someone uses your personal information to commit fraud.

How can errors crop up and what kind of errors should I look for?

Banks and financial institutions hold all the data pertaining to your credit card and loan accounts. They keep track of your payments and pass on the data to the credit bureau. If the information passed on is inaccurate then there might be errors in the credit report. Mistakes in data entry or time lag between data collection, submission and updation of details can lead to discrepancies. These can relate to your personal details for example misspelt name, wrong date of birth, PAN number etc. There may also be mistakes in the balance amount, account status or payment details. More serious errors include inclusion of credit card or loan accounts that you have not taken.

What to do if there is inaccurate information in the credit report?

However trivial or serious an error maybe, you should get it corrected to prevent any negative impact on the credit score. CIBIL has a dispute redressal mechanism through which you can report the discrepancy and get the mistakes corrected.

Fill a dispute resolution form

The first thing that you need to do is to file a dispute by submitting an online dispute form available at the CIBIL’s website. You need to furnish your personal details, the nature of the error and a brief description of the error in the online form. You are also required to fill in a control number. This is a unique 9 digit number that you can find on your CIBIL report. This number aids CIBIL in identifying the report for which CIBIL dispute is raised. Once a dispute is raised you will receive an email mentioning the dispute ID that can be used for future correspondences.

Verification of information

CIBIL contacts the concerned financial institution to verify whether the dispute is legitimate or not. Only after the credit institution gets back to CIBIL with the relevant facts and authenticates the dispute, will CIBIL go ahead and rectify the errors. CIBIL is not authorized to make any changes to the Credit report without proper verification. Only when the loan provider confirms the error CIBIL will update the records with the correct data. You will keep getting email notifications regarding the status of your request. When the dispute gets resolved you will be notified accordingly. CIBIL usually takes 30-40 days to resolve any dispute depending on the time the credit institution takes to revert back with the required information.

If the mistakes in the credit report relate to personal details or incorrect overdue amount then the resolution happens faster.  But in case you find entries of loans or credit card accounts that don’t belong to you, then it is a case of mistaken identity and it may take a little longer to resolve the issue. The law requires the bureau to come up with a formal resolution of dispute within 45 days of the dispute being raised. Once you get the resolution you can apply for the report again to see whether the changes got reflected.

In case you are not satisfied with the resolution provided you can approach the bureau again and initiate a fresh complaint. The information will be re-verified with the bank. Usually CIBIL provides a satisfactory resolution but it takes time to verify and correct the errors. So you need to be patient during the entire process.

 

CIBIL report is increasingly gaining importance. It is prudent to reflect upon it if you wish to have a smooth loan application process. You should check the report at least once every year. If you haven’t done it till now, make sure you do it at least 3-4 months before you wish to apply for any loan. In case you uncover any errors you will have sufficient time to get them rectified.

Be mindful that the errors can lead to depleting your credit score and you may be left with little options but to look for bad credit fix and apply for personal loan with low CIBIL score.

Can I Get a Loan to Repay The Debt on my Delinquent Accounts?

So, you have been falling behind with your bills for a while, and now you have a huge debt to deal with. You don’t have enough savings, and don’t want to turn to friends and family for help. You don’t know what to do now. Then one day, as you are having lunch with your colleague, they tell you about taking a personal for the repayment of debt. It sounds good to you, but you ask yourself- “Is this a really good idea?”

The situation above is more common than you think. When your back is against the wall, as debt is increasing with each passing day, you are ready to try everything possible to deal with the situation, with a personal loan being one of them. However, you must know that it has both upsides, and downsides. And it is worth being aware about them before you make the final decision.

The Upsides

1) Low Interest rate

One of the best advantages of taking a personal loan for paying off credit card debt, or any other kind of debt, is that you have to pay a lower interest rate. Personal loans generally have a lower interest rate, in comparison the interest rate on the credit cards. This means you can save a lot of money this way. Also, since many online lenders have started offering personal loans, you can get one approved easily, and quickly.

2) Easy Finance Management

Debt consolidation can make debt management a lot easier, since you just have to make one major payment every month, instead of several smaller payments. If you have more than a few credit cards, then this move can be highly beneficial for you.

3) Credit Score Improvement

Taking a personal loan can also help you build a better CIBIL score. If you make the payments on time, then it can increase your creditworthiness, and show the future lenders that you are  responsible credit user.

If the outstanding balance has increased a lot, and you are on the verge of making it to the loan defaulter list, then you can prevent so by taking a personal loan for its repayment. A loan flor low CIBIL defaulters is extremely hard to come by, which is why you should avoid defaulting at all costs.

A personal loan for debt repayment is indeed a good idea, but it has its downsides.

The Downsides

1) Continued Usage of Credit Cards

A personal loan can only help you if you minimize your credit card usage. If you have to use your credit cards even after taking a loan, then you will only add more debt, which is counter-productive. Thus, when you take a loan you should be committed to never carrying credit card balances again.

2) Higher Monthly Payments

It may not always be possible to get a personal loan that has a lower interest rate than your credit cards. In such a case taking a loan will increase your monthly payments.

Despite the potential downsides, a personal loan is generally the best way to deal with huge outstanding balance. However, if this is not an option that can work for you, or if you seek alternatives, there are a few that you can consider:

  • Credit Card Balance Conversion To EMI- The majority of banks allow their credit card users to convert their credit card loan to an EMI loan. Popular tenures for the same include 3, 6,12, 24 months. The interest rate could be anywhere between 12% to 18%.
  • Credit Card Balance Transfer: If the rate of interest on credit card balance is lower in some other bank, then you can your current outstanding balance transferred to it. In most cases you will need to pay a certain fee, but if the pending amount is a lot, then the fee will be worth the transfer.

Delaying loan payments, or credit card bill repayments can often lead of the loss of CIBIL score, and damage on CIBIL report.  The only way to improve credit score, is to choose the best way for repayment, and ensure that the payments are always made on time. The tips given above can be quite helpful in that enterprise.

 

 

 

 

Understanding the Basics of CIBIL Report

Your CIBIL report (also referred to as CIR report) is a file that contains the information about your credit history. It contains the details of the current and previous loans that have been taken by you, bank account number, account type, list of enquiries made by banks or lenders, credit limit provided to you, etc. it also contains your basic personal information.

If you want to learn how to correct CIBIL report you should understand its basics first.

Your CIBIL report contains 5 different sections apart from the CIBIL score section. These are:

1) Personal Information

In this section your personal details are provided. Here you can find your name, date of birth, and gender. Apart from that it could also contain the details of some or all of this: income tax ID number (PAN), passport number, voter ID number, driver’s license number, ration card number, and unique ID number.

2) Contact Information

The next section that you‘ll find on your CIR is the Contact Information section. It contains your phone numbers, email addresses, and residential addresses. When a bank checks a CIBIL report this sections helps identity the account holder.

3) Employment Information

The employment section carries your employment details such as your income (either monthly or annual). The mentioned income may not be your current income but the one you provided at the time of your loan application.

4) Account Information

This section is the most information section, especially for your loan lenders. It carries your credit information such as the name of your previous and current lenders, types of credit facilities available (such as credit cards, home loans, personal loans, education loans, etc.), account numbers, payment history, current balance, loan amounts, etc. Most importantly, it contains the detailed record of your last 3 years’ payment history regarding loans and EMIs. All these factors affect your credit score and are also influence your lenders when they consider you loan applications.

Here are some of the things that you should carefully look at in the Account Information section of your report before you apply for a loan or a credit card:

  • Account Details- It contains details such as your name, account number, account type (such as home loan, credit card, etc.), date of account opening and closing, and the latest date when updated information was provided to CIBIL.
  • Account Status- If there are any settlement issues pertaining to your account or if it has been written off by a lender then it would be mentioned in the report. The same goes for when you are on a loan defaulter list. Your future lenders are unlikely to approve your loan application is they will see any mention of such things in your report. For your understanding the definitions of “Settled” and “Written Off ” are given below:
    • Settled: If you report mentions an instance where an account was settled then it means you had made it to the loan defaulter list and the lender had to settle for a lower amount than the outstanding amount.
    • Written Off– When it has been more than 180 days past the due date for a pending bill or EMI then your bank writes off the amount and reports it to CIBIL.

Both the status mentioned above affect your score negatively.

5) Enquiry Information

Whenever a bank or some other institute requests for a copy of your CIR to CIBIL it accounts for an enquiry. The information of the recent enquiries of your report is mentioned in this section. If a lender notices multiple enquiries that have been made in a short period of time then they may see it as an act of desperation and decide to reject your application.

A lot of times people get a low CIBIL score because of errors in their reports.  If you too have come across any error in your report then you can get it fixed and improve your score easily. However, to make that possible you must be able to understand your report first. The information given above will be able to give you a better understanding of CIR.

 

 

How do I Take Old Stuff Off my CIBIL Report?

Remarks of late payments, and “settled” accounts can be detrimental to your CIBIL score. If not addressed in time these could cause a significant damage that can take forever to repair. By learning how to correct CIBIL report you can save yourself from the efforts that you would have to invest for credit repairing in future.

Late Payments

One of the most common factors that affect your CIBIL score, and turn away potential lenders is the mention of late payments in your report. Late payments are the no. 1 reason behind low credit score in India. This is because the damage they cause is incremental and often unnoticeable in the beginning. People don’t really worry as they should be when they miss an EMI or credit card payment, even though every single payment matters.

When people come asking how to increase CIBIL points then the first thing financial gurus do is take a look at their payment history, for most of the damage is usually done by late or missed payments. The damage cause by late payments is directly proportional to the delay. Late payments are divided in four different buckets, which are- 30, 60, 90, and 120. So, if you make the payment within 30 days after the due date then it would fall in the first bucket, if you make it within 30-60 days then it would fall in the second one, and so on. As it can be guessed easily- the damage in the first bucket is the least and in the last bucket the highest.

How to Remove Late Payments?

The only way you can get the mention of late payments removed from CIBIL report is to convince your lender. You should first become punctual with your payments, and after a while request your lender to have the remarks removed. If you have been a good customer of the institution then they can certainly send an update to CIBIL, which will then update your report accordingly.

Settled Incidents   

When a borrower has a huge outstanding amount and has not made any payment in a long time then the lender could tag them a defaulter. Eventually, the lender may decide to propose a settlement, in which the they are willing to close the account once and for all by settling for an amount that is lower than the actual pending payment.  If the borrower agrees then the ledger is closed, but their CIBIL report bears a mark of “settled” status. This is enough to raise alarms for future lenders, as it shows a lack of credibility.

How to Remove “Settled” tag?

To get the “settled” tag removed from your CIBIL report the first thing you have to do is contact your bank, and let them know that you are willing to pay the remaining amount of the loan that you had closed with a settlement amount. If the lender agrees then once you have paid the amount you can request them to update CIBIL with the new information. Once CIBIL receives the update from your lender it will update your report, which you can check for confirmation after 30-45 days.

Apart from getting bad remarks removed from your CIBIL report there are many other things that you can do to improve your score.  Here is how to increase CIBIL points

1) Variety- If you only have taken secured loans in the past then you can get some unsecured credit, such as credit cards to increase your score. Variety in credit is always a score booster.

2) Lower Credit Utilization- Do you often use your credit cards to their maximum limits? High credit utilization can lead to lower credit scores. Ideally, you should not use more than 30% of the credit provided to you on the cards.

3) Limited no. of Credit Cards and Loans- When people use multiple credit cards and take loans frequently then lenders can take them for credit hungry individuals. Thus, this kind of behavior should be avoided.

Taking bad credit history off your credit report is certainly a great way of boosting your score, and improving your chances of loan approval in future. Still, it is far better to avoid such situations rather than dealing with them later.

3 Things Your Credit Score Needs

Credit Score is a three digit number but is sums up a lot of factors and reveals a lot of information. It offers a peep onto your credit history, your financial health and of course how responsible you are towards your debt. Five major factors go into making or breaking the credit rating; they are repayment history, credit utilization, loan tenure, credit mix and the inquiries made about your CIR. These factors ultimately decide what that three digit number will be.  So what are the three lifelines for a good CIBIL rating?

  1. Timely Payments:

This is one thing which one cannot ignore if they want to have a blemish free Credit Information Report (CIR) or want to improve CIBIL score. This factor impacts the calculation of the rating the maximum.  So the biggest favor one can do themselves is to pay on time, always! Paying on time cannot be a one of event, it is something that needs to be inculcated as a habit and discipline; one cannot do it for a few months and then go lax on it. Repayment history contributes maximum to the rating calculation and each missed or delayed payment is reported to the credit agencies. So be it the monthly credit card payment or the loan EMI ensure you are nor late in paying them.

  1. A Cautious Approach:

We all love new shiny things and that little plastic thing (your credit card/s) may look like a genie that we have in our hands. However if you are not cautious then that genie can quickly turn into a devil. Here I am not talking about only overspending which of course can cause problems but also about a high credit utilization ratio. While spending too much on your card can put you in a fix at the end of the month, a high credit utilization ratio can also harm your credit score. Keeping your credit utilization ratio below 40% will ensure that your CIBIL score does not take a hit. Credit utilization is the ratio of the average monthly spending on the credit card/s vis-a-vie the overall sanctioned limit for the card/s. Apart from that another area in which you need to exercise caution is; applying for a loan. Each time you apply for a loan the prospective lender seeks your CIR; this is termed as a hard inquiry and is reported to the credit rating agencies. Hard inquiries also lower the score. So apply for a loan only when necessary and after doing sufficient research about the lenders loan process so that your application is not rejected which will make you apply for a loan again and generate another hard inquiry.

  1. Stay Faithful to Old Debt:

If one has surplus funds you may think about repaying or that SBI Home Loan or that education loan from Bank of Baroda. However think before you do so! A long well serviced loan is good for your credit report. Deeper the credit history the better it is; so though repaying may sound like a good option but consider its impact on the rating. Similarly if for any reason you need to surrender one credit card if you have multiple cards then consider cancelling the newer one. Of course this needs to be done after considering all the advantages and disadvantages or you could keep both cards and use the older one occasionally and remember to pay on time. This way it will still reflect in the CIR.

 

The above are three things that can help you stay in good credit health; these are not the only ones but they are definitely on the top priority list. So follow the above and you will never have to worry about your Credit Information Report.

 

 

 

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.

What CIBIL Score Should I Have To Get A Business Loan?

When one hears someone talking about CIBIL, one tends to believe that it must be related to an individual who is seeking loans such as personal loans, home loans etc. What is not known to everyone is, that CIBIL is the keeper of records for all credit facilities availed by individuals and business entities. Individuals are scored according to their credit performance, whereas businesses are not given any score but their detailed credit reports speak for themselves. Private & Public Sector Banks, Non Banking Financial Institutions, Housing Finance Companies, and other financial institutions, that actively lend to businesses, use Company Credit Reports to estimate the company’s ability to repay the loan sought before they extend any credit facility to a company.

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Unlike individual scores there are no benchmark CIBIL score that you must possess to get a business loan however, there are details in your credit report that could dampen your plans of seeking credit or accentuate your creaky credit situation. You must watch out for them and work to make sure these don’t make way into your report.

 

Understanding the Company Credit Report

 

A company credit report is a factual account of your previous debt repayments, the credit lines availed, lenders who have extended credit and lenders who have enquired into your report in the past. This report helps a prospective lender analyse the creditworthiness of a borrowing firm, which basically means lenders try to judge the likelihood of default by the borrowing entity. The lender is interested in looking for number of “wilful defaults”, suits filed against the company, outstanding loans, existing exposure to credit including those that the borrowing entity has guaranteed etc.

 

Some Commonly Reported – Trade Lines

A business may need several types of loans during its functioning, such as:

  1. Term Loans: Loans that are extended for a specified period and a specific purpose. They can be short term, medium term or long term.
  2. Bank O/D: An overdrawn current account, short term funding.
  3. Letter of Credit: A letter that guarantees to a seller, on account of buyer, that the payment for goods or services will be paid
  4. Bank Guarantee: A sort of insurance against damage or loss of goods or service and to make good the payment.
  5. Lease Finance: Where the bank becomes the legal owner of a particular asset of the borrowing firm and remains so unless the final instalment of the loan is not repaid. In other words, the asset is given as collateral.

And many more.

How to Clear CIBIL Issues

Some of the common stumbling blocks in a report are:

Problem #1: Loans that are “written off” or “settled” by a lender, means loans that went unpaid by the borrower or the lender was unable to extract money from the borrower and were eventually “written it off” in the books of the lender. It quashes a borrowing entity’s aspirations & it may almost never be able to get a loan. A lender may never come around it. Although the report shows information of past 24 months only, but such accounts may remain on your report for a much longer time like seven or ten years.

Solution: Ideally avoiding them could be your best bet. But sometimes, not out of choice but due to financial constraints you were unable to pay off your loans in the past. The only way to have it removed from your report is to pay to the bank now and request the lender to send a clean report to CIBIL for updating.

Problem #2: You have been paying your dues, however in a delayed fashion.

Solution: Change your attitude towards your creditors. This alters the way a lender perceives you. Either the business is not able to generate enough returns to meet the financial obligations on time or the borrowing entity has half a heart to pay back the loan. Either ways, the lender will consider the entity to be very risky. Even if a lender does grant a credit to the firm, it will do so at higher rates of interest.

Problem #3: You seem to be overleveraged already. The amount of debt are already exposed to plays a vital role in estimation of the borrowing firm’s credibility.

Solution: If you are already burdened under a surmounting pile of debt, lenders will be strictly wary of extending further loans. This is because they begin to question your ability to keep up with future repayments. You must first pay down existing debt and then apply for more loans. If you are hard pressed for funds then you could try peer-to-peer or business-to-business loans for the period.

Problem #4: Important financial ratios reflect a poor financial health of the firm.

Solution: Inventory, turnover, receivables turnover, liquidity, leverage, gross profit margin ad return on sales are some of the key financial ratios that credit grantors consider before extending any credit facility to you. These ratios help a lender take a look into the company’s financial health and only if they feel the company is strong financially, they sanction the loan.

Problem #5: The loan to which the firm stood as guarantor has been defaulted.

Solution: As with other things, this again throws a poor light on your credibility. A guarantor has committed to make good a default by the borrowing entity. In the absence of so, the guarantor is as good as the defaulter itself. Although it may not have a direct bearing on your own application but your CIBIL report will carry a remark too. A lender may consider you as someone who does not honour commitments and your image as a borrower will be tarred.

There are certain items or details in your report like incorrect name or address of the firm, repetitive account information, wrong relationship status of the signatory etc. and you would like to have them corrected then raise a CIBIL dispute. You must fill the dispute resolution form online to highlight your concern with the bureau. However, you cannot have any intended defaults or late payments removed from the account.

A clean and healthy credit report enables a borrowing entity to capture favourable terms and gives an upper hand to negotiate lower rates of interest. Thus it is in your own interest to be a responsible credit user and make sure your report shows a credit friendly firm.

How to get eligible for the highest credit card limit available?

The highest card limit is not a fixed number. It is relative, and differs from one person to the other. Before you ask for the highest credit card limit to be made available to you, it is important for you to know the exact reason for the request. Let’s check a few of the reasons and then see a few simple ways to become eligible for a higher credit limit for the right reasons.

 

What is the number one reason for you to ask for an increase in spending limit? Are you in the habit of maxing out card often? If that is the reason, you’ll be disappointed to know that credit card companies may not entertain your request. The card that has been issued to you is basis a few factors. The issuing company, even those that offer you instant approval credit cards, may have got cognizance of your shopping trends and / or association with clubs, or they have direct sources of information by way of your salary slips. In addition, if you have credit history already, they will have accessed your CIBIL rating online and downloaded your credit history. So, the initial limit on your credit card is a combination of these assessments. Also, it is essential to understand that your available spending limit is a compound of your income level, after taking into account your current debt obligations and expenses. So, if you trying to become eligible for a higher credit limit, have a sound reason, like earning more reward points on your card that will lower the cost of your frequent need for air travel (a genuine reason), or improving your credit utilization ratio, which accounts for nearly 30% of your CIBIL score.

 

The best way to become eligible is to not ask for the raise, but build credibility, as a financially responsible person. Make your payments on time and keep your credit utilization below 30%. If you sound desperate to have your spending limit increased and the card issuer affirms that you are still not eligible, this can impact your credit score negatively, causing a dip. Even if you ask for an increase, don’t bite off more than you can chew. A 10 – 15% increase is still viable, but doubling the limit is well-nigh impossible.

 

More often than not, your spending limit is revised on a periodical basis. If you are accessing more credit on your card and have managed to stay way out of the loan defaulter list, you will be rewarded with an automatic increase in 6 – 18 months of getting the card. However, if your limit is on the higher side, the chances for dramatic increase are, perhaps, limited. In the meantime if your salary has increased or number of income streams has increased, notify your card issuer. They may revise your limit based on the new income reports.

 

The best way to qualify for an increase is also to use your card frequently and showing financial discipline in paying back on time. This is an indicator to the card issuer that not only do you need access to more credit, but you are capable of managing your finances without a problem.  Make sure to pay off within your billing cycle. When your card issuer observes this pattern over a period of time, your automatic increase will be substantially higher.

 

There is yet another way to become eligible for a higher spending limit. It is unorthodox and may affect your CIBIL rating temporarily, but if the objective is to ultimately improve the credit utilization of your credit card accounts, then this may work. If you have two credit cards from the same company, you may want to transfer the limit from one card to the other. This increases your limit and allows you to spend a bit more. However, ensure not to go overboard. Keep the utilization to below 30% to maintain a good CIBIL score.

A good credit score is paramount to staying on the good books in the financial world. It opens a world of opportunities for more credit and loans. However, it takes some financial discipline to be on the high side of 700. Half your battle for more credit is won if you have a good score.