How is my Credit Score Determined?

A credit score plays an important role when you apply for a loan or any line of credit. It’s a three digit number which is used by the banks or lenders to evaluate whether or not they should sanction your loan. It is important to understand what your credit score is before applying for a loan, so that you have an upper hand in loan negotiations i.e. interest rates, processing fees etc.

Imagine you have applied for a loan and your loan gets rejected. You have been told to apply for a loan after you build a good credit score. Many questions will cross your mind like, what is my credit score?  How to check cibil score? How do I improve it? Now this is the tricky part! A credit score is a compilation of a lot of factors associated with your financial things.

Today we will set sight on how a credit score is determined,

Payment History

The most important factor which contributes to your cibil score is your payment history. It accounts for 35% of your score. It is a compilation of factors like : your account information, any default payments, how long the default payments are carried forward, if you have filed for any bankruptcy in the past, etc. If you would like to see a good hike on your cibil score, you should make regular payments to the lenders and make sure you do not have any default payments.

Your balance payments

The credit bureaus have each and every financial detail of yours. They monitor your financial activities on regular basis. Your credit score also gets influenced by the amounts owed by you to the banks or lenders. For example, you have a credit card and its limit is around 1 lakh rupees, imagine you have spent a fortune on the same and when the due date arrived, you converted a lot of transactions into EMIs. This way you have blocked your limit at the same time you owe a lot of money to the bank and the same is reported to the bureaus. It contributes a whopping 30% to your cibil score! It’s better to spend less rather than spending more and facing financial instabilities

Length of Credit

Building a good cibil score is a lengthy process and you need to start somewhere or the other. Once you have applied for a loan or any other financial product like a credit card your transactions start getting recorded with the bureaus. Various accounts have different accountability to your score. For example, if you applied for a home loan, the loan account will be active for at least 15 years. On the other hand a car loan lasts maximum for 5 years. Let’s take a credit card for example. It does not have an account expiry date and you can use the same, until the time you don’t want to close it. It contributes 15% to your credit score. In any case, do not close your credit card account, as that will influence your score under payment history section.

Number of inquiries

We understand there are a lot of financial products available in the market. Some of them so mouthwatering, you would definitely like to get it. Did you happen to know, for each financial product inquiry; your cibil score is being checked? The more inquiry you make with the bureau, the more your chances are to get your cibil score down. As there are a lot of products in the market, only go for the product which is tailored to your need and try making fewer inquiries with the credit bureaus.

Types of Credit Used

There are various credit accounts with which you can be associated with. The cibil score is also determined with the types of credit accounts you hold like, loan accounts, credit cards, etc.

This is just tip of the iceberg as far as credit score goes. It is important to know all these factors and how they contribute to your cibil score. But what’s more important is how you are managing your finances. The more you are financially responsible, the more you have chances of getting a loan without any hassles.

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4 Different Credit-Scores You Should Know About

The first rating agency in India was established in the year 2000, which makes the history of credit health assessment in India less than two decades old. Since then three more credit rating agencies have been set up in India; thus now there are four different agencies then rate individuals based on their credit behavior and credit history. Although while the basic tenets of rating remain same, there might be few differences in their scoring model and also some other aspects. When you seek a loan, the prospective lender can seek the credit report from any of these four agencies. Thus it is important that one knows the basics that pertain to these different scores that one may have.

What’s in a Name?

The lender can seek the credit report from any of the four rating agencies to judge the credit health of the applicant and scores from all of these are valid. The rating by all agencies is done based on five factors that includes : the repayment history for paying credit card dues and EMIs, hard inquiries made by lenders, credit utilization, credit mix and the length of the credit history. The information supplied to all the agencies by banks and FIs are also same. However, there still might be a minor difference between the scores of all the four agencies due to the weightage that might be given to each parameter which may cause a variation of 5 to 10 points between scores of two different agencies but not more than that.

However, if you follow the basic tenets of being a responsible borrower then you will have a healthy score across agencies and if you want to increase credit score be sure to check what is included in the score calculation. When lenders seek a report from any of these agencies they are aware of the difference in the rating models of each of them and they will keep this in mind when evaluating the CIR of the customer.

As per the RBI guideline, all rating agencies have to provide a free report once a year to all customers who ask for it. The cost of getting the reports (mentioned below) is if you need another report after getting your free one in the same year.

  • TransUnion CIBIL Ltd:

It’s only fair that the first credit rating agency we talk about is TransUnion CIBIL. CIBIL was set up in the year 2000 and was given a license by RBI in the year 2009. TransUnion acquired an 82% stake in CIBIL in 2016 and hence it is now known as TransUnion CIBIL.  The score ranges from 300 to 900.  You can get a report and score by paying Rs. 550; you also could opt to take the option twice or four times in a year or just get the report for Rs. 159. Report is sent in 7 to 10 days; if online verification is successful then you can do a CIBIL score check through email too.

  • Experian Credit Information Co. of India Pvt. Ltd

This rating agency was set up in the year 2006 and was given a license by RBI in the year 2010. The rating agency had a different range of scoring but now they also score in the range of 300 to 900. The report can be sought by paying Rs 138 or the report and score both can be bought online by paying Rs. 399. If you send the request online you can receive the report immediately via email, an offline request may take up to 20 days.

  • Equifax Credit Information Services Private Limited

This agency received its license in 2010 and it also scores between 300 and 900. Basic report and credit score can be obtained by paying Rs. 138 and Rs. 400. Reports are sent within 7 to 10 days of the request being sent.

  • CRIF High Mark Credit Information Services Pvt. Ltd

High Mark was established in 2007 and received the license from RBI in 2010.  High Mark also had a different scoring pattern earlier but now just like the other three agencies above their scores also range from 300 to 900. You can get the report and the score by paying Rs. 399.

All the agencies have a defined and well laid out dispute resolution mechanism. So if you find out there is a difference of 50 points or more between score by two agencies be sure to find out the reason for this discrepancy.

How to Save Money on Your Loans and Improve Your Credit Score in the Report

Loans are part and parcel of our life these days. Anyone who is financially prudent seeks loans to build assets and lead a lifestyle of their choice. Your ability to borrow is not limited to what you earn every month rather your ability to manage finances is something that defines your credit worth. In fact the colour of your credit report indicates your credit health.

Most of us use multiple credit accounts these days like credit cards, auto loan, home loan, personal loan, to name a few. The appetite for credit is not limited to day to day requirements and many of you would desire more loans such as student loan, travel loan or business loan. You can practically borrow for any purpose these days. However your past credit history define if you could borrow more or not.

Anyone who has a current mortgage or multiple loans would probably be using enough of his credit limit. To borrow more you would need to save on your previous loans and create a gap between what you earn and what you are utilizing. It is important to know how to save money on your loans and improve your credit score in the report.

The higher is the score, higher is your loan eligibility. Thus you should always pay attention to your CIBIL score calculation and assess your credit report at least twice a year. Factors that help your credit score include: regular repayment of loans and credit bills, credit utilization ratio, length and age of credits, credit mix and history of loan queries.

Saving on Loans and Improving Credit Score in the Report
One of the smart ways to increase your credit score and avail better rate of interest on a long term loan is by closing your previous loans. By prepaying your previous loan you would build a good history and boost your credit score.

If you are planning home purchase and need loan for the same, the lender would assess your credit history before offering the loan. With low CIBIL score or not so perfect score your low eligibility is low and you could be offered interest on higher rate.

However by prepaying your previous loan you would be marked as a potentially worthy customer and your loan application would be approved. Likewise prepayment of loan also saves you enough money.

To understand how let’s take an example.

Mr. Rajeev Shukla is an IT professional and he has savings of Rs 1000000 in his bank account. His net monthly income (after tax deduction) is Rs. 80000. He spends Rs 10000 as credit card expense every month which he diligently pays before the due date every time. He pays Rs 6000 as his car installment which is calculated at 9 percent of interest every month. The auto installments are due for next 4 years. He wants to prepay auto loan, but he has 4 per cent pre-payment penalty if he pays before one more year.

Mr. Rajeev decides to prepay the auto loan as he plans to raise a home loan of Rs. 3000000 after six months.

By prepaying his auto loan Mr. Rajeev reduces his debt to income ratio. This leaves additional credit limit and makes him eligible for more loan. It also gives him more flexibility to pay for his next loan installment. If he has additional six thousand to pay for loan installment every month he can either have a bigger loan or reduce the loan duration by having bigger installments. Also he can use this money for raising student loan for his daughter’s higher education.

Now coming on to prepayment penalty of four percent, how would he compensate that additional prepayment charge? By prepaying the loan he actually saved five percent which he would have paid as interest in the due course of time. If he could manage to get a better interest rate on his home loan for next 20 years he would further save.

By prepaying loan you would not only save money but also improve your score and worth. Thus a financially prudent person looks at his money from its worth for his future plans and never values it conservatively on its current purchasing power.

The 4 Things That Affect Your Credit Score

It’s foolhardy to underestimate the significance of CIBIL score. You might be earning a sizeable income and have multiple assets to your name, but if your CIBIL score is not up to the mark, you can lose the very chance of obtaining a personal loan, home loan, or rather any other type of credit from a bank.

Fortunately, it’s never too late to start caring about your CIBIL score calculation. So, if you want to become more careful with your credit usage, it can help to learn about the top 4 things that affect your CIBIL score:

  1. Payment History

Late payments are often the biggest reason behind a low CIBIL score. These include credit card bills, loan EMIs, etc.

When you don’t pay your credit card bills, etc. on time, it reflects irresponsibility towards money management. Moreover, it shows that you can’t be trusted with credit. Thus, credit rating companies such as CIBIL, Equifax, etc. can deduct a large number of points from your score.

If you want to increase credit score in the fastest way possible, then just start paying your bills on time. Set up reminders on your phone if need be, but make sure that you don’t delay a single payment ever.

  1. High Credit Utilization

Credit utilization plays a big role in CIBIL score calculation, but what’s it exactly?

Credit utilization is the ratio of the amount of credit you spend every month on average to the amount of total credit available to you.

For instance, if you have 2 credit cards, with Rs. 50,000 credit limit on each, then the total credit available becomes Rs. 1 lakh. Now, if your monthly expenditure with the cards is about Rs. 60,000, then the credit utilization ratio becomes:

60,000/100,000 = 0.60 = 60%

If your credit utilization ratio is high, then it can have a negative impact on your score. Although the exact threshold varies from one credit bureau to another, usually it’s around 35% to 40%.

So, by lowering the credit utilization ratio you can increase credit score. The following are two ways you can do that:

  • You can stop using your credit cards frequently. Instead, make payments via mobile wallets, net banking, or even cash.
  • Get a new credit card so that the overall limit is increased and the credit utilization ratio is lowered.
  1. Credit Report Discrepancies

When was the last time you checked your CIBIL report? If there are any mistakes in your personal details, banking data, etc. in your report then it can affect your CIBIL score calculation.

To make sure that your CIBIL report doesn’t damage your credit score, it’s important that you go through an updated copy every now and then. The following are some of the things you should look for: unfamiliar credit card/loan accounts; discrepancies in payment history, personal details, etc.; and false tags such as “settled account”, “defaulting”, etc.

  1. Too Many Loan Requests

When you need a personal loan or a home loan on an urgent basis, then it’s natural to assume that submitting multiple applications to multiple banks can greatly increase your odds of getting an approval from at least one lender. However, nothing can be further from the truth.

When you send out the loan applications at the same time, credit bureaus sense an urgency in this behavior which is not good from the lender’s perspective. Thus, your score could take some damage by this.

In other words, rather than increasing the possibility of you getting a loan, sending multiple loan applications around the same time, can, in fact, lower your odds even further.

If you really want to make sure that you get a loan in the first few attempts, then you must check your CIBIL report first. If it’s all good, you can get a loan without a problem. If it’s not, then you can improve it first, and apply for the loan only after that.

So, these were the most common things that can affect your CIBIL score. Be sure to adjust your credit behavior accordingly so that no only you can prevent your score from any damage, but rather increase it even further.

3 Strategies to Help You Save Money Now and in the Future

When you are young and just started out in the world, it’s easy to think that money is nothing and spend what you earn. Have you ever given a thought that saving money will not only help you build a secure future but also will add supplement when you make huge plans for life. In this decade we are living in, we are surrounded by a lot of unwanted things and the temptation to have them all. What we do not understand is we are spending a fortune on luxury without giving a thought on the future. These practices lead to bankruptcy and result to taking a loan and if you do not pay your EMIs on time your credit score will go for a toss. Do you know your cibil score calculation? And if you don’t, then steps to enhance your credit score?

How does the temptation to buy or spend on luxury things rises? In every group there will be friend who buys the latest IPhone every year and flaunts it whenever you meet. It gives you a thought, should I buy the same phone to live up to my friend’s standards and end up buying a similar phone. What you do not realize is that, just for sake of status you spent a fortune on a phone which will prove worthless after a year when a new model releases and then you will be going after that phone as well.

Just to avoid such perceptive buying and spending, today we will be sharing you three best strategies to lower your expenses and save for a better future,

Set your priorities straight;

Everyone has their own priorities; the priorities can be of two types and can be categorized into needs and wants. Try understanding your needs over wants, for example buying a car for your commute is a need but buying a Mercedes or a BMW for your commute is a want. You can always cut down on a lot of your wants and start contributing for what your needs are. Make a priority list of things you need with the age when you expect to achieve it. We can set some priority points which are common in everyone’s life and you can start from this,

For emergencies you do not know what can happen at any time, always be prepared for the worse. It can be a broken mobile screen; you lost your job in some company and need at least three months of financial backup, any medical emergencies.

For Education a good education plays a vital role in everyone’s life and where does good education come from? It comes from great educational institution. Instead of opting for an education loan try saving money for the same.

For home buying this is a big step in your life, buying a dream house is no joke, there is a lot of planning and savings involved in the same. If you start saving money from today who knows you may land up in your dream house without hassles of taking home loan.

For retirement after a long innings in your money making life, you will be expecting a comfortable life after retirement so you can save for your retirement and spend the rest of your life in financial peace.

Always plan to save

 We all know nothing is impossible without proper planning; the same goes with financial planning where you are supposed to make plans on savings and track them on a regular basis whether  you are adhering the same.

Build a budget for saving every month is not the same, you may encounter emergencies and you may have to spend your savings but building a budget will not harm you. Build a budget you would like to save from your earnings and stick to it. One tip: try saving in a bank account with no debit card and internet banking so that you do not tempt to use that money for luxury.

Track your expenses after you make a budget track your expenses, where you are spending, how much you are spending. If needed cut some luxury of availing public transport for short distances, go by walk.

Make secured investment these days you can make secured investment like fixed deposits, recurring deposits and so which will guarantee you good returns in short tenure.

Stick to your plan

 It’s just like a new year’s resolution where you promise yourself to get fit this year and workout a good two weeks and after that stop going to the gym and your resolution goes for a toss. If you have made a financial plan stick to it no matter what.

Something is better than nothing is the quote we should stick to, and start saving from today. You do not know what life has for us; it can be sweet pleasures or bitter pain. For such bitter pain be prepared and start saving from today.

Bank Pulling Your Credit Report? Wait, Don’t Freak Out

Unless you seek to borrow funds from your friends or relatives or from a lender who is not a part of the mainstream organized financial structure you cannot circumvent an inquiry into your credit score. Thus whenever an applicant applies for a loan or a new credit card the prospective lender will seek the applicants credit report to assess their credit health and then based on that they will decide whether to accept the application or not. Credit check is not only a part of the screening process used by lenders when assessing potential candidates but it is the first step in that process. So the borrower or an applicant can do nothing about a financial institution seeking their CIR when applying for credit. However is this a cause of worry?

Impact of a Bank Pulling Your Credit Report:

Banks or any other lender seeking the applicant’s report is part of the screening process and is beneficial to both the lender and borrower. Lenders can eliminate applicants who pose a threat of default as may be revealed by their credit score and for the borrower it means a more objective process of screening which is not based on subjective factors. So what happens when a bank pulls the CIR of an individual?

A credit report consists of various sections and each section has information related to that aspect respectively. There is a personal information section which will have details about name, contact details and so on for the person; the accounts details section will have details about home loans, personal loans, auto loans, all credit cards that a person may have and so on while the inquiries section will have details about the inquiries that have been made about the credit score of the individual. Thus which financial institution sought the report of the applicant and when will be recorded in this section.  There are five aspects that are taken into account when the credit score is calculated. Inquiries information is one of the five factors and each inquiry can cause the credit score to fall.

So is there a Cause of Worry?

Despite hard inquiries causing a dip in the credit score there is no reason to worry about it when a bank seeks the CIR. This is due to a couple of reasons; the first reason being that each hard enquiry will cause a dip of only five points or so in the score. The actual impact will depend on some other aspects also; if there are few accounts and the credit history is not very deep then the impact of each hard inquiry will be slightly higher. When there are a larger number of accounts and the credit history is deeper then each inquiry will have a comparatively lesser impact on credit score.

Though hard inquiries are taken into account when calculating the score but their weightage is only 10% thus their actual impact is very less when compared to other aspects like repayment history and credit utilization ratio. Thus if one has been responsible in paying their dues on time in the past and has also been a responsible credit card user their overall score is expected to be good. If there are missed payments, high credit utilization ratio and too many unsecured loans in the credit report then there is not much that can be done. In such a scenario a bank pulling your report will just worsen the score slightly.

So unless one makes reckless applications for loans there should not be a cause of worry.  When calculating the score only inquiries that were made in the past two years are considered which should reduce the stress level for any applicant.

When applying for a loan the applicant should ensure that they check the eligibility criteria of the lender so that they are sure of their application being accepted. Also stay away from applying for a loan or fresh credit unless absolutely necessary, this will save you from unnecessary hard inquiries and any impact on the credit rating.

Employers Are Using Credit Checks for Hiring, Hope you are not missing on Good Jobs!

A CIBIL report is like a financial report card that keeps track of your borrowing behaviour. It details the loans that you have taken, your payment patterns and other details relating to your credit history. This information is for sure useful to the banks who use it to evaluate your credit worthiness before granting you loan. In fact the CIBIL score and report have become an integral part of most bank’s loan approval process. But is this information of any use to your prospective employers? It seems very unlikely that your employer would be interested in knowing such details. He should only be concerned about your education qualification, experience, skills and aptitude required to do the job successfully! Right? Wrong!

You may be surprised to hear this, but there are quite a few companies especially in the financial sector who check the credit history before hiring an individual. You may think that your financial health has nothing to do with your capability to perform a job well, but some employers think differently. So next time you go out looking for a job, you need to worry about one more thing apart from your resume and interview preparation; that’s your CIBIL score and report. This practice of reviewing the credit history as a part of employee background check was prevalent in many western countries. Slowly this is gaining acceptance in India as well especially in the financial sector. It will not be long when companies across all sectors will use this as a standard practice.

For what kind of roles is credit check more prevalent?

Positions with financial responsibility, senior executive positions and roles that require handling of confidential or sensitive data usually involve credit checks. Many private sector banks like IndusInd, Standard Charted and DBS bank check the CIBIL report as a part of the thorough background check that they perform before offering a job. Such checks are usually performed for hiring for sensitive roles in an organization.  The rationale behind these checks is that if a person has defaulted on loan payments or not settled credit card dues since long, he may not be considered suitable for handling customer’s funds. Employers use this data to judge how responsible and financially stable you are.

So if your credit report is not in good shape, now is the time to work on improving CIBIL score. As the job market is becoming more and more competitive, companies are analysing the candidates profile more deeply to select the most suitable person for the job. A low CIBIL score may hinder your chances of getting hired for your dream job.

A CIBIL report which shows 100% credit utilization, significant levels of debt, late and missed payments and delinquencies indicates the irresponsible attitude of the individual. If the report shows many settled dues, bankruptcy, foreclosure then you may be seen as an individual with bad intentions. Companies refrain from hiring such individuals as they believe that poor financial health of an individual will have an adverse effect on his or her performance levels at the job. On the other hand a good CIBIL score and report is associated with honesty, integrity and responsibility towards one’s obligations.

What and how can the employer check credit details

Your credit score and credit report are two different things. Your report does not display the three digit number. Your employer can only check your credit report and not your score. Secondly, they cannot do a credit check secretly behind your back. They can do so only after seeking permission from you. The employer will ask you to authorize him and give a written consent to allow him to have a look at your report. So when you sign the authorization documents, you will know that your credit profile will be evaluated. You may refuse a credit check, but then the employers may reject your job application on the grounds that they were unable to complete their screening process.

If you have negative information on your report what should you do?

If you have questionable items on your report, inform the employer before hand as to what they can expect. You need to be prepared with an explanation for the negative record. Companies would want to know how you took charge of the financial situation when you were faced with adversity. Explain what you did to rectify the situation.

Bottom Line

Having excellent skills for the job is no longer enough to guarantee a placement. Employers have adopted the practice of checking CIBIL report to analyse your trustworthiness and attitude towards your responsibilities. So keep a check on your CIBIL report and improve CIBIL score. This will improve your prospects of landing into a good job when you are competing against other equally qualified candidates.

Four Steps to a Healthier Credit Report

Credit scores are important as they are not only an indication of financial well being and discipline but it also a crucial factor in getting a loan application accepted or rejected. Thus it makes sense for you to be aware of what contributes to making a good or bad credit rating so that you can aim to have a healthy credit report. Here we look at a few aspects that contribute to a healthier credit score.

How to Get a Healthier Credit Score:

Five factors impact CIBIL score calculation and taking care of these factors will ensure that you have a good rating that will allow you to have access to credit if you so require.

  1. Ensure Timely Payments: This is the most crucial factor in the credit score calculation. Thus paying on time is the best way to a healthier score. So whether it’s the EMIs or credit card bills remember to always them before the due date or by the due date. This simple rule will go a long way in maintaining a good score. If you have not done this in the past it is never too late to remedy your ways. While paying on time going forward will not immediately improve the score but it will have a positive impact over a long period of time and the negative impact of late payments each month will reduce. Plus it’s a great way to get you off the loan defaulter list and better your chances of getting a loan approved.
  2. Use the Credit Cards Wisely: Credit cards come with a sanctioned credit limit; this is the maximum amount that the user can spend without paying the dues. Thus if your card has a sanctioned limit of Rs. 100,000 then this means you have access to credit up to Rs. 100,000 per billing cycle. However this does not meant that you actually need to spend an amount equal to the sanctioned limit. Actually it is good idea to keep the spending below or equal to 30%-35% of the sanctioned limit on a regular basis. A low credit utilization ration (usage/sanctioned limit) has a positive impact on the credit score and after the credit repayment history it is the most important factor when calculating the score.
  3. Eliminate Old Dues: If one is looking at getting a healthier credit report card then it is mostly a long term process. Improving the rating takes time but eliminating old dues is something that can have an immediate impact if done correctly. If you have pending dues that are reflected in your CIR then take care of them in the right way to see an improvement in the score. When you repay old dues remember to pay the entire amount and in case you do negotiate with the lender then do ensure that the lender does not report it is “settled”. A settled debt is never a good sign and would not improve the score and may have an opposite impact. Having said that paying an old debt does not mean that the delays and missed payment are removed from payment history but the debt will not show as an overdue amount in future reports which is bound to have a positive impact.
  4. Avoid Credit Enquiries: Needless to say one must apply for a loan only when one requires it! Each time one applies for a loan the prospective lender seeks the credit report of the applicant. This is known as a hard enquiry; enquiries are one of the five factors that influence the CIBIL score calculation. Even when one needs a loan and applies for it then make sure you make a thorough check about the lender’s eligibility criterion and the required documentation. This will ensure that there are no unnecessary credit enquiries and you apply to lenders only where you have a fair chance of getting the loan application accepted.

Staying credit healthy should not be something that one does once in a while and them forgets about it. Inculcating healthy credit habits and being financially disciplined ensures that one remains credit healthy throughout! Just like are financial and physical health we need to take care of our credit health too.

Buying Your First Life Insurance Plan? Here are Things to Keep In Mind

Life is the most valuable asset for anyone and we all shudder at the thought of losing someone we love or for that matter about the loss that our loved ones would endure in case of one passing away.  Though one cannot do anything about the emotional loss that befalls the family in case of death of a loved one but one can take measures to ensure that they do not suffer (especially in the case of dependents) any financial hardships. This is where a life insurance policy comes in; the right life insurance policy would make sure that the dependants are taken care of financially in the event of death of the primary or sole breadwinner. So what should you keep in mind when buying your first life insurance plan?

  • What Life Stage are You In?

If you are buying your first life insurance plan then most likely you are at a stage in life where you have started working recently or have just started a family. However there may be times when you may have missed getting an insurance policy then; better late than never. Each life stage has different requirements and since a life insurance plan is bought primarily to take care of the dependents you need to keep their requirements in mind. As life stage changes so does the number of dependents and the requirements of the family. Insurance needs will be different for an individual who is recently married, both partners are working and they do not have any kids as compared to an individual who has spouse and two kids to support. As the life stage changes so should the insurance cover.

  • How Much Life Cover Do You Need?

The amount of insurance one needs will be dependent on your life stage, your lifestyle and your liabilities too. It is possible that two individuals who are at the same life stage may have different liabilities and hence their requirements may vary. The rule of thumb says that the insurance cover must be ten times the yearly income but there are various methods of calculating how much cover one should have. If one has a loan to service then that should be taken into account when calculating the required life cover, the number of dependents, their education and other requirements etc also must be factored in.

  • Which Plan Suits Your Requirements

There are numerous plans available to take care of the needs of an individual. Term plans give high coverage at low premiums as they are pure insurance plans. Endowment or money back plans guarantee a saving corpus by paying regular premiums and they also provide insurance cover. ULIPs help in wealth creation, though insurance is also provided but the cover provided vis-a-vie the premium is pretty low.  Insurance premiums are dependent on the age, medical health and of course the amount of cover one seeks. Another factor that may impact the premiums is the CIBIL score! Based on the CIBIL score the company will calculate its own insurance score which will indicate the likelihood of a claim. Choosing the right plan based on your requirement is important; for somebody who has just started working and has no liabilities an endowment plan or ULIP could be an option but for someone who wants maximum insurance at lowest premium the Term Plan is the best bet!

  • How is the Claim Process?

As we said earlier an insurance policy is bought to serve the needs of the dependants in the absence the breadwinner. However the policy would be useless if the family is unable to get the funds when they require or the process is too complicated for the family members to follow.  Thus before buying the policy check about the claims process, what is required, how much time it takes and other important aspects related to filing a claim. Do not forget to check the Claim Settlement Ratio of the company as it will give you a fair idea about how the company is at processing claims; it obviously makes sense to choose a company that has higher settlement ratio.

So if you are looking at buying an insurance policy, do keep the above in mind. Also do not forget to try and focus on how to improve CIBIL score so that you can buy a policy without paying higher premiums. A suitable insurance policy is very important for every individual.

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.