Bank of Baroda Loan Against Property - Features of BOB Loan Against Property

Bank of Baroda Loan Against Property is a multipurpose loan that assists people in taking credit against their assets during times when they face a financial crunch. The loan comes with its own set of properties and features.

Bank of Baroda Loan Against Property Scheme

Baroda Overdraft Against the Land and Building

• Purpose: To provide hassle-free credit to SME borrowers for meeting working capital requirements.
• Minimum limit: Rs.10 lakhs
• Mortgage of factory land and building or any other property belonging to the unit, promoters of the business group, or close relatives of the developers (such as father, mother, wife, son, and daughter - based on the condition that they stand as guarantors).
• Note: In case of a residential or commercial building, the age of the property shouldn’t be more than 25 years at the time of loan sanctioning.
  

Features of BOB Loan Against Property

• The loan can be used for various purposes, such as business expansion, funding of children’s education, vacations, etc.
• This loan can be availed either as an overdraft facility or as a demand loan, depending upon the requirement of the customer.
• The loan quantum can range from ?1 lakh to 3 crores; however, it varies based on the residential area of the applicant.
• An applicant residing in a rural area can apply for a maximum loan amount of Rs.10 lakhs.
• The applicants living in semi-rural or urban areas can get a maximum loan quantum of up to Rs.3 crores.
• The eligible loan amount varies depending on the business profile of the applicant as well. A salaried professional can avail a loan of up to 36 times his gross income, whereas a self-employed professional can avail a loan up to 5 times the average of his last three years’ annual income.
• The loan has to be paid in the form of monthly EMIs. The maximum number of EMIs is 84, as fixed by the bank.
• BOB loan against property is a secured loan, and its documentation process is quite easy.
• The bank also sanctions loans to individuals who want to transfer their existing loans to Bank of Baroda at low interest rates.
  

Eligibility Criteria

• Age: The permissible age limit for borrowers is 21-60 years.
• Job experience: The salaried applicant should have at least three years of job experience in total.
• A self-employed applicant should have been in his current business for the last three years.
• The gross annual income of the applicant, whether salaried or self-employed, should be a minimum of Rs.60000/annum, which means that an applicant in his current job/business must at least earn Rs.5000/month.

IndusInd Bank Loan Against Property

Induslnd Bank gives utmost importance to its customer services. The bank aims to be a leader in the market place in terms of productivity, profitability, and efficiency. A loan against property from IndusInd Bank helps customers in meeting all financial needs and allows an individual to take care of personal or business expenses.

Features

• Competitive interest rates with maximum loan approval
• A hassle-free and easy documentation process
• Fast approvals
• Balance transfer at a lower interest rate
• Multiple assessment criteria
  

Co-applicants

• For expanding the eligibility criteria, one can include co-applicants in the loan application.
  

Interest rate

• The minimum and maximum interest rate for an IndusInd loan against property also depends on the tenure, which is a maximum of 10 years.
  

Bank ROI

• The minimum rate is 9.95%
• The maximum rate is 15%
• The average is 11.32%
  

Annual Percentage Rate (APR)

• The minimum rate is 10.05%
• The maximum rate is 15.10%
  

IndusInd Bank Loan Against Property Schemes

• Loan Against Home: Residential properties can be mortgaged to get a loan against property.
• Loan Against Commercial Property: Commercial properties can also be put under collateral to avail a loan.
• Loan for Commercial Property Purchase: By keeping one commercial property as collateral, an individual can buy another one with the help of the loan availed.
• Funding Against Rentals from the Commercial Property: If a person has rented out a commercial property, then he can take a loan against property against the rented income as well.
• Balance Transfer: The borrower can also transfer a home loan from another bank to IndusInd in order to avail the advantage of a low rate of interest.
• Top-Up Loans: Here, the borrower can take additional credit on an existing Loan.

Eligibility Criteria

Salaried Employees

• Individuals who are employed permanently with PSUs, Government undertakings, MNCs, listed public limited companies, or any renowned private limited companies are eligible to apply for IndusInd loan against property.
• Minimum age of applicant: 21 years
• Maximum age of the applicant: Should be lower than the retirement age during the maturity of the loan.
• Minimum income: Rs. 30,000 per month (gross income).
• The minimum experience required is three years.
  

Self-Employed Professionals

• Chartered accountants, doctors, cost accountants, engineers, architects, company secretaries, and chartered financial analysts are eligible to apply for IndusInd loan against property.
• Minimum age of the borrower: 21 Years
• Maximum age of the borrower: Should be lower than 70 years.
  

Documents Required for IndusInd Loan Against Property

For Self-Employed

• A filled in loan application form
• Two passport size photographs
• ITR for the last two years
• Identity proof(any of the following IDs): Passport/ driving license/ voter ID/ PAN
• Residence proof: Leave and license/registered rent agreement/ utility bill (up to three months old), passport.
• Business proofs: VAT/ service tax registration, incorporation details, company address proof, P & L (Profit and Loss) account, balance sheets certified by CA, copy of partnership deed, and proof of business existence.
  

For Salaried Employees

• A filled in loan application form
• Two passport size photos
• ITR of the last one year
• Identity proof: Passport/driving license/voter ID/PAN
• Residential address proof: Leave and license/registered rent agreement/utility bill (up to three months old)/passport.
• Income documents: Six months’ payslips, two years’ Form-16, 6 months’ bank statements reflecting monthly salary credit (and EMI debit if any).
  

Property Documents

• Registered sale deed/lease deed
• Past sale deed records (each transaction with respect to this property since the first allotment)
• Latest house tax payment receipts
• Approved building plan from a Municipal Corporation
  

IndusInd Bank Mortgage Loan EMI and Interest Calculator

• The EMI calculator present on the IndusInd Bank website can be used to calculate loan EMIs. EMI is a fixed amount that a customer has to pay each month towards the repayment of the loan.
• Monthly EMIs at various rates of interest can be calculated and compared to the lowest EMI per lakh on loan.
• Loan tenure is of considerable significance, as a higher loan tenure reduces the EMI amount.
• Another factor that affects EMI is the interest rate on the loan. Higher the interest rate; higher will be the EMI. However, the cumulative interest charged will be significantly more in a longer tenure loan as compared to a short tenure loan.
• The interest rate comparison of different banks helps the customer in finding the cheapest loan.

Canara Bank Loan Against Property - How to Apply for Canara Bank Loan Against Property

Canara Bank provides Loan Against Property (LAP) under the name ‘Canara Mortgage’. Customers can avail this loan only for personal requirements such as unexpected and costly medical treatments, buying another home, etc.

Features of Canara Bank Loan Against Property

The key features of Canara Bank loan against property are:

• Attractive interest rate 11.70% onwards
• The customer can avail a loan of upto Rs. 10 crores
• The loan repayment tenure is seven years
• No prepayment fees for the loan taken at floating rates
• No hidden charges
  

Eligibility Criteria

The eligibility criteria for Canara Bank loan against property is given below:

• All Indian citizens are eligible to apply for this loan.
• NRI customers can also avail of this loan by registering their close relatives (Indian citizens) as co-applicants.
• Customers who apply for this loan must have had satisfactory dealings with the bank in the past.
• The applicants should furnish valid property documents.
• The credit score should be above 700.
• The Net Take Home (NTH) must be an estimated value of 20% or Rs. 20,000 p.m., whichever is higher, after paying the EMIs of the proposed loan.
• The age of the applicant should be at least 21 years at the time of submitting the loan application.
• The applicant should have been employed with a reputed organization or should be involved in a business for a minimum stipulated number of years.
• The applicant should have the minimum required salary or monthly repaying capacity.
• The applicant should have a clear credit history for the last three months before submitting the loan application.

IDBI Bank Loan Against Property - IDBI Bank Loan Against Property Schemes

IDBI offers loan against property to borrowers who require money to meet business and personal needs, holding their existing property (residential or commercial) as collateral. Availing a loan from IDBI has some fantastic benefits, some of which are listed below:

• Pay low EMIs for a tenure of 15 years
• Overdraft facility is available
• Loan amounts of up to Rs. 10 crores and above are made available
  

Features of IDBI Bank Loan Against Property

• The borrower can use this fund for the expansion of his/her business.
• Education and marriage expenses can be quickly funded through this loan.
• If the borrower wishes to buy a new home, he/she can apply for the loan.
• People can borrow funds for the improvement or extension of the existing property as well.
• The burden of medical treatment expenses can be dealt with.
• Any other personal needs can also be fulfilled with the help of a loan against property.
• Loan amount : Up to Rs.10 crore loan and above can be borrowed depending upon the merit of the proposal.
• Loan tenure : Maximum tenure of up to 15 years.

IDBI Bank Loan Against Property Schemes

IDBI Loan Against Property (Overdraft Facility)

This loan has been customized to cater to the needs of the business community. Businesspeople can avail this loan for the purchasing or stocking of raw materials, payment of salary, wages, etc. and also for bridging the gap between the supply of goods and payments after that.

IDBI Loan Against Rent Receivables

This loan has been designed to address the financial requirements of people having self-owned property given on rent and to enable them in getting liquidity against the expected future rentals of the property.

IDBI Bank Loan Against Property with Interest Saver (LAPIS)

This loan provides a facility for linking the loan account of the borrower with the Flexi Current Account. The interest liability of your loan reduces to the extent of surplus funds available in the current operative account. You will be allowed to deduct cash from this operative current account or deposit in it as and when required. Interest on your loans will be calculated by subtracting the balance in the current account (based on EOD) from the outstanding loan amount.

Maximum funding provided in the loan:

• Up to 65% of the market value of the property (residential and self-occupied)
• Up to 55% of the market value of the property (residential property leased out)
• Up to 50% of the market value of the property (commercial or industrial)
  

IDBI Bank Reverse Mortgage Loan

• This loan has been designed to supplement the present income/pension of senior citizens for covering expenses such as medical treatment, upgradation or renovation of the existing property, business purposes, etc.
  

Loan amount:

• Up to Rs 2 crore (subject to the market value of the residential property as calculated by the bank, based on the borrower's age, and according to the interest rate)

IDBI Bank Commercial Property Purchase

• This loan has been introduced to facilitate the purchase of readily built/re-sold building units for commercial purposes.
  

Loan amount:

• Up to Rs 5 crore and above can be provided, depending upon the individual case.
  

Maximum funding provided

• Up to 55% of the market value or 65% of the registered value (whichever is lower, inclusive of stamp duty and registration charges).

Kotak Bank Loan Against Property - Kotak Bank Loan Against Property Schemes

Loan against property (LAP) is a multipurpose loan that helps an individual in raising funds against his assets. An individual buys assets to secure his/her money through investment. However, there can be times when, despite having properties at different places, an individual faces a cash crunch and has to find a source for liquid funding. During such times, your existing property can help you avail loans from Kotak Mahindra Bank at a lower interest rate, in comparison to other loans.

Features

• The applicant can avail this loan against any kind of property, be it commercial, residential, or industrial.
• Loan Tenure: The loan is issued for a maximum tenure of 10 years. However, the period of repayment varies depending upon the purpose of the loan and the applicant’s business profile.
• The applicant can avail a loan amounting from Rs.10 lakh - Rs.3 crores.
• In the case of commercial property, an applicant can avail a loan of up to 55% of the cost of the property.
• The bank decides the loan amount according to the repayment capacity of the borrower. The repayment capacity is determined based on the borrower’s income, age, educational qualifications, number of dependents, income of spouse, assets, liabilities, savings history, occupation, business profile, the operational time of the existing business and the net take-home salary.
• Kotak Mortgage Loan can be applied for by customers either jointly or individually.
• The bank also offers the facility of extending the scope of eligibility to the borrower by adding a co-applicant while applying for a loan. In such cases, the income of the co-applicant is also considered before approving the loan amount.
• For a loan against property from Kotak Mahindra Bank, the co-applicant can be parents, the spouse, or even children (above 18 years old) of the borrower.
• The bank generally keeps the property under a mortgage, as security till the maturity of the loan period. However, in some cases, the applicant can also provide additional securities such as LIC policies or term deposit receipts issued by Kotak Mahindra Bank.
• Kotak Bank also allows prepayment of the loan. However, early redemption fees as applicable will be levied by the bank.
• Kotak Bank customers can use the EMI calculator to calculate the EMIs on the loan amount, for which they will need three principal elements: loan tenure, loan amount, and rate of interest.

Kotak Bank Loan Against Property Schemes

Kotak Mahindra Commercial Property Purchase Loan

Commercial property buyers can avail this loan from Kotak Mahindra Bank at very attractive interest rates. Here are some of its prominent features:

• Eligible Borrowers: Salaried, self-employed, and businesses.
• Type of Property: The bank offers commercial property purchase loans only for properties whose stage of construction is more than 80 percent.
• Low Interest Rate: 9.25-11%
• Tenure: Maximum ten years
• Loan amount: Rs.15 lakhs-20 crores
• Processing Fees: 1-3% of the loan amount, plus GST
• Eligible loan amount: Up to 60% of the cost of the property or 90% of the current market valuation of the property, whichever is lower.
  

Kotak Mahindra Bank Overdraft Facility

Salaried and self-employed applicants opting for a loan against property from Kotak Mahindra Bank get an option to borrow either a term loan or a dropline overdraft(OD) facility. In the case of an OD limit, the borrower pays interest only on the loan amount that is used. Given below are some of the vital features of

Kotak Mahindra Bank LAP OD:

• The overdraft facility is available mainly for self-employed borrowers.
• Interest is payable only on the used sum of the loan amount and not on the entire sanctioned limit.
• The limit can be reset based on the eligibility of loan applicants after completing a tenure of one year.
  

Kotak Mahindra Bank Lease Rental Discounting (LRD)

Kotak Mahindra Bank provides lease rental discounting(LRD) loans to both salaried and self-employed borrowers who get monthly rental income from reputed lessees. The loan amount Kotak Mahindra Bank offers in the LRD scheme can go up to eighty times of net monthly rentals, subject to the expiry clauses of a lease agreement. Kotak Mahindra Bank offers a lease discount loan against commercial and industrial properties leased for over one year with renewable clauses in the rental agreement.

• Eligible borrowers: Salaried and self-employed individuals, firms, and companies.
• Type of property: Commercial shops, offices, and industrial premises such as warehouses, factories, workshops, etc.
• Tenure: Up to 10 years, depending on the lease term of the rented property.
• Loan amount: 15 lakhs-20 crores
• Processing fees: 0.50-1% of the loan amount.
• EMI: The bank restricts the EMI to 90% of the net monthly rentals.
  

Kotak Mahindra Bank Loan Against Property Balance Transfer

Customers can also transfer the loan from another bank to Kotak Mahindra Bank for a lower interest rate, which can significantly reduce the loan burden and monthly outgo on EMIs.

Eligibility Criteria

To apply for a Kotak loan against property, you must either be a self-employed individual or a salaried employee working in a renowned private or government organization.

For Salaried Employees

• The minimum permissible age is 23 years, and the maximum is 60 years.
• The minimum monthly income should be Rs.30,000/- and work experience should be three years.
  

Minimum credit score required: 700

For Self-Employed Professionals

• The minimum annual income should be Rs. 1.44 Lakhs as per the P&L account.
• The minimum permissible age is 21 years.
• The maximum age is 65 years during loan maturity.
• The firm/company should have been in operation for the last three years.
• The firm/company should have been making profits for at least the last two years.

PNB Loan Against Property - Punjab National Bank

Punjab National Bank offers various loan schemes and other financial products to its customers. With an extensive presence across the country, PNB’s property loan provides a host of unique features, which are entirely customized to suit the needs of its customers.

Features

• The loan against property from PNB can be used for any personal or business needs.
• If the loan against property is borrowed for personal usage, the amount of credit is granted between the range of ?1 lakh-5 lakhs.
• For business use, a loan amount ranging from ?10 lakh-2 crores lakh can be approved.
• The amount of a PNB property loan is granted based on a few parameters:
• Value of property: Only 75% of the value of a property is provided as loan.
• If the loan from PNB is borrowed in the form of a term loan, a maximum of three times the gross annual income/profit is issued by the bank.
• If the loan is taken as an overdraft, a maximum of four times the gross annual income/profit is issued.
• If any individual, whether salaried or self-employed, takes a loan, his/her net income should be at least two times the EMI.
• If any business enterprise avails a loan against property, the net income should be 1.5 times of the EMI in case of a term loan.
• For a term loan, the processing fee levied by the bank is 0.90% of the loan amount sanctioned, which can be up to ?45,000.
• For an overdraft facility, the processing charge is ?225/lakh.
•     There are no prepayment charges applicable for PNB loan against property.

Eligibility Criteria for Salaried and Self-Employed Individuals

For individuals to be eligible for a loan against property from Punjab National Bank, they have to satisfy the following criteria:

• Loans for personal needs are provided to individuals who are employees of any Central or State Government body, school, college, PSU, or of any other reputed company. Non-employed income tax payers can also avail this loan. However, the age of the borrower should not exceed 60 years.
• Business enterprises seeking a loan against property should be existing customers of PNB with a clear track record in the past three years, with cash profits of the previous three years and net profit in preceding year constituting the past track record.
• Salaried employees should have had a minimum in-hand salary of ?10,000 in the last three years.
• Business enterprises availing a PNB loan against property should have a net annual income/profit of ? 1.2 lakh or above.

Documents Required
Any of the following address and age proof documents (of the applicant and guarantor):

Voter Id card

Passport

SSC certificate

PAN card

Ration card

Driving license

• Net worth statements certified by a CA containing details of the assets and liabilities of the borrower and  guarantor (if the amount of loan sought is greater than or equal to ? 25 lakh)
• Two colored passport size photographs of the loan applicant, co-applicant, and the guarantor.
• Property title and other linked documents, such as sale deed
• Updated encumbrance certificate for the last thirteen years
• The latest property tax payment receipts
• The legal opinion from a Corporation-Bank-approved advocate on the title to a property
• Copies of the approved plan and building license
• Property valuation report from an approved civil engineer
• A copy of the Occupancy Certificate (OC) issued by an authorized local body

Income Proof and Other Documents

For salaried employees:

• Salary slip for the last three months (showing deductions for other loans, if any)
• Income tax assessment order or income tax returns for the past three years.
  

For self-employed individuals:

• Copies of the balance sheet and profit & loss account for the last three years (certified by a chartered accountant)
• Income tax assessment order or income tax returns for the past three years
• Bank account statement from the current bank for the previous six months
  

Punjab National Bank EMI Calculator

Punjab National Bank EMI calculator helps in calculating the EMI on a prospective property loan, which would be required to be paid each month. For calculating the EMI, one has to provide the required principal amount, tenure (in years) and the interest rate in the calculator. The calculator shows the approximate monthly EMI to help the applicants in deciding the amount of loan that they can afford to avail.

How to Apply for PNB Loan Against Property

The Punjab National Bank property loan can be applied only by visiting a branch of the bank, obtaining and filling in the required application form. Online application is yet to be made available for PNB loan against property.

HDFC Loan Against Property - Features of HDFC Loan against property

HDFC gives you 60% of the value of your property when you take a Loan against Property. You can use this loan for weddings, for home renovation, for investing in a business, for meeting emergencies, and so on. What sets HDFC LAPs apart is that these come with attractive rates of interest.

Features of HDFC Loan against property

• Get high loan amounts- Most banks and NBFCs have a limit as to how much they want to give you. Well, so does this bank, but at least it gives you more money as a loan. It also offers longer repayment periods and attractive interest rates. You can expect 60% to 65% of the property’s value as loan.
• Use the loan for anything: You can use both residential and commercial properties to get this type of loan, and can use the funds for any personal and business requirements.
• Easy repayment: As you have seen, you get a competitive rate of interest here, which means you can repay even more easily. You can also choose the Dropline Overdraft Facility.
• Transparent processing: All charges shall be told to you from the very beginning. Thus, there shall be no hidden charges.
• Fast and efficient service: HDFC is known for its doorstep service.
• Benefits galore for the self-employed: There is a specially-designed program just for the self-employed.
• Ease of debt consolidation: HDFC’s LAP gives you a change to get its renowned debt consolidation tool.
  

HDFC Bank Loan Against Property Schemes

HDFC offers four different types of Loans, as listed below:

• LAP (Term Loan)
• Dropline Overdraft (DOD)
• Loan for Purchase of Commercial Property (LCP)
• Loan Against Rent Receivables (LARR)
  

Dropline Overdraft

DOD Product is a unique overdraft limit based facility where the limit is downsized monthly. You can utilize the limit as per your requirement, and the interest rate is charged only on the used amount.

The limit drop amount calculation is done as shown below

Drop amount = Limit or Loan amount / Loan Tenure

Flexibility of repayment: No EMI

Loan for Purchase of Commercial Property

This loan scheme is useful when you are purchasing a commercial property, and it needs proper approval documents for commercial usage by the relevant civic authorities. LCP is restricted only to properties like shops and office premises.

Loan Against Rent Receivables

This scheme is offered only to approved borrowers who have a stable and assured income source in the form of rent from a credible lessee like big organizations and MNCs.

How to Apply for HDFC Bank Loan Against Property

Online Application:

You can visit the HDFC Bank website and apply for the loan that best suits your requirements by  filling in the application form.

Then, a bank representative will call back to guide you through the application process.

Offline Application:

To apply for HDFC Loan Against Property, you can visit the nearest HDFC Bank branch to do so.

HDFC Ltd. also offers a Missed Call facility to its borrowers. You can call +91-9289200017 anytime and then wait for the bank executive to call back and follow up on your request.

ICICI Loan Against Property - Features of ICICI Bank Loan Against Property

Individuals can mortgage either residential or commercial properties to avail the loan. Although you would be applying for a loan against property through ICICI Bank, the amount will be disbursed through ICICI Home Finance Company Limited, registered under National Housing Bank (NHB).

What Kind of Loan Against Property Scheme Does ICICI Bank Offer?
Unlike many other banks, ICICI Bank offers only a general Loan Against Property scheme. The loan can be availed at attractive interest rates and can be repaid over a tenure of 15 years.

Features of ICICI Bank Loan Against Property
Let’s look at the key benefits and features of ICICI Bank Loan Against Property:

You can use the loan for both the business and personal needs.

ICICI offers a maximum loan amount of Rs. 5 crores with a maximum loan tenure of 15 years.

ICICI Bank offers a balance transfer facility at an attractive interest rates, and also provides special offers to doctors.

You can mortgage both residential and commercial properties to avail loan against property.

ICICI Bank also offers upto 90% of the total LAP as overdraft.

ICICI Bank Loan Against Property EMI Calculator?
ICICI Bank’s Loan Against Property EMI Calculator is an online tool that helps you calculate your monthly installments for repayment towards your Loan. ICICI Bank's EMI Calculator provides an easy way out for everyone to use and give you instant results.

How to Apply for ICICI Bank Loan Against Property

Offline Method

Visit the nearest ICICI Bank Branch: To apply for an ICICI Bank Loan Against Property, you can visit the nearest bank branch and get in touch with the bank representatives.

Give a Missed Call: Other than visiting the branch; you can also give a Missed Call on 8100881008 anytime and wait for a bank representative to call back.

Online Method

ICICI bank provides customers with the online loan application facility as well, wherein you need to visit the official website and fill out an application form. After submitting it, a bank executive will get in touch with you within the next 24 hours to guide you.

6 Reasons Why Your Credit Score Dropped

Your credit score is your magic wand in the finance world. You struggle hard to keep it high. However, despite the effort you put into maintaining a high score, there could be unforeseen circumstances that bring down your credit score all of a sudden.

Don't worry; it might not be your fault. Let us discuss a few instances that could lead to such a situation.

Factors Responsible For Credit Score Drop

There could be innumerable reasons for your credit score to drop. Let's discuss the most crucial ones:

• Your credit utilization rate could have increased.
• You could have missed a payment on one of your credit accounts.
• A disparaging remark could have been added to your credit report.
• You may have closed an old credit account.
• You may have paid off your loan.
• You may have recently applied for a new loan or credit card.
  

Increase in Credit Utilization

This refers to the percentage of your credit limit that you are using. It is a high-impact factor when it comes to calculating your credit score. You can calculate your credit utilization rate by applying the following formula:

(Credit Balance/Credit Limit) * 100 = Credit Utilization%

Your credit utilization rate tells the lenders how reliable you would be with a loan. Low credit utilization is the best for maintaining a high credit score. It shows that you are keeping your expenses within limits by using only a small amount of credit. A low utilization rate, not exceeding 30%, is considered best for your credit score.

A high rate of credit utilization will bring down your credit score, as it indicates that you are overspending and might not be able to pay your bills on time. If you don't manage to repay on time, you end up paying a higher rate of interest. Hence, you would end up repaying more than what you had actually borrowed. Your funds would gradually deplete, leaving you with less money in your pocket.

What if your credit utilization rate is way above 30%? Don’t worry. It's not too hard to bring down your credit utilization ratio. You could reduce your expenses, pay off some outstanding credit bill, increase your credit limit, or even get yourself a new credit card. You can track your credit utilization rate on a regular basis for free at mymoneykarma.

Did you know that you can get a free credit report once a year from credit bureaus? With this credit score report, you can see whether you have any debts, and which ones demand your attention. This way, you can prioritize your finances.

Missing a Payment

Missing your credit card or loan payment is off the table in the finance world. It can bring down your credit score drastically. Your credit score indicates how trustworthy you are with credit, right? If you miss even one single payment, you prove that you are unreliable. Additionally, it incurs a high APR. In short, missed payments damage your credit health in the worst possible way.

Always repay the owed amount on time. Try your best to pay the amount in full. Set up reminders and autopay to avoid this mistake in future. Don't get too disheartened by the drop in your credit score. Henceforth, ensure that all payments are made in a timely fashion. Your credit score will gradually improve. Read this article for a few good tips on this.
Receiving a Negative Remark

Serious delinquency or an 'account in collection' can reflect as a derogatory remark on your credit report, and can cause a sharp drop in your credit score. If you spot a derogatory remark, you should take care of it immediately. These remarks tarnish your creditworthiness and you must act accordingly to get them removed at the earliest.

Account Closure

You might have some old credit card accounts charging an exorbitant subscription fee or an unreasonably high APR. A quick solution to all of these problems would be to cancel the cards and close the accounts. However, it isn't a constructive solution, as your credit score will take a blow.

The age of your credit history impacts your credit score. Bidding adieu to your oldest credit card results in a sharp drop in your average age of credit history and severely impacts your credit score. It also cuts down your credit limit and causes a hike in your credit utilization rate; hence your credit score takes a hit once again.

However, it doesn't mean that you can never close an old account. Just be careful if you ever plan on it - evaluate the pros and cons before taking action.

Paying off a Loan

This one is indeed strange. That feeling of satisfaction and relaxation when you finally settle a loan isn’t a relaxation in the financial world. You need to have a variety of accounts for maintaining a good credit score. If you pay off a loan, the loan account is closed and you lose an account, making your credit score drop inevitably.

It is better to have different types of accounts running. Keep a good mix of credit accounts and loans if you want to maintain a consistent record of credit score. It indicates that you responsibly manage your finances. Lenders thus consider you to be a creditworthy candidate.

I am not asking you to refrain from paying off your outstanding credit. Before you open or close an account, you must check your credit score report, inspect the distribution of all your open and closed accounts, and then respond accordingly.

Hard Inquiry

When you apply for any new line of credit, the lenders run a check on your credit score report to check if you are creditworthy. These inquiries are known as hard inquiries.

Whether you apply for a new credit card, a loan, an internet connection, a phone connection, or a new rental apartment - all these can and will amount to a hard inquiry. Upgrading your credit card or applying for an increase in credit limit can also result in the same.

The bottom line is that any credit check is treated as a hard inquiry as it indicates that a lender has reviewed your credit score because you have applied for credit. Too many hard inquiries reflect your desperation for credit, and potential lenders might question your ability to handle more of the same.

Each hard inquiry leads to a drop in your credit score. In case you find an unauthorized hard inquiry, this article can answer your queries.

What to Do When Your Credit Score Drops - mymoneykarma

Managing finances can be a hectic task. Often in your busy life, you might miss out on a tiny thing that could affect your credit profiles. There can be innumerable reasons for a drop in your credit score - some obvious and some incredible.

While there is no absolute solution to reset your credit score immediately, each of these reasons has a unique countermeasure that might help you in the long run.

Credit Score: How Does It Work?

A credit score is basically a measurement of your ability to pay back loans. It measures your prior instances of paying loans back in time, or your inability to do so. The better the score is, the more easily you can get loans, and the better your needs will be addressed.

The converse will happen in case of a low score and bad debts. Your credit score It is measured based on criteria like timely bill payment, money owed, credit history period, types of credit, and whether you have any credit currently.

You Can Fix a Damaged Credit Score!

The good news is that it is indeed possible to fix a damaged score. Whether or not you need a loan right now, doing this is quite important. For this, you need to pay bills on time and reduce debt. Cutting down on expenses and saving more is certainly more helpful at such times.

Normally, you may check your credit score at least once a year. Well, when you are fixing your damaged credit score, there are indeed ways in which you can have a free credit score report, which will keep you updated on your status regarding the same.

Hard Inquiry

A hard inquiry is made when a potential lender, following an application for a credit or loan made by you, reviews your credit score to check if you are creditworthy. A hard inquiry could occur for the following reasons:

• Applying for a new credit card.
• Upgrading a credit card.
• Applying for a new loan.
• Requesting for an increase in credit limit.
  

The bottom line is that a credit check by a potential lender is treated as a hard inquiry, as it indicates that a lender has reviewed your credit score because you have applied for credit. Too many hard inquiries reflect your desperation for credit, and potential lenders might question your ability to handle the same.

Most importantly, each hard inquiry leads to a drop in your credit score.
Countermeasure: It doesn't take long to recover from this score drop. Once an application is approved and you open a new account or increase your credit limit, the points added to your credit score can outweigh the initial drop in your score. Just ensure that your actions don't result in an unnecessary/unauthorized hard inquiry.

Account Closure

Bidding adieu to your oldest credit card can reduce your credit score. It would result in a sharp drop in your average age of credit history, considerably impacting your credit score. Closing any credit card account can diminish your total credit limit as well, which causes a hike in your credit utilization rate, and your credit score takes a hit yet again.
Closing a loan amounts to the same. You should keep a mix of credit accounts and loans if you want to maintain a consistent record of credit score. When you close a loan and lose an account, your credit score drops inevitably.

Countermeasure: As for your oldest account, try not to close it. Do so only if the yearly fee on the card is unreasonably high.

Maxing Out

Entirely using up the available credit card limit isn’t advisable. It indicates that you solely rely on your credit cards to manage your expenses. Lenders will hence consider you to be a risky borrower. It will not only reduce your chances of getting credit in future, but will also bring down your credit score.
Countermeasure: Try to pay off the balance immediately - in the very next month if possible. Keep your usage low for a while. Make sure that it looks like a one-time necessity, so that it won't leave lasting effects on your credit health. If you really need the funds, consider applying for a credit limit increase.

Late Payments

Late payments can and will damage your credit score more than in any of the three instances mentioned above. Defaulting on an account or missing a payment is a negative activity that largely impacts your credit score and leaves a dark mark on your credit report for a long time.

Credit score calculations try to predict how likely you are to repay a debt. If you fail to repay once, it will surely raise a red flag. More so if it is the first negative activity in your credit score report, as it serves as the first evidence that you could be an unreliable borrower.

Countermeasure: Set up reminders so that you don't let it happen. Even better - set up autopayment via a standing instruction to your savings account. The quicker you do this, the better are your chances of recovering your credit score.

How Does Credit Utilization Affect Your Credit Score?

Credit Utilization refers to the portion of your credit limit that you spend in each billing cycle. If your credit limit is Rs. 100, it doesn't mean that the entire money is yours to spend. What if you can't afford to repay? What if you are overspending without reason? A borrower is expected to be mature and spend responsibly.


Your credit utilization rate reflects your spending habits, and thus credit bureaus treat it as an important determinant while calculating your credit score.

If you wish for a good credit score, you better keep your credit utilization rate healthy. Most financial advisors say that a credit utilization of 30% and below is ideal for your credit health. Read on to know more.

How to Calculate Credit Utilization

Let's say that you have a credit card with a credit limit of Rs. 1,00,000. You have made a purchase worth Rs. 30,000 using the same credit card. The ratio between these two is your credit utilization. To put it lucidly, it refers to the amount or percentage of your credit limit that you have used. In this case, it is 30%. Here is how you can calculate your credit utilization:
(30,000/1,00,000) * 100 = 30%
In case you have multiple credit cards, you can add the balances in each card to get your total credit balance. Similarly, add the credit limit on each card to get the total credit limit. Now apply the formula to these new numbers to find your overall credit utilization rate.

Why Does Your Credit Utilization Affect Your Credit Score?

Lenders refer to your credit score to judge your creditworthiness. Credit utilization being a valid indicator of the same, it affects your credit score. Your credit utilization rate indicates if you are a lending risk. According to the lenders, if you exceed your credit limit regularly, you are more likely to have difficulty repaying the money. However, if you spend less and pay off your balance in full every month, lenders will consider you to be more reliable with credit.

How Does Your Credit Utilization Affect Your Credit Score?

Low credit utilization is the best way to maintain a high credit score. It shows that you are keeping your expenses within limits by using a small amount of credit. A low utilization rate, not exceeding 30%, is considered best for your credit score.

The credit utilization ratio in each of your credit cards is taken into account by the credit bureaus to determine your credit score - individually as well as collectively. All these can make the calculation quite complicated. You can always try mymoneykarma’s Intelligent Finance Tool for regular tracking.
A high rate of credit utilization will bring down your credit score. It indicates that you are overspending and might not be able to pay your bills on time. If you don't manage to repay on time, a high rate of interest is applied to the principal borrowed amount. So you would be paying more than you had actually borrowed, and your funds will gradually deplete. In the long run, your pocket will have way less money.

How Do You Reduce Your Credit Utilization Rate?

You could follow these simple steps to reduce your credit utilization rate:

Pay Your Credit Balance More Than Once a Month

The credit card issuing companies typically report your credit balance to the credit bureaus at the end of your billing cycle. You need not be worried about how much you are spending each month. If you pay a part, or preferably all, of your outstanding balance before the issuing companies report your credit balance, your credit utilization rate for the concerned cards will remain low.

Paying the balance in full each month positively impacts your credit score. It also shows that you can borrow money responsibly and stay within the limits of your affordability. It makes you a creditworthy borrower in the eyes of a lender.

If your credit utilization rate tends to shoot up, you should try to balance it by making multiple payments each month. Reduce your credit utilization rate as much as possible - preferably below 30%, which is considered healthy for your credit score.

Let's say your credit limit is Rs. 1,00,000. You have spent around Rs. 50,000. The card issuer will report your credit utilization at 50% in your monthly statement, bringing down your credit score.
However, if you pay off Rs. 25,000 before the statement is generated, your credit utilization will be reduced to 25% in your statement, thereby boosting your credit score. Before you proceed with this strategy, you must get in touch with your card provider and find out when exactly they report your information to the credit bureaus.

Credit Bureaus - What Do the Credit Bureaus Do?

Have you ever tried to find out your credit score? If yes, did you check your scores on different sites on the same day? If not, just try it once, and it is likely that you would experience something strange - you may get different scores on different websites.

Are you confused? Worry not. We are here to clear your confusion. Let's start off with the very concept of a credit score.

What Is a Credit Score?

A credit score is an indicator of an individual's financial stability. Whether you are applying for a loan or a credit card, this three-digit number carries a lot of significance. This numerical value is determined based on your financial (credit) history, and it depends on the following factors:

• History of debt repayments
• Total debt of the customer currently
• Credit available to him/her
  

A credit score ranges between 300 and 850 or 900. If you have a high credit score, you will find it easier to get loans approved. You may also get better interest rates on loans.

What Is a Good Credit Score?

Usually, if the score is more than 700, it is considered to be a  good credit score. The closer you are to the highest score (900), the higher the chance of approval for your loans. Given below are the industry-specific scores:

Poor - 300 to 579

Fair - 580 to 669

Good - 670 to 739

Very Good - 740 to 799

Excellent - 800 to 900

What is a Credit Bureau?

A credit bureau is a data analytics agency that researches and collects the credit history of an individual, generates the credit score, and sells it to banks, other financial institutions, and directly to customers as well.

Credit Bureaus use proprietary algorithms to calculate your score. Though this may vary marginally form one bureau to another, it is generally similar so as to maintain some semblance of uniformity.

How Do Credit Bureaus Get Your Information?

Aren't you intrigued about how these credit bureaus generate your credit score?

Financial institutions supply information about your credit dealings to credit bureaus. This information is in turn utilized to calculate a numerical score. Banks and other credit institutions regularly report to credit bureaus so that credit reports prepared for each individual is up to date.

Why Does Your Credit Score from Different Bureaus Vary?

Credit scores matter a lot to your financial well-being, especially while applying for credit cards or loans . There are a few reasons why your credit scores vary from bureau to bureau.

• Each bureau has its own algorithm to generate these scores.
• Lenders report credit information to the bureaus at different times, and hence, some financial information might not be updated with all bureaus simultaneously.
• A credit bureau may store or display the same information in different ways.
  

How Many Credit Bureaus Generate Credit Scores?

The following are the four most popular and best credit monitoring services in India:

• Equifax
• Experian
• TransUnion (CIBIL)
• CRIF Highmark
  

Equifax

Established in 1899, Equifax is the oldest of all the credit bureaus, and is  one of the largest credit bureaus in the USA. In India, it was licensed by the Reserve Bank of India (RBI) in 2010. The credit range is 300-900, 900 being the highest. A score of more than 700 is considered good.

The cost of the report is Rs.400 (excluding GST) for credit report and credit score. The credit score generated by Equifax is as good as the other bureaus. mymoneykarma provides you the Equifax credit score for free.

Experian

Headquartered in Dublin, Experian was established in 1996 and is a leading global information services company. RBI licensed it in 2010.

Experian initially offered a different score range but later on adopted the range of 300-900 as directed by the RBI. A credit score of 700 and above is considered good. The cost of the report is Rs.399 for credit report plus credit score.

TransUnion

TransUnion Limited was founded in the year 2000. It is India’s leading credit information company and is popularly known as CIBIL. The score ranges between 300-900. A good credit score would be 700 and above. The report costs about Rs.550 for credit report plus score.

CRIF Highmark

Highmark or High Mark Credit Information Services is another popular credit bureau in India that maintains record of every individual’s and organization’s credit information. Based in Mumbai, the Credit Information Company was founded in the year 2005.

Besides collecting credit information, it also offers credit reports and score to its members and individuals. It helps lenders and financial institutes gauge risk-profile of individuals and organizations before approving their loan applications.

The credit score ranges between 300-900. A good credit score would be 700 and above. The report costs about Rs.399 (including GST) for credit report + credit score.

All these credit bureaus provide online credit reports, delivering instantly once payment is made.

How Do You Know If Your Credit Needs Repair?

It is always important to understand what leads to a problem if you want to fix it. The same goes for a bad credit score. Factors that can negatively impact your credit score include not paying bills on time, having a balance on credit cards, and many more such reasons.

As these are capable of bringing down your credit score significantly, it is essential to identify and remedy such factors, while also checking for credit report errors.

What Is a Credit Score?

A credit score is a 3-digit number that indicates how well an individual has been managing credit - especially with regard to loans and credit cards. In India, it ranges from 300 to 900. The closer you are to 900, the better your chances are of getting loans and credit cards, especially at good terms and rates of interest. Conversely, if your credit score is in the lower range, you may not get any reasonable offers at all.

Your credit score is based on the information provided on your credit report, which is a detailed account of your credit-related behaviour. For lenders and banks, the score is quite essential, as it lets them know whether you are trustworthy enough to give loans to.

Signs of a Bad Credit Score

• Loans rejected or credit card rejected: If you have a low credit score, lenders will be less inclined to give you further credit. Hence, your loan or credit card application being rejected could be indicative of a bad credit score. After such rejection, however, you are eligible to get a free credit report for checking.
  
  
• Credit account closed by a lender: If you do not pay on time very often, lenders may write off your account as bad debt. If this happens to your account, it is a clear sign of a bad credit score.
  
  
• Low credit limits, bad credit offers, and high APR: Even if some lenders are willing to give you loans, these loans would come with high APR and low credit limits. With a bad credit score, it is pretty much a given that you will not be getting good deals.
  
  
• You get calls from debt collectors: When you get calls from debt collectors, it means you have debts that you have not paid back on time, which can significantly undermine your credit score.

The Solution

If you notice any of the signs mentioned above, it is time to check your credit report to see what is wrong. Reviewing the report can tell you whom you have to pay, which accounts need more attention, etc. In case any of the credit bureaus have made an error in calculating your credit score, checking the report can alert you to that as well.

The good news is that you can check your credit score on the mymoneykarma website. As the service comes free of cost, you can use it regularly to keep a tab on your credit score. That way you can readily identify when and where your credit health needs repair.

How To Start Building Credit at 18

Consider a situation where you have to take an unsecured education loan at the age of 21. Would you be able to borrow it without having a credit score? The simple answer is no. Not quite.

Now, you might be thinking, “When my parents can take a loan for me, why do I need to think about it?”

Say certain circumstances come about, such that your parents can't afford your education; don't you need to prepare yourself to take that responsibility? If the answer is yes, then you do need to start working towards it.

Here comes the real question - at the age of 18, how can you build a credit history? As you have come to this page, it is safe to assume that you would also be seeking an answer to this question.

Let's find out the answer through a thorough discussion.

Why Should You Have a Credit History at the Age of 18?

A credit history builds your creditworthiness for the future. Having a good credit history ensures lenders that they can trust you with money.

For instance, when you borrow money from a friend for the first time, he lends it to you quickly. But if you don't pay him back, the next time when you ask him, he would be skeptical about you. Sounds about right? Well, the same is the condition with banks.

If your credit history is good, reflecting no missed payments, banks will offer you credit happily and that too at a low interest rate.

However, it so happens that students lack the financial literacy needed to understand this at the age of 18.

How to Build a Credit History as a Newbie

Understand Your Credit Report

This is a baby step to start building credit. If you are wondering where to check your credit report, then the answer lies in websites of credit bureaus such as Equifax and TransUnion, or fin-tech portals like mymoneykarma.

Familiarizing yourself with the factors that lenders consider in credit score calculation will reduce the chances of committing harmful mistakes, which can impact your credit score immensely.

The factors accountable for the credit score calculation are:

• Payment history
• Length of credit history
• A mix of credit accounts
• Hard inquiries
• Credit utilization ratio
  

Get an Add-On Card

In India, the minimum age to become eligible for getting a credit card is 21 years.

The good news is that even at the age of 18, you can become an authorized user on your parent's/relative's card. Such cards are known as add-on credit cards. Frequent transactions and regular repayment through an add-on card can help you in building credit.

Remember one thing; such cards are only helpful when you maintain a low credit utilization rate ( < 30%).

Many banks, such as HDFC, American Express, etc. offer these cards.

Get a Secured Credit Card

Secured cards are a part of credit builder programs and can be used to build new credit, as credit issuers report the activities on the card to credit bureaus.

These cards are offered against collateral or a fixed deposit, which means that you deposit an amount with the bank as security to avail an equivalent credit limit on the secured card.

Some of the top secured cards in the market are:

• ICICI Bank Coral Credit Card
• ICICI Platinum Chip Card
• SBI Advantage Premium Credit Card
  

Pay Your Dues on Time

The hard work that you are putting in to build your credit will not pay off if you miss payments. Missing payments will have an adverse effect on your credit score.

A good credit score is as significant as your college grades are. If you think any of them are trivial, you may face great trouble in your career and finances.

Remember one thing; if you can't clear the entire bill amount, try to pay at least more than the minimum due. It can save you from paying huge amounts of interest.

Use Your Credit Cards Frequently

For building credit, you need to use your cards at regular intervals. This does not mean overspending, though! If you end up maxing out on your credit limit every time you use a card, you’d rather not be using it at all. Make sure that your card doesn’t idle away, however; at the same time, keep your credit utilization rate low.

6 Stranger Things That Affect Your Credit Score

The series Stranger Things, if you may have noticed, is quite strange. Particularly strange extra-dimensional creatures hell-bent on destroying the known universe for some strange reason - sounds strange enough.

You don’t need to worry about those strange things, however. Believe it or not, there are stranger things going on in your credit report. So forget everything else and get ready to defend yourself against the strange entities that wreak havoc on your credit score.

The Ambiguity of Credit Scores

When it comes to your credit score, there are several things that may seem confusing. For instance, you may think that you are pulling all the right strings, yet find that your credit score takes a beating. You may think that since you are making your monthly payments on time and not maxing out your credit cards, your credit score will only rise. Unfortunately, this is not always true.

Your credit score can be adversely affected by several lesser-known factors.

Six Things That Wreak Havoc on Your Credit Score

• Avoiding credit: You may think that if you have no credit cards with which to borrow, your credit score will be on top. Unfortunately, it does not always work that way. It may even seem counterintuitive, much like the Upside Down. After all, it makes more sense to have a high credit score if you have no debts and loans. In reality, it is not all that simple.
  
  
• Credit score is calculated based on the appropriate use of a particular mix of credit products. If you have been avoiding credit products such as credit cards, you would get what is known as a ‘thin file.’ A 'thin file' means that there is not enough data to assign you a credit score.
  
  
• When you close your unused credit card account: It may seem natural to close the credit card accounts that you have no plans of using. The problem is that doing so will lower your credit score. Your credit utilization ratio influences around 30% of your credit score. This ratio measures the credit used against the credit limit. For best results, keep this ratio below 30% of the credit limit.
  
  
• Taking credit offers: It can be pretty infuriating to know that even if you do take advantage of credit offers, you are penalized. Yes, you guessed it right; even this penalty has to do with your precious credit score.
  
  
• Every time you take a credit offer, the loan provider starts a hard inquiry into your credit history. The problem here is that each hard inquiry brings down your credit score a little bit. Remember that there is also a maximum limit of inquiries allowed by the creditor for getting approved.
  
  
• When you consolidate your credit debt to a low-interest card: Let’s go back to the credit utilization ratio. The issue is that even if the rest of your cards have zero balance, one maxed-out credit card is enough to make your credit score suffer.
  
  
• Administrative mistakes in the credit report: Mistakes in the credit report is common. As you can understand, this is capable of making your credit score go haywire. The score can be brought down sharply by a great degree when the mistake recorded is significant, even if not your fault at all.
  
  
• These mistakes happen for several reasons. For instance, people having common names are more vulnerable. If you face a similar situation, here’s what you need to do. You can get a credit report per quarter from the credit bureaus. Follow the instructions provided by the agencies to detect any mistakes, and make sure that you report them immediately.
  
  
• Not paying bills: You may not pay a bill for just about any reason. You are safe for as long as the lender or service agency remains oblivious. If they do find out about your exploits, there will be a black mark for that in your credit report, while delinquent accounts will be given over to a collections agency.

How To Improve Credit Score - Improve Credit Score

Why Does Your Credit Score Matter?

A credit score is an all-powerful force in the strange credit world. It helps lenders determine your creditworthiness - how likely you are to repay your debt on time. Good credit is also vital in deciding your odds of approval for a loan at a lower interest rate. A low interest rate can make a notable difference to your savings.

Every time you set a financial goal, your credit score is likely to be a part of that financing picture. However, credit scores are not the only parameters lenders will look for.

What Are the Factors That Go into a Good Credit Score?

The fundamental factors that go into calculating a credit score are:

• Payment history, which accounts for 35% of your credit score
• Credit utilization, which makes up 30% of your credit score
• Credit age is used to calculate 15% of the score
• Mix of credit accounts makes up 10% of the score
• Recent credit inquiries affect 10% of a credit score
  

Payment History

Late and missed payments can sink your credit score as they account for a significant portion of it.

When determining your score, the scoring model focuses on:

• if you have recently missed a payment, or were late to pay
• how many accounts you were late to pay
• how many payments you missed or made late on each account
  

To inch closer to a good credit score, improve your payment behavior and develop a clean payment history.

Credit Utilization

Your credit utilization ratio is the amount of credit you use against your total credit limit. So, if your credit limit is Rs 30,000, with a balance of Rs 12,000, your credit utilization ratio is 40%.

Maxing out on your credit limit will raise your credit utilization ratio drastically, which will bring down your credit score likewise. A good credit score requires the credit utilization ratio to be less than 30%.

Credit Age

Your credit age details for how long you have been using credit. To be precise, it's the average age of all accounts on your credit report. To establish a good credit score, you need a minimum of one line of credit on your credit report that is at least six months old.
Mix of Accounts

Account mix states the number of installment accounts and revolving accounts you have.

• Installment accounts are loans, such as mortgages, auto loans, or personal loans, with a fixed monthly payment for a specific duration.
  
  
• Revolving accounts consist of credit cards and lines of credit with an overall credit limit that you can charge against.
  

A right mix of these accounts can push your credit score forward.

Credit Inquiries

If you apply for way too many lines of credit all at the same time, your credit score might have to endure a hard blow. Such applications result in hard inquiries, which can taint your credit report for up to 7 years. Although hard inquiries only make up 10%, to make the most out of it, try and minimize credit inquiries.

Now, you may have another question.

How Do I Improve My Credit Score?

If you have reviewed your credit report and discovered that it isn't quite where you thought it'd be, then you're not alone. Start by taking control of your financial future by improving your credit score.

• Pay bills your on time - Repaying your debt timely will help you build a clean payment history. It will boost your credit score as it has the largest impact of all the factors in your credit score.
  
  
• Use credit responsibly - Always try to keep your credit card balances below your credit limits, ideally under 30%. Credit utilization ratio has the second-biggest influence on your credit score.
  
  
• Don't close all your old accounts - Keeping your older accounts open necessarily raises your average credit age. It will help you improve your credit score and bring down your credit utilization rate. Be careful when you cancel credit cards.
  
  
• Don't apply all at once - Avoid applying for several credit applications within a short time frame. Such applications yield hard inquiries which can cause a small, temporary dip in your score.
  
  
• Regularly monitor - You must track your credit reports to look for errors in your credit report.

Where to get your credit report from? - Where do CIC’s get all your information from?

You may already know by now, but it begs repeating, especially when there is information which is not given elsewhere on the web.

You can get your credit report from the three main credit bureaus in India, who are also called Credit Information Companies or CICs.

Now, not all CICs offer you your report for free. There are some from whom you’ll need to buy it.

However, every single time lenders want to check your credit score, they have to pay a fee.

Needless to say, lenders check your credit score every time you apply for a loan or credit card.

Where do CIC’s get all your information from?

You may now be wondering where on earth these CICs get your information from.

Well, that’s no mystery.

They get your financial and personal information from the various financial institutions like banks from whom you have taken loans, or have applied for one.

Credit reports allow lenders to minimize defaults in repayments by knowing beforehand who has a bad credit history. Even though your credit score is not the only factor in getting a loan, credit reports do have significant weight and are considered to determine your eligibility.

Why are they so important?

Credit Scores are important both for you and the lender, as we have discussed earlier.

For the lenders, it is a measure of your creditworthiness.

Having a high score means you have a healthy and consistent repayment habit, while a low score indicates the opposite.

What are they used for?

Credit reports tell lenders how creditworthy you are.

For lenders, your creditworthiness is perhaps one of the most important factors. After all, they’re more likely to give you a loan when they are sure of your ability to pay the loan back, in time and with interest.

If a person has a low credit score, it means he or she is not very creditworthy. Most lenders won’t want to risk their money on them. And even if people with low credit scores get loans luckily, such credit shall be accompanied with pretty high interest rates and long repayment periods, which means you’ll end up paying a whole lot of money just because you are plagued with a poor credit score.

Because of this, it is much better to improve your credit score before asking for credit. Those with high credit scores get the best loans and credit cards

Hard Inquiry vs. Soft Inquiry 101 - Types Of Inquiries

In some of the previous sections, we have talked about you checking your credit score and credit report. You may already know this action has no effect on your score whatsoever.

In this section, we are going to go deeper into the details of Soft Inquiries and Hard Inquiries.

When you yourself or a potential lender asks credit bureaus for your credit report, it generates an Inquiry. According to the type of Inquiry, your credit score won’t or will be affected.

There are two types of inquiries:

• Hard Inquiry: A hard inquiry takes place when a lender with whom you have applied for some form of credit decides to ask for your credit report. They do this so as to gauge your creditworthiness. This type of inquiry brings down your credit score (damn it!), but it’s temporary.
  
  
• Soft Inquiry: A soft inquiry is when you ask the credit bureaus to check your credit score. It also includes instances of credit card companies and lenders checking your score in order to pre-order you for their offer. The best thing about soft inquiries is that they do not affect your credit score at all!

Now, it is just the proverbial tip of the iceberg. There’s much more to know about hard and soft inquiries.

Hard Inquiries

When you apply for loans or credit such as an auto loan, mortgage or credit card, the lender of those financial instruments checks your credit report for the score. The lender approaches any one of the credit bureaus for this. Since these practically are actual credit applications, these are considered to be hard inquiries. As such, your credit score is affected adversely.

How do Hard Inquiries affect your scores?

When there are too many hard inquiries for your credit score within a short span of time, your credit score slides down faster than you can imagine.

This is because a lot of hard inquiries in a short time makes potential lenders sit up and take notice. It upsets them. Too many hard inquiries adds to multiple new credit accounts. Opening so many new credit accounts in a short span of time only shows you are having problems in paying bills and require new loans to stay afloat.

Therefore, hard inquiries are bad for your credit score as no one likes giving loans to those who are in perpetual need, no matter how much it helps their cause.

There is a silver lining to this dark cloud though. Credit bureaus consider the possibility you were just rate-shopping, and not actually applying for loans. Thus in this case, multiple inquiries about a particular kind of product like home loans are considered to be a single inquiry. Thus, this has only a small effect on your precious credit score.

However, do remember inquiries are not the only reason you can be denied credit. In fact, that rarely happens. Criteria like payment history, credit mix, credit utilization ratio and types of credit are even more important.

How long do inquiries affect your credit report?

The bad news first: hard inquiries stay on on credit report for more than 2 years.

Now for the good news: Their impact on your credit score decreases over time.

Don’t worry even if you have several hard inquiries just within a few months. For a potential lender, on-time payments and low credit utilization ratio are more important than your number of hard inquiries.

While you yourself can remove hard inquiries from your credit report, it is possible only if a company pulls your credit in error, or has done it without your permission. In such cases, you need to ask the credit bureau to remove this instance from your report file.
All about Soft Inquiries

A Soft Inquiry is developed when:

• You check your own credit score and report.
• You give permission to outside agencies like potential employers to check your credit report.
• Lenders, credit card companies, insurance companies and others check your credit report to give you a pre-approved loan.
  

Who can see your report’s Soft Inquiries?

Normally, only you can do so. However, there are exceptions.

Others who can view it are:

• Insurance companies who can see the inquiries of other insurance companies
• Debt settlement companies who are authorized by you to view your report, that will also be shared with your current creditors
  

Soft Inquiries simply have no effect on your credit score. These are only for future reference and cannot be disputed.

Only a few outsiders, and only those who have your permission, can view your soft inquiries. These are not taken into account when calculating your credit score.

Now that we have learned both about Hard Inquiries and Soft Inquiries, let us learn about:

How to manage the Hard Inquiries as to salvage your credit score:

• Apply for loans only when you really need it
  
  
• Try removing the dispute by a certified letter, addressed to the credit bureaus. Explain why you want to dispute the inquiry, the name of the company than initiated the Hard Inquiry without your permission, and that you want it to be removed. Include your updated credit report and highlight those items you are disputing. State the reasons clearly.
  
  
• If you don’t want to write such a formal letter, you may just want time to do its work. Hard Inquiries are not permanent. They may take a few years, but fall off your credit score in time.

What Is a Credit Score? - 6 credit bureaus in India

A credit score is the measurement of your creditworthiness, which means your ability to pay back loans on time.

It is a 3-digit number representing your ability to pay back loans. Its range starts from 300 and ends at 900. You should always and constantly strive to get the score closer to 900 because that’s when you’ll get the best loans.

When we say best loans, we mean the credit cards with a large credit balance, loans with low interest rates, friendly and flexible terms, and more. When your score is closer to 900, it shows lenders you have been a responsible borrower, and giving you a loan won’t be risky for them.

Conversely, the further you are from 900, expect less loans to be given. This is because a low credit score shows you were not a responsible borrower. Perhaps you had:

• missed payment 

• defaulted on a loan

• taken too many loans within a short time

By the way, when we say try getting your score towards 900, understand you cannot realistically reach 900. No one has. The maximum you can hope to reach is around 850, which is an excellent score by the way.

Credit scores are calculated by entities called credit bureaus.

There are 6 credit bureaus in India:

1. TransUnion Credit Information Bureau (India) Limited 

2. Equifax

3. Credit Rating Information Services of India Limited 

4. CRIF High Mark

5. ICRA (formerly known as Investment Information and Credit Rating Agency of India Limited)

6. Experian

Equifax, TransUnion, and Experian are the three main ones. They take into consideration several factors like your credit history, number of credit inquiries, repayment records and others.

Your credit score is checked by banks other lenders whenever you apply for a loan or credit card. They check your creditworthiness every time before giving you loans and credit cards.

The higher your credit score, the better your loans are, and vice versa. High credit score enables you to get discounts and preferential pricing on interest rates, which people with low score can’t hope to get!

If you have a high score, you can use it as a bargaining chip while shopping for credit. Lenders will give you high preference over others.

 

How to Improve Your Credit Score for Home Loan Application?

Rarely have you felt so apprehensive.

You’re actually dreading applying for a home loan.

Why?

You do not want to apply for a home loan with an inadequate credit score, only to see the application being rejected and experiencing a fall in your credit score to boot!

I mean, that’d be really unpleasant. It’d be like rubbing salt on injury.
Fortunately, it’s mymoneykarma to the rescue!

In this article, we are going to show you several ways to improve your credit score for home loan application.

Let’s jump right in.

1. Check your credit report

When you apply for a home loan, a lot of processes go on unbeknownst to you. For instance, just after you make the application, the bank or the lender checks out several essential criteria. These are:

• A steady income
• How much downpayment you can make
• Your credit history
  

But why should you check your credit report?

Because, my friend, it helps you to find out anything that is suppressing your credit score. This can be anything from an unpaid EMI to a loan default.

Don’t worry though! Your checking of your credit report is not going to affect it adversely. This is something called a Soft Inquiry that has no effect on your credit score.

Now, back to the point: you know by now how important it is to check your credit score before applying for a home loan.

But where can you check it?

You can do so from the three credit bureaus namely Experian, TransUnion and Equifax. You can get a free copy of your credit report once a year from all three of them.

So far so good? Fantastic! Let’s move on.

2. Dispute inaccurate information

A big reason to check your credit report is so that you may find inaccuracies in the calculations. Sometimes, the credit bureaus make mistakes in the calculations. Credit bureaus compile or develop millions of credit reports a year. Thus, a mistake in the calculations can happen in anyone’s report.

Now, if you do find such errors, you can and should dispute it by contacting the concerned credit bureau. A lingering error can make a big difference in your credit score, which can spell doom to your home loan application. This is why it is essential to remove inaccurate information.

Didn’t miss that payment? Go for a dispute resolution.

Didn’t default on your last loan? Get in touch with the credit bureau.

Didn’t take too many loans within a short time? Holler out loud!

However, they won’t be making any corrections just because you tell them to. You need to show proof! So gather all the required proof before going for a dispute resolution with a credit bureau.

3. Pay off delinquent accounts

Maybe you already have creditors, or have taken some loans already. Doesn’t matter. But what does matter is that you pay them consistently and timely.

Whatever you do, make sure that there are no delinquent accounts. These murder your chances of getting any loan. Delinquent accounts include bills in collection, late accounts, judgments, and charge-offs.

This is why you need to pay them off, especially before applying for a home loan.
But there are already delinquent accounts in my credit report!

Take a deep breath. Take a few more. Now, what you need to do is to get rid of this delinquent account first by paying it back.

Once done, wait for 6 months. By this time, the fact that you have paid off the delinquent account shall reflect on your credit score.

That’s a good time to make a home loan application.

Now, granted that waiting 6 months to make a home loan application can be a long time, especially when the need is dire, but trust me. You won’t want to go headfirst applying for a loan when your credit score is unsatisfactory due to delinquent account records.

4. Reduce your debt-to-income ratio

If you have a high debt-to-income ratio, banks are going to question your ability to pay back loans.

The ideal debt-to-income ratio is 12%. The lower this ratio is, the easier it will be for you to get a loan.

But what is the debt-to-income ratio?

Let’s say that your income is Rs. 10,000. Your debt EMI per month is Rs. 4000. This means that your debt-to-income ratio is 40%.

Now that you know that a debt-to-income ratio is, here’s something important.

Make sure that the ratio is not more than 43%.

And last but not the least:

5. Don’t incur any new debts

Most lenders may refuse you any loan even if your debt-to-income ratio is less than 12% of your total income. In other words, they see existing debts in a negative light. Because of this, till your mortgage is secured, you must consider not to take any new credit, including applying for credit cards.

Simple Steps to Protect Your Credit Score - Improve Your Credit Score

Who knew that the world would one day be forced to cease functioning just because of a virus. But the truth is, this is not just any virus. It is a deadly pandemic that is affecting millions around the world with a death rate of 3%.

We are not going to give you the statistics or news of the coronavirus pandemic. You can find updated news regarding that in so many other websites. No, we are here to provide you with  information on something else; This facet of life is equally important as well: credit and credit score.

All the viruses and pandemics will not change these two facets of our life. They’ll stay the same, and as important as ever. Now, you probably have a lot of problems regarding money management, credit and credit score in the context of the pandemic/lockdown. This article could help you out with that as well. Let’s get started.

When it comes to credit standing, which are the best practices in this economic environment?

There are some things you can take to minimize the effect of the coronavirus on your credit standing.

• Ask for help: in case you are not able to make the minimum payment, get in touch with your creditors and lenders. Maybe they shall be able to help you out.
  
  
• Pay what is possible: If you can pay something, pay it now. It is better to pay now than to accumulate everything for later. Always avoid making late payments.
  
  
• Make sure your credit reports are up-to date: You get a free copy of your credit report each year from three credit bureaus, which means three free reports a year.
  
  
• Get a consumer statement: Sometimes, you just cannot make payments. Don’t worry, it happens. For such situations, you need to have a consumer statement.

This is a short statement of 2000 words to explain your financial condition.

What steps can one take to avoid falling into debt during the Pandemic?

You can fall into debt at any time, but falling now is especially dangerous because banks are not very keen to give out new loans right now. The economic situation is quite bad. More and more people are finding themselves unable to pay back their medical loans, student loans, bills and expenses.

Right now, many are facing layoffs, and therefore are in the risk of becoming just another statistic in the unemployment bracket. Because of the pandemic, income is being disrupted all over. In such a situation though, there are still a few things you can do to help yourself.

1) Budget: This is one of the most important things that you can do. Making a budget allows you to keep track of your income and expenses. This will help you to trim your expenses.

2) Pay what’s possible: In an ideal setting, you should pay your credit card bills each month. If you miss payments, interest gets added steeply. This only increases your debt. Thus, pay whenever you can. At the very least, make a minimum payment. And always keep in touch with your bank or lender.

3) Talk to creditors and lenders: They can help you if you are not able to pay right now. Perhaps they can make another payment plan for you that is easier for you.
 What about customers who are facing financial problems or have fallen into debt due to Covid-19?

If you are in this situation, you are most likely wondering how your credit score will be impacted. One thing you can do is to contact your lender directly and tell your problems. Discuss with them other options to pay. Also consider adding a Consumer Statement that explains your financial situation.

What about missed payments, deferred payments and other actions that can destroy a credit score?

Thankfully, the RBI has declared a 3 month moratorium on all loans in India. So you don't need to be worried about missing payments for the time being.

Nevertheless, it still remains true that one missed payment is enough to spoil your credit score, and these blemishes remain on your credit reports for 7 long years! However, you get 30 days after missing a payment to pay up before all this happens. However, you still need to pay late payment fees and interest.

If you are unemployed right now and cannot pay, contact your lenders and explain your financial situation. It is very much possible that they can help you by waiving off fees, allowing reduced payments, interest-only payments, etc.

Can You Use Tradelines To Boost Your Credit Score?

Desperate to increase your credit score fast? Well, we don’t blame you. A lot in your life depends on your credit score. A good credit score makes the road to credit lines easier. It even makes renting properties easier nowadays, with landowners increasingly desiring a good credit score. In short, it makes your life easier in many ways. This is why you, and so many others, want to increase the score fast. Now, what if you tell you that there is a secret way to buy another person’s good credit score.

Let’s face it. Credit score plays a huge role in your making major purchase decisions. A low score means higher insurance premium, higher loan interest rate, and even outright loan denial. Repairing credit takes time, and the process is grueling.

Perhaps the only other solution?

Tradelines.

You can ask for, or pay for someone’s credit score. Yes, you can buy these.

What is a credit tradeline?

A tradeline is an account that appears on your credit report.

Here’s how it works: if a person makes you the co-authorized user to one of more of the person’s tradelines like credit cards, you can benefit by seeing a positive credit history.

You may have heard of parents making their children authorized users of their credit card to help the kids in building credit.

Sometimes, a tradeline is also called renting a tradeline. In this case, only the name is different. The concept is still the same. When someone is adding you as their credit card’s authorized user, the same person can remove you as well.

This type of credit repair technique has several benefits:

• Get loan approval: When lenders see that you are the co-user on someone’s credit card who has a good credit score, you get much better chances in getting a loan. This is due to the tradeline owner’s good credit score standing.
  
  
• Get better interest rates: This is the same as above. Since you now are the co-user of someone’s tradeline, or have purchased a good tradeline, you are now in a better position to ask for better loans and better or lower interest rates. And as you know, lower interest rates mean less expense in the long run.
  
  
• Get approval on rental applications: As we said before, nowadays more and more landlords want to see your credit score before even allowing you to be their tenant. After all, they too need to be sure whether you can pay the monthly rent. Having a good tradeline ensures that you get approval.

How do tradelines work?

When you buy a tradeline, you become the authorized user of someone else’s credit card. The card issuer reports to credit bureaus. New positive tradelines are added to your credit report when the card’s issuer reports your account to credit bureaus. This increases credit score and decreases negative information on your credit report.

A Short Guide To Your Financial Assessment - What is financial assessment?

Let's start with the very basics of the matter…

What is financial assessment?

Simply put, it is a check of your financial health. Financial health covers a lot of things like how much savings you have and how far that is towards your long term goals like retirement savings. It includes your credit score as well.

Why should you assess your finances?

When was the last time you started a diet or an exercise regimen? At the very start, you probably measured your weight for having a yardstick, right? Personal finance assessment is similar. You need to have regular check-ins to make sure that you are reaching your goals and that you are well on your way to save for retirement.

Why should you do it?

Experts say that assessing your finances before making big financial decisions like taking out a mortgage and getting married can save your life. Ideally, you should be assessing once a year. Let’s face it. Times, and your needs change. And that means your income and expenses change as well. At times like these, and during times of taking big financial decisions, you need to find out the current position of your personal finances.

You’re not on a budget. So what now?

Maybe you are just going on a day-to-day basis and managing your short term needs. That is fine, but you still need to be prepared for more.
How to do that?

Here are a few ways to do this.

1. Retirement savings: Check your monthly contributions. Take full advantage of your company’s PF match, if it has one.
   
   
2. Meeting debts: Tackle your debts head on. There are debates on which debts to tackle first: ones with the most interest or one with the least interest. Pick one that suits you the best.
   
   
3. Budget based on income: Choose the 50/30/20 budget which says put 50% of income on necessities, 30% on meeting wants, and 20% on contributing to savings and debt repayments.
   
   
4. Building an emergency fund: At a bare minimum, you should have 6 to three months of savings for meeting any emergency.
   
   
5. Having a good credit score: Check your credit score regularly. The healthier it is, the more likely you are to get loans.
6. Insurance: Check that you have minimum coverage to protect yourself against loss.

Increase your Credit Score and Make it More Fun!

Let’s face it: Increasing your credit score does not happen overnight.

It’s like going to the gym, wanting to lose all your unhealthy fat in a month!

Sorry, but that doesn't happen, and neither does credit score get a boost in a month.

Because of this, lots of people lose focus and motivation to keep on increasing their scores over the long term.

To help you guys out, here are some fun ways to do just that!

Get competitive

Are you bored out of your wits of checking the credit score each time? Well, you can make it more fun. Here’s how to do it. Speak to your friends or peer group. Suggest a competition.

For instance, the one who increases their Credit Score first in the next few months wins. Have whatever reward you all agree on, or not. After all, it's all about you!
Celebrate small victories

One of the main reasons people get bored and lose focus is when they feel they’re not making noticeable progress. To actually show yourself you are making noticeable progress, celebrate your small victories.

For instance, you may be waiting to increase your credit score by 1000 points. But that takes time. So each time you increase the score by 10 points, celebrate your victories.

See the credit report as cheat codes

Don’t see credit reports be your enemy. Remember when you were a kit and you played video games? You loved using cheat codes, right? Well, your credit report is a kind of cheat code for boosting your Credit Score!

If you play the game smart and use your report well, you can easily remove the areas decreasing your score. Then you can focus on enhancing those areas which boost the score.

Each year, you are entitled to one free Credit Report. From these, you can learn about those elements that are pulling down your score. So focus on removing those first.

See credit report errors as your foes

What’s the fun in a game if there are no enemies to bash, right? Well, from a Credit Report, you can see which those enemies that are decreasing your credit score are.

These can just be errors in the credit report. Within a short time, you’ll become a pro in identifying these errors.

Use your special powers!

You have special powers to help you out in increasing your credit score. These are having the Ideal Credit Utilization Ratio (below 30%), and having a Diversified Credit Portfolio. Lenders shall love you for this!

Just use these tips, and you’ll not just boost your Credit Score, but also have fun doing it.