Will My Job Hurt My Credit Score?

Money is an important aspect of life. You almost need money to complete every task in life. Where do you get the money from? That’s right, by doing a job. A good job can determine what you do, where you stay, what you wear and how your lifestyle can be. Your job can impact you in lot of ways both directly and indirectly.

Will it impact your credit score? Absolutely not! Your jobs, the designation, take home salary, bonuses, etc. does not get reflected in your credit report. This does not mean your salary does not have power on your loan buying process. For example, you are applying for a credit card; the lender will ask you for your annual salary to set a credit limit on your card. This way your job indirectly contributes when you apply for a financial product or a credit line.

So what exactly may hurt my credit score?

Payment history, debt levels, age of credit, types of accounts and inquiries on your credit report are the five main factors which contribute to your cibil score. Your employment status, your incomes and gains are never reported to the bureaus.

If unfortunately you lose your job for some reason, that can indirectly affect your credit score and you will end up on the loan defaulter list. Losing your job can be a saddest thing that can happen to you. You join a firm with a lot of confidence expecting your position will be intact, but when a bomb is dropped on you of unemployment, you are shattered everywhere.

Let us see how a job loss can indirectly harm your credit score,

Behind on loan EMIs and credit card payments

There is a famous proverb stating “Money brings Money”. When you happen to be in a job, there are a lot of bankers and card lenders who offer you different financial products like loans and credit cards. Though we know, they are just our want not need; even then we tend to go ahead with it. Because you have a stable job and a fat cheque, you start spending and get used to a lavish lifestyle. After losing your job, you realize that the EMIs are pending and the credit card bills are overdue and you have no money to make the payment. This will definitely result to a dip in your credit score.

Take new loans to pay your bills

Now that you know that you are in deep trouble financially after losing your job, you will opt for a new loan. A new loan will come with new terms and a new EMI, because it is an urgent requirement you may end up paying more processing charges than usual. You may also try to get in touch with your credit card vendor and ask for a limit raise. Limit raise totally depends on the sole discretion of the card lender, who will check your cibil score first and then think of giving you a limit raise.

 

Unexpected expenses

Trying to close one financial hole after another can be stressful but if in between this process something unexpected happens, like a family member needs medical attention then you are in for another problem in your life. This will result to you finding another loan to fill this gap.

A job hunt

Maintaining a good credit score is really important, even if you have lost your job. Many employers check your credit report to understand your financial capability and determine if you are job worthy. A bad credit score can cost you your next job. So no matter how bad your financial situation is, always pay all your debts on time.

You should always save money and keep some amount as reserve for unexpected events in life. Even if you lose your job, the reserve money can help you keep going for at least till the time you find another job. Spend less, always focus on what you need rather than what you want, this will definitely help you in long run to save money and live in financial harmony.

Why Should I Check My Credit Score?

While dreaming big, on buying things, it all revolves around how much money do you have. Nothing is for free! Whether you are planning for a house or a bike or a vacation or gold or the property, things are expensive. On a larger picture of say 10-15 years down the line, you see yourself achieving the dreams of properties or asset you want to acquire. But what if you want them now? The answer to this now is credit. Credits are available these days on an easy base compared to how they were earlier. The credits or the loans are a nice way of living your life now compared to how you had decided a few years down the line. Its not something that is offered to you for free. But it’s the plain logic of getting the amount of money in advance where you will repay it later with the interest on the amount. But in all, it’s a help which is to be got from banks or NBFCs or Private Lenders. It’s also safe to get it from a trusted party in order to get away from any chaotic situations later if you have borrowed the money from your friends or relatives.

How can one get these credits or the loans? With the standard procedures, you go to the bank, ask for the loan and know the details. The bankers would want to know the type of loan you want, amount of loan required and the tenure for the same. Once they get this detail, your credit score is checked. According to that, the loan amount is sanctioned and rate of interest is decided. Now banks can get the credit score when an applicant comes to them for taking a loan. But, is there any requirement for you to know the score?

Yes, it is really important for one to know the credit score. There are many reasons why you should know the credit score and check it periodically. Let’s look at them turn by turn.

  1. To stay credit healthy

                 We always take care of our physical health or financial health or emotional/mental health. But what is credit health? Credit health is a much talked upon topic these days. By the word credit health, means your credit report should be good. Your credit score should be 750 or plus. It takes efforts to stay credit healthy. You need to make proper payment on time of the credits you have taken from banks via loans or credit cards. You need to think and use the credit you have received else you can get into loan defaulters list. This is not much of a task, is it?

By checking your credit score regularly, you will come to know if your score is the same, or it has gone down or it has been increased. A regular watch will be an add on to the work you are doing in maintaining the credit health.

  1. To check if everything is in place on the credit report

                 If you have applied for a credit card, and it gets rejected saying your credit score is low. How would you deal with the situation? When you had checked the score last time, it was good enough and hence after taking a lot of time to think, you applied for the credit card. But what happened? It is advisable to check your credit score every 6 months. There can be a possibility if some one has stolen your identity, i.e. its an identity theft case wherein your details are used by someone to take loan and you are completely unaware about it. Or there are some mistakes in your report and you are clueless as you have not made those payments. So, in that case, you need to raise a dispute.

In any of the case, if your score is not reflecting how you had thought it should be, you have to check the score.

  1. Keeping an eye

Either you are new to the credit score or you are trying to repair the credit score, in either the case it is important to check the credit report regularly. RBI has passed a rule of giving 1 free credit report per year to any individual to all the bureaus. Make the use of such advantage and keep an eye on the score.

In any of the cases, to stay updated is best. If you are going through a new built or repair, regular checks are important. Don’t be lazy in such things and stay credit healthy!

How Will Mistakes Be Removed From Credit Report

One day, you plan to take a look at the most talked upon topic amongst your peers. The Credit Report. This is the first time you are looking for this report as some one told you that it is advisable to have a cibil score of 750 points to get better interest rates on loans and easier disbursal of it. You research a few website and you come to know that you can get a free credit report once a year. That adds a Smile on your face, as what you heard about the reports being expensive to fetch, the myth broke!

Now, while the process of applying for a free credit report, there are a lot of thoughts coming to your mind. What will be your score? How will it help you in getting better loans? What if your score is not good? What if you are in loan defaulters list? What if there is no score? Take a break! Know the basics of credit score. How is credit score calculated, various parameters of the score, what can take the score down, what are the mistakes one should not make, how to remove mistakes if already done?

Let us first know the Mistakes that can be reflected in Credit Report :

  1. Errors or the Report
  2. Things that lower the score
  3. Parameters on Which the score is calculated

Errors On The Report :

There are Major and minor errors which reflect on your report. To list a few; we have When the account you have asked to look into, is not your account, or PAN card is not updated properly, the account status is falsely updated, or there are ownership issues with the account, salary or date of birth or address is not updated or wrongly updated.

While you fetch the report, always check if your details updated are correct or not. If any issue, do follow the concerned department of the credit bureau and get them rectified.

Things that lower the score :

  • At times, a person does not pay the credit card bill, or he does not pay a few EMIs of his loan, and the interest keeps on building. At these time, to complete or close an account, the bank offers a lumpsum amount to the customer. While the customer pays this settlement amount, the loan/credit card outstanding vanishes, but it affects the score. If you are in one of the above mentioned conditions, try to completely pay the balance and not the settlement amount.
  • If due to some mishappenings in your financial conditions, you and the bank/NBFC agrees upon a loan tenure or EMI structure to be altered, you feel happy about it, but do not put the blush on too much as this also affects your score.
  • If because of any reason, the lender has filed a case on you, or u have put off your hands on payments, would also lower your score.
  • Bankruptcy also is a huge black spot on the credit score and requires almost a decade to get it off from your credit report.

Parameters On Which Score Is Calculated :

This is to be taken care of the most, so that you do not make any mistakes or if they are done, you rectify them!

  • How are payments done in past? If you have made payments on time, or if the are delayed. If they are delayed, then what was the reason for the delay and how long was the payment delayed, this is one of the parameters on how the score is calculated.
  • When a loan is taken or a credit card is applied, the payment methods are specific. Some have fixed payment module and few have a revolving payment module. For a good credit score, you should have both!
  • The total age of your account (loan or card) is a huge benefit on the score. Older the account and clear are the payments, Better is the credit score.
  • If, in any case, you apply for too many new credit cards or loans, that is taken as credit hungry behavior, and can take your credit score tremendously low!
  • If you have many accounts which are not paid on time, make sure you start paying them as soon as possible, else it will also wreck your score.
  • Debt to income and income to expense ratios generally checked by the lenders while giving a loan to the customer.

The above given information is on how and what to check and do to increase the score or maintain the current one. Also, there are different places where its mentioned how not to fall in a trap to avoid the dip in your score. However, If there is any place you have missed which might take your score down, do not worry! Have patience, and work on them. If you are unable to understand, consult a credit counselor and take the help! Remember “A Wise Person Is The One Who Takes Help When It’s Most Required”. So, do not feel ashamed, to ask for help in rectifying the mistakes which you want to get removed from your credit score.

Length of Credit History vs. Late Payment History, where do you stand?

All of us would have had history as a subject in school. And many of us would also have cribbed about why to learn about something that has gone past. However, the fact is that history is something that all of us have a lot to learn from. We can improve our present by reviewing our past. Goes without saying that our present is an outcome of our actions in past and studying our past does help us in taking better decisions at present.

You must be wondering how is this related to your credit profile. It indeed is. There are two important historical trends that make or break your credit score. In fact these two have the potential to either put you at a position where you are able to save lakhs of rupees or can become part of the loan defaulter list. The two important historical trends that we are referring to here are “length of credit history” and “late payment history”. Let us look at these two important aspects and how do they impact your credibility.

Length of credit history

The length of your credit history means that how long you have been holding a trade line. This is one of the most important aspect reflecting on your credit report that makes your healthier on credit front.

To explain it better, let me put you in a situation. Two known people approach you for Rs 10,000 each. One of them has been known to you for a few years now and you are aware of his history of borrowing money  few times and also about his commitment to repay as soon as the salary gets credited. The other one is a new acquaintance who has joined office about 2 months back and you do not have much awareness about his past. Who would you be comfortable in lending your hard earned money? I am sure your answer would have been the first one.

Similarly the length of credit history reflecting on your CIBIL report helps in establishing a comforting factor with the underwriter of the lending institution. A person who has enjoyed credit facilities from various banks for years v/s a person who is new to credit makes a lot of difference in the process of evaluation.

But the loans keep getting closed over a period. The fact also remains that you would want to pre-close it in case you have some funds available with you. So how to manage the length of credit history? Do not close that old credit card that you may feel has become obsolete in terms of its features. Continuing with that credit card will only help in keeping your credit scores healthy.

Late payment history

While the underwriter evaluates your loan application, the way you have managed your credit in past becomes the single most important factor that can lead to approval or rejection of the application. How have you faired against the payments would lead to impacting the outcome.

Again referring to the above example, if the first person who you had known for a few years had only paid other friends after some follow up or has had defaulted on even one friend’s loan (while paying the others in time) you would be skeptical on extending him with financial help. Just like you, even the structured lending institution would be apprehensive of giving a line of credit to an individual who has had default reflecting on the bureau report. Thus it becomes very important that all loans and credit card payments are happening in time without any delay.

Your length of credit and your repayment history are the two most important pillars of your credit profile and must be maintained. In the absence one may not have access to funding at the time of need.

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.

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.

 

 

Dummies Guide to the CIBIL Defaulter List

CIBIL defaulter list

Being credit healthy is the key to an individual’s financial fitness and in today’s times is an important aspect that cannot be overlooked. Whenever you apply for a loan or credit card, the first piece of information that a lender considers is your credit score, an integral part of your credit report. Not just restricted to loans any more, globally credit scores are used by telecom and insurance companies to evaluate prospective customers as well as employers as part of the hiring process. Landlords too factor in the credit score when deciding whether to rent out property to an individual.

What is a credit score? Does it differ from a CIBIL score?

A three-digit indicator ranging between 300 and 900, a credit score tells a lender about an individual’s creditworthiness, and whether lending to a person would be risky. Higher your score better are the chances of your loan or credit card application being approved. A credit score is generated by a credit information company, or credit bureau, based on the information provided by its members (banks and financial institutions).

In India, there are 4 credit bureaus licensed to operate by the Reserve Bank of India, namely CIBIL, Equifax, Experian and CRIF High Mark. Of these,the oldest bureau of them is CIBIL and hence credit scores are often called CIBIL score colloquially. However, all bureaus generate scores, and you can avail of a report from any or all of these bureaus.

What is a CIBIL defaulter list?

When a person defaults on a loan, i.e. fails to make payments towards EMI or does not pay off credit card outstanding, it eventually becomes a payment default. Categorised into buckets, a lender will take increasing action as the number of days past due also increase.

When an individual defaults, the lender puts them into a loan defaulter list, which may then make it difficult to avail of credit subsequently. These lists are often shared with other financial institutions as well.

However, CIBIL itself does not maintain a loan defaulter list. This is because CIBIL does not generate the information in the CIBIL report itself, it is based on what its members i.e. lenders provide. Hence, CIBIL will neither modify information in the report of its own accord, nor classify any customer as a defaulter.

If you wish to get your name struck off from the lender’s loan defaulter list, consider getting in touch with the lender and working out a suitable repayment solution. What you would then need to do is contact the concerned credit bureau (where the data has been reported) and file a dispute.

How do you raise a CIBIL dispute?

The first step would be to call for a copy of your CIBIL report, at a nominal fee. With a quick and hassle-free process, your credit report would be delivered to you within a short time span. Once you have the report, go through it at length and check for any discrepancies. Remember, every small error in your credit report can have a negative impact on your score; hence it is imperative to ensure that all the data contained in the report is accurate.

There can be various types of inaccuracies in a report, for example, basic information such as your name or date of birth could be incorrect. However, what impacts your score is incorrect account information, and this requires immediate rectification. Let us assume there is a loan account on your report that you are not aware of: you could well be a victim of identity theft in this instance, wherein your personal information has been used to avail of a loan by someone else. However, any default in payment on such a loan will continue to reflect on your credit report. It is also possible that owing to an ongoing dispute with a credit card issuer, you have not made a payment as per the due date. However, even after settlement of dues it is possible that the credit report shows a skipped payment, as the records have not been updated.

How is a CIBIL dispute resolved?

When you identify an error in your report, contact the credit bureau at once. With easy to access online dispute redressal mechanisms, it is easy to initiate the process. Of course, do remember to have concrete proof – such as a payment acknowledgement from the lender – when you file a dispute. CIBIL will then take this up with the concerned lender, and depending upon the lender’s decision (whether to accept or reject the dispute), corrected data will be sent back to CIBIL. This entire process can take up to 30 days, depending upon the time taken by the lender to revert to CIBIL.

In conclusion

Seeing the necessity of maintaining a clean and good credit history, you should check your report at regular intervals and ensure that there is no incorrect information therein. Else, do make sure that you raise a dispute and have the same rectified, in order to be able to avail of the best credit solutions when you actually do require them.