Tips for making your marriage a financial success

Marriage means a couple coming together with a common outlook about the future. Couples should always plan their solo, as well as joint finances. Without appropriate financial planning, the financial health of the couple could suffer in a big way.

Life partners always maintain two distinct credit records and histories. Both husband and wife should ask for their individual credit information reports (CIR) from a known credit information company such as Credit Information Bureau (India) Ltd (CIBIL) and study them properly. Most of the couples after marriage jettison an individualistic credit strategy in favour of a joint one. In such instances, it would be wise to study the individual CIRs and decide on the steps necessary to improve their financial health.

A favourable credit report or a healthy credit score is essential to borrow money from lenders easily and on better terms. It will help to have a decent repayment track-record, whether the married couple plans to access a home loan or a car loan. Banks will sanction their loans based on the credit information report and an accompanying credit score assigned to them. The credit scores of individuals fall in the range of 300-900. Those with a credit score of 700 or higher can expect to borrow money easily from banks.

However, maintaining a credit score of 700 is anything but a cakewalk. The steps enumerated below are small ones but can go a long way in bolstering your CIR.

Timely repayments

All repayments, including missed ones, are kept track of in your CIR. Missing payments or high amounts of accumulated dues are viewed as negatives for your credit report and credit score. One should always be meticulous in paying EMIs and credit card dues on time and in compliance with the terms agreed upon at the time of borrowing.

Joint, Co-Signed & Guarantor credit accounts

It is worthwhile to keep a track of all joint loans or of loans where you have stood as the guarantor regularly since you are equally responsible for missed payments. Carelessness of the joint holder could hamper your chance of accessing credit/borrowing when you need it the most. Credit/Loan applications

Inquiries that lenders make regarding your CIR with CIBIL when you apply for credit/loan can affect your credit score in India. Too many inquiries could mean that you are borrowing excessively, and you could end up being perceived as somebody in financial trouble. It would be wise for married couples to apply jointly for loans rather than as individuals.

 How to improve scores?

Lenders look at defaults from the perspective of how recent they are. Thus, though defaults are viewed as a blemish on your credit report, they should not impact your credit score if your loan repayments and credit card payments have been timely of late. In the case of couples, one partner having a healthy credit history can compensate for a slightly poorer record of the other partner. Individual credit scores of married couples are viewed as complementary when they agree to accept joint responsibility for a loan.

Credit score is impacted both by positive and negative steps you take. Banks allow individuals to rebuild tarnished credit histories by availing secured credit. A credit card that can be secured with a bank deposit is one such instrument that helps improve a credit record.

Telecom payment details may get linked to credit scores

Mobile bill payments may become part of CIBIL’s evaluation

The credit rating analysis of CIBIL, India’s premier Credit Information Company, may soon involve lenders scrutinizing mobile phone bills’ payment details of customers to gain a better insight into their credit history. If you have carelessly defaulted on your mobile phone bill payments, your credit scores could suffer, and this would impact your chances of securing a bank loan or even a credit card.

Credit Information Bureau of India Ltd (CIBIL) assigns credit scores in the range of 300-900 to individuals along with providing them a detailed Credit Information Report of their credit history. The higher the credit score, the easier it is for a customer to borrow money from the lending institutions across the country. It is recorded that almost 80% of loans are sanctioned to those individuals who have a credit score of 750 and above.

Telecom, bank defaults have strong correlation

Top officials at such Credit Information Companies feel that the reason is not far to seek. Globally, there is a convincing correlation between telecom payment defaults and banking defaults, they say. By seeking details on telecom payments, insurance premium payments and other utility bills helps Credit Information Companies offer a comprehensive look at the consumer’s behavioral pattern with respect to credit which can forewarn lending institutions of the individual’s willingness to repay.

Looking at the mobile penetration in the country, sharing of telecom payment details ought to help improve credit profiling of consumers. Private telecom operators have been requesting CIBIL for years to get mobile phone payment details into the individual’s credit history to get the customer to realize the ramifications of defaulting on payments and also enable easier collection of dues.

CIBIL data used for deciding credit limit on post-paid connections

Telecom operators are presently using CIBIL’s credit score along with the client’s ability to repay to take a decision on post-paid limit for customers of mobile connections. When a customer applies for a post-paid connection, the operator enquires with CIBIL for his/her credit score along with their credit history based on the details provided in the customer’s application that also includes his/her income details. This is the basis that telecom companies use for evaluating the customer’s financial health and taking a decision on how much credit limit to offer to the applicant.

Top officials at CIBIL point to various World Bank surveys that indicate reporting of non-financial payment details such as telephone bills, insurance premium payments and electricity bill payment details can help banks take a call on money lending to an individual.

Still early days for telecom companies to share data

There are many benefits that could accrue after telecom operators start sharing data with credit agencies, such as better profiling of first time borrowers, but there is also a disadvantage that merely a telephone bill default could deprive an individual of a loan facility. Banks may definitely have to take a more cautious stance on telecom defaults while lending money. The permission to share data of telecom operators will take a little longer because of the regulatory hurdles but will have a big impact so far as credit profiling in the country is concerned.

Though telephone defaults are still a long way away from possibly impacting your chances of getting a loan, there are other areas where more caution is advised. For instance, applying for new loans should always be avoided as much as possible. Even the mix of credit you currently utilize can impact your chances of getting more loans. An ideal mix would be a home loan, a car loan and a credit card. The more the number of credit cards and higher their %utilization of credit limit, it would reduce the individual’s financial capability to repay fresh loans and this is hence viewed negatively by CIBIL.

Is a poor or no Credit Score the end of the line for you?

Recently, a middle-aged person tried getting a loan from his local bank. He had taken a small vehicular loan about 10 years back and had paid it off on time, without a single late payment. He has never felt the need to take another loan or maintain a credit card. He received a jolt when he was denied a loan by the bank because he did not have a credit score, when he applied for it this time. Have you faced a similar problem and are wondering what to do about it? Don’t see a road ahead of this obstacle? Then it is time you learn more about credit scores before you try applying for a loan again.

Any reputed Credit Repair Company will provide a comprehensive list of corrective options, but here are some of the common ones for your easy reference:

1. The lack of a credit score should definitely not be a dead end for you. It is important you find a bank that may agree to lend you a small loan even without a credit score. They may charge you a high interest rate as they may consider you a slightly bigger risk than usual, but if you are keen to create a credit history and credit score, you will have to run the loan for some time. When the bank reports your timely payments to CIBIL, your credit history would then be created and you can get a score.

2. If you have got a credit report and your CIBIL score is poor then it is important that you quickly work on taking up the task of rectifying the issue straightaway. Firstly, check the credit report and ensure there are no fraudulent cards or loans showing up there. If there are any, immediately report it to CIBIL and contact the bank named in the report to get the entry removed from your report. If you can provide sufficient evidence that the entry should be deleted, CIBIL will issue a new report within 30 days and will re-assess your score.

3. The second thing you should do is close all unwanted credit cards by completely paying them off or consolidating your debt. Too many loans and credit cards showing on your report indicate you live a life above your means, which necessitate you to borrow large sums of money. Some cards may have a small balance that you have been ignoring for a while but is now seriously jeopardizing your credit worthiness. Go ahead and close them immediately by paying them off. Look for a bank, which can offer you a loan big enough to consolidate 2-3 of your cards and loan debts at a reasonable good interest rate and close the multiple accounts to have one debt account.

4. Lastly, ensure you start making your payments on time for all your loans and cards. Late or non-payments are the biggest obstacles to getting a good credit score whereas prompt payments will increase your score dramatically in just a few months’ time.

Take these few steps and get a good credit score in place today for a secured financial future.

Making yourself financially rich

India is still one of the countries that believe in saving for a rainy day rather than living largely on credit. Thanks to the money saving tips passed on by our elders to us, we are familiar with different saving and investment options. There are, however, times when you must rely on someone or an institution for financial aid.

In the past decade, lending institutions have made a number of lending policy changes that affect us directly. Apart from the usual changes in interest rates and closure formalities, they have also strictly started following a credit check routine.

What does this check involve?

When you understand how the check works, you will also perceive the credit score meaning. Credit scores are a measure of how reliable you are as a re-payer or borrower. Whether you are taking an electronic gadget on a short-term loan basis or you are building a house worth a crore, the moment you approach a lending or finance institution, they will try to find out what your credit score is. Ranging from 300 to 850, a credit score of 720 and above is supposed to be excellent while a score between 600 and 720 is considered moderate. Anything lesser than that; you run the risk of not being able to get any type of credit.

Credit scores and ratings have been popular in the Western countries so far and have recently made an entry in the Indian market. Managed by CIBIL in our country, the credit score is based on the following factors:

1. How promptly you repay you loans and credit commitments. Any late payments affect your score negatively.
2. The number of credit commitments you have – an excess of this and you may not be eligible for any further credits.
3. The duration of your credits – if a loan has been on-going for a very long time and there have been payment issues in the meanwhile, you are not considered a safe risk.
4. The ratio of the amount of debt you owe and your income at any given time (known as the debt to income ratio)
5. Any bills that are paid at the end of a beginning cycle – post paid bills.

There were days when sufficient ID and address proofs and employment details were sufficient to get a loan. Now-a-days, even if you have an excellent track record with private lenders and do not have a good or any credit score, all your financial transactions do not improve your credit worthiness. So while it is important to have some amount of credit and to manage them wisely, it is also important to note that all of them are being recorded by several rating and monitoring Government bodies and you must be careful about keeping a good track record to have a good credit score.

If there are any further tips you require about scores and how they can be improved, there are several agencies that can easily help you with such tips and help you make your life financially secure.

Financial health – For businesses and people

The financial world is an arcane one that involves a lot of rules – some simple logic and some complex legal ones. In this world of a myriad of financial transactions taking place physically and online, it is tough to keep a track of the ever-changing guidelines. For the better or worse, money-lending institutions and even some employment agencies have started keeping a track of the credit-worthiness of a person. But, not just private individuals are subject to this rule; even companies big and small fall under the scanner.

Money has to be lent from time to time by people and companies alike. The simplest way for one to be eligible for loans and overdrafts is by maintaining a good credit score. Credit rating meaning, however, is slightly different. Credit scores are usually given to individuals and in India are managed by CIBIL, a government body that provides credit reports based on the scores collected by the reputed credit score company – TransUnion. Credit rating is assigned to government and private organizations all over the world by companies such Fitch & Moody and Standards and Poor. Unlike scores, ratings are in the form of grades such as AAA+ or B-, depending on how a company or even a nation’s economy has performed.

What does it mean for a common man?

Credit rating is not what a private individual needs to focus on. His focus lies on achieving and maintaining the best possible credit score at all times. Why is it important?

1. You will only be eligible for loans and financial credits from banks and finance companies only if you have a satisfactory credit score.
2. Large transactions that have an element of credit, such as the purchase of expensive jewellery or electronic goods, will be declined if you do not have a credit card from a major bank (unless you save for the purchase, which may take a long time). Credit cards are now-a-days only issued to people with good credit scores.
3. Some companies will run thorough background verification about your financial history using your PAN. Pan, of course, is the key to a credit score, as well. Maintain a solid financial reputation by keeping a good credit score.

Banks place special emphasis on good credit scores. They urge people to keep a track of their scores by ordering a credit report from CIBIL. If the scores are not satisfactory, you can take advice from credit health improvements agencies that have come up recently in India. This will help you tackle low credit scores and getting past thorny issues like bankruptcy and defaulted loans.

Credit scores can be improved by:

1. Making all your payments on time.
2. Maintaining a healthy debt pattern.
3. Not exceeding in debts and limiting the number of credit cards and loans.
4. Making all your bill payments on time.
5. Having an adequate debt to income ratio at all times.

Credit scoring can also be worked upon by companies by asking for appropriate guidance plans from the agencies that help people with their scores. You just need to ask and diligently follow their steps and enjoy a healthy financial life always.