This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in
Many of you must have checked your CIBIL credit score sometime in the past and for some of you it must have got a surprise either positively or negatively. Some of you might have been caught unaware of a credit card account running in your name with annual charges being levied year after year. Some of you might have undergone for a loan settlement with the lender which could have impacted your score quite negatively.
But to your surprise, some of you could have found your credit score to be quite high, despite defaulting a couple of times. This is due to some unique but scientific methodologies being adopted by CIBIL to calculate your score.
Factors that negatively affect Credit Score:
1. Late payments or defaults in the past: Your payment history has a significant impact on your credit score. So, if you have missed payments on any of the existing loans over the past couple of years, then the credit score would get negatively affected as it indicates you are facing difficulties in servicing the existing obligations.
2. High utilization of credit limits: You must remain quite careful while using the credit limits available on your credit cards. A higher and higher utilization pattern against the available credit limits is an indication of an increased repayment burden and may negatively affect your credit score. Lower outstanding balances getting reflected in your credit card statements improve this score.
3. Higher percentage of Credit Cards or Personal Loans (i.e. Unsecured Loans): A higher number of unsecured loans coupled with a high utilization would also affect the score in a negative way because of the fact that these unsecured loans carry a very high rate of interest as compared to secured loans like home loans or car loans and result in larger payments and higher defaults.
4. Behaving Credit Hungry: If you are behaving “Credit Hungry†(i.e. in an urgent need of money) and have applied for new credit facilities with a large number of lenders, then it is going to affect your score negatively and make the lenders more cautious while evaluating your application for a fresh loan.
Can your CIBIL Credit Score be improved? If yes, how?
As I mentioned in my earlier post, it is like a CAT examination. Like you can always improve your CAT score by appearing for the exam again, your CIBIL credit score can also be improved, but not overnight. If you have taken a 20-year home loan which is just a couple of years old and you’ve defaulted on your EMIs 3-4 times since the beginning, then it will probably take you at least 2-3 years or probably more than that with regular EMI payments to improve your score. You will have to maintain the greatest of financial discipline in order to secure a better credit treatment in the future. Here is how it can be done.
Measures to improve your Credit Score:
1. Pay your loan EMIs regularly in a timely manner to maintain a clean credit history: Try to keep a diligent track of your EMIs in case you are running more than one loan.
2. It is highly advisable to make full payments on your credit card instead of just the minimum payment. In case it becomes very difficult to pay the bill in full, at least make the minimum payment without fail.
It takes you a longer time to build your credit history with a loan as compared to a credit card as these loans are usually for a longer tenure whereas a regular payment of your credit card bills can help you start building a good credit score as you keep on making the regular payments. A credit card debt is categorized as a revolving credit and it helps in building a good credit score faster if the payments are regular.
3. Do not apply for an extra credit card unnecessarily when your bank’s relationship manager approaches you to get one and actually you do not require it. Applying for an extra card or a loan without any requirement would mean more credit exposure and reaching near the card’s credit limit would result in a lower credit score.
4. If you have been issued a credit card but you have not used it very frequently or the utilize credit limit has been very low, then this would affect your credit score in a positive way as unused credit cards actually imply that you are financially secure.
5. You should use special incomes like bonus or a monetary gift or some other source of savings for the prepayment of some of your existing debt. Early repayment of debt also helps in improving your score.
6. Avoid becoming a joint account holder or a guarantor in a loan or a credit card facility as any default would lower the quality of your credit score.
7. Avoid going in for a settlement or “write-off†of your loan accounts as it implies that you have not been able to pay the past dues. Keeping the credit history clean improves your credit score.
8. You should keep reviewing your credit history on a regular basis to ensure that the credit report accurately reflects your current financial status.
At the end of the day, common sense should dictate what you do with your financial life and good financial habits along with awareness of credit scores will help you build a good credit history and a good credit score.
Hi
I’m a HSBC credit card holder. Twice I have converted my dues into 3 months EMI option. My question, does EMI conversion effects credit score?
Also, please advise atleast what score one should have to get loans/CC from banks.
hi. i just got my cibil score report and it shows 757.
i got a current balance of -800 for my credit card which i was closed 1 year ago and that was the excess payment i made at that time. is negative current balance is good or bad.
I had a Edu Loan at 2007 but due to some personal reason it was delayed but at 24 Aug 2013 i have paid the full amt with interest.But still in the cibil report it is showing defaulter. And now my Cibil Score is 622 only. Please give me suggestion…when it will delete from my CIBIl as an defaulter? How much time will take to update?
I have seen my CIBIL report and it has all wrong information in it. My address is wrong, my telephone numbers were never known to me and it gives two instances of credit cards supposed to be closed in 2001, still carrying 150 days and above overdue amounts which are written off, I don’t know what what reason. It shows I had 6 credit cards in the past, where, what I remember are only 2 and that too closed long back.
I have tried to write to CIBIL to know who has given this wrong info or if someone else’s data is included in my report, but they do not respond.
It gives a completely wrong picture to a new person looking at the report. If banks or credit card organizations can be allowed to spoil your report without giving a chance for you to review the same and give your version also, this is unfair and devoid of rights of the consumer.
Dear Mr. Phadke,
Cibil and other Credit bureaus have a process in place where the KYC provided by you to access your report might have got mis-matched with the database and that’s when the wrong data is reflecting in your credit bureau report. As you have asked CIBIL to rectify the data, they will have their own mechanism in place because at their end they would have to do some verification to clean your credit bureau report.
In certain cases, you may have to coordinate with the respective lending institution for getting your account information updated correctly.
Also, in case of your demographic information such as addresses and phone nos., these details are recorded and updated on your report as per any prior applications you may have made with them.
We at Credexpert are celebrating Independence Day with our clients to become debt free and live credit healthy. We have exciting offers and discounts on our products to monitor your credit bureau score and report on timely and regular basis.
Regards,
Credexpert
http://www.credexpert.in
Hi Manish,
My CIBIL score is badly affected because of a personal loan. Current score is 540. The personal got closed on Nov, 2010. I recently applied for a Home Loan and got rejected. On enquiring for the reasons, I got a shocker, saying the personal loan has 2100/- outstanding. The reason for this amount was because of the bank triggered ECS twice for 6 months and hence the late fees remained which I was unaware of. Now a month back I have cleared it with full payment and filed a request with the Bank for which I got a mail stating that the amount will be refunded. Now the funny part is, I paid them 15000 including interest but I will get only 2100 as refund.
Now my goal is to improve my credit score. I am using a CC card since an year and its history is quite clear.
do I stand any chance of getting my score because of the refund I got from the bank and full payment I made to them?
thanks in advance.
Dear Sadhu,
We can assist you with your query, if you could clarify on the following points:
1. “the bank triggered ECS twice for 6 months and hence the late fees remained”. What do you mean by this statement?
2. “I paid them 15000 including interest but I will get only 2100 as refund.” Please clarify as to what this amount is for, and why you had to pay them Rs. 15,000.
If the account on your credit report shows a closed status with “zero” balance, it may marginally improve your score. Also, using a credit card and paying your dues on time will improve your score gradually.
Regards,
Credexpert.
http://www.credexpert.co.in
Hi,
I have setteled all my overdues in my cards and my loans one year back-where in i have received all the noc.
Now i have come to know my cibil score is 600-suggest how to improve it now?
Dear Som,
Settlement of any credit facility has a negative impact on your score. To improve your credit score, you may repay the outstanding on your accounts, and depending on the bank’s policies, the settled status may be removed from your account.
The other way to improve your score is to build a new credit history. This can be done by getting a new credit facility such as a secured credit card and service this regularly to show good payment behaviour. This will reflect on your credit report, and in time improve your score.
Regards,
Credexpert.
http://www.credexpert.co.in
Hello Shiv,
I just got my CIBIL report and score today and got to know that my scores is 684. In the report the first one is showing as a write-off on my two wheeler loan taken 8 years back where as I have closed the account by paying the whole balance. Now what do I need to get this corrected.
Also 2 of the credit cards taken long back do not have a closer date but there is no written-off and anything mentioned.
Please advice.
Dear Gautham,
If you have paid off all the EMIs on your two wheeler loan and the bank has given you a “No dues outstanding” certificate stating that you have closed your account, then you can raise a dispute with CIBIL for the incorrect status mentioned in your report.
You can raise a dispute at the follow link: http://www.cibil.com/consumer-dispute-resolution
In case of your credit cards, if there is no date closed, it means that you are currently using the cards. If you are not and you have closed the credit card accounts, you may include the same in the CIBIL dispute.
Regards,
Credexpert.
http://www.credexpert.co.in
Hello Everyone,
I was told by a few banks that every time I order my cibil report online the score drops (deduction of 30 points) is that true?
I have ordered my report more than 5 times now. Score was NH for the first time when I ordered in Sept 2012. Then 804 in Jan 2013, 739 In march 2013, 652 in Apr 2013 & May 2013, 623 in June 2013.
What is going on? Why is the score dropping so drastically? I have always made payments on my loans and credit cards on time.
Why can’t people have a systematic procedure which helps consumers and not torture them in life.
Loans/cards applied through marketplace also gets declined, what is the point in having such a cibil marketplace which is of no use?
I’m currently going through a horrifying experience with the Banks in our country. I have been trying to avail a personal loan since Oct 2012 from financial institutions and have been unsuccessful all the time. All my loans and credit card applications are being declined. None of the banks are able to provide me with the same. I understand that the sanction of loan is at the sole discretion of the bank. We come across so many ad’s regarding loans. Just like any common man I applied for a few as well. I have almost approached every single bank in our country and have been unsuccessful in getting a personal loan. I and my wife are salaried with a household income of 90,000 per month, we have our own house in Bangalore. Even after this I’m told that i’m not eligible for loans by each and every bank. There have been many instances where I have shared my cibil score prior to application and was always convinced that the loan will be sanctioned since the report looks clean. But then they decline the loan again. Me and my family are going through a very rough time with these banks. All I needed was a loan of 4 to 5 lakhs to clear our debts and start a new life. But never knew that getting a loan is this difficult in our country. I think RBI needs to look into the policies, procedures and norms that banks follow in granting a loan. I have approached the below mentioned banks for loans and have face rejection now and then for no reason. ICICI Bank, Standard Chartered Bank, HDFC Bank, ING Vysya Bank, HDB Financial, Bajaj Financial, Axis Bank, Kotak Mahindra Bank, Indusind Bank, Citibank and so on. I have a secured job and i’m salaried since 8 years. All these banks have rejected my loan application for one or the other reason and has never shared the reason for declining the loan applications. This has been such a disappointing and terrifying experience. Please help with your inputs and give me advice.
And yes, Apologies for the wrong name as I didnt want to disclose my name.
Is there any bank or Financial unit which offers Personal loan in cibil score of 630
Hi Sandeep,
CIBIL score alone is not the only factor which the lenders look for while taking their decisions to extend loans to the borrowers. Every lender has its own risk management systems and other parameters to judge your repayment capacity. So, it is not possible for us to name any financial institution which can offer you personal loan with CIBIL score of 630. You should try it yourself with some of the lenders.
Dear Shiv,
Iwanted to go for a home loan and before applying for the same, I applied for my CIBIL score. Unfortunately my CIBIL score as on 20 May 2013 is 601.
I had a vehicle loan which I had defaulted a few times, but I have foreclosed the loan a month back. Also there were 2 credit cards which I had assumed would get closed by itself (in 2008). Unfortunately, the annual fees kep accruing and just this afternoon, I have paid 2 cheques to settle my out standings.
How long would it take before my CIBIl score improves. I want to go for a housing loan in next 40 – 60 days. Do you think it would be possible?
Please advise.
Hi Prabs,
It is very difficult for me to guesstimate the time it would take your CIBIL score to improve, but I think if you apply for a home loan with a lower “Loan to Value” (LTV), then it increases the probability of you getting the loan. e.g. If the property your are planning to purchase is worth Rs. 30 lakhs & you manage to pay majority of the cost on your own, say Rs. 16-18 lakhs, then the lender would be happily willing to extend you the loan with even this credit score of 601.
Hi Shiv,
I would like to thank you for your advise. Also some of the posts/comments also did help me in improving my scores.
I bought my scores yesterday and found that the score has improved to 725. Moreover, there are no out standings now. I have one credit card which I have not used for more than 6 months now.
Hopefully I would get a home loan.
That is great Prabs, I am glad it helped you !!
Looking for Home loan. How much i can get?
My CIBIL score is 500 and my monthly EMI is 20,000. My monthly earning is 80,000.
My credit card due across cards is 250,000.
Please check your home loan eligibilty with the lenders Mr. Suresh, we are not competent enough to do that. Thanks!
Hence, by asking this question I mean to ask in layman’s terms that is there a 3rd party organization which maintains the scores of Lenders/Banks/NBFIs etc. A history and score and the fair practices code which could give an insight view to a loan-seeker that to whom to approach to get loans/financial aid or assistance. As, the sort of trend which is prevailing, seems to be a one-sided way. That irrespective of any reason, any lender/banker or financial institution can blacklist a person and hence, can render a person helpless incase of real time emergency situation wherein a person might be looking out for a loan or financial help for home for family or for medical emergencies and NOBODY would extend a supportive hand, just because some banker has had marked him/her down on CIBIL score for any XYZ reason. The reason I have asked this is that I have faced this situation for none of my fault and that the concerned bank does NOT want to correct/rectify it’s report sent to CIBIL, despite the fact that I have cleared all the dues with that bank’s credit cards honestly. Moreover, I have been caught up with family emergencies and hence have not been able to take out time to approach Consumer Court or the Civil law-suite for their reluctance to get this addressed altogether.
Hi Navin… I can understand your concerns here and I’m afraid I dont know any such agency to the best of my knowledge, which maintains such data for the lenders. I dont know what reasoning your lender has in not rectifying its reporting to CIBIL in your case and whether you’ve tried the CIBIL’s Dispute Resolution process or not, but I think & hope that approaching the Banking Ombudsman or a consumer court should help you out. I know this is not a world for people like us, but we cant change the whole system and can only pray to the God to improve things around.
Dear Shiv,
we all know of various agencies like CIBIL, TransUnion etc. where every individual’s records is kept that whether that individual is a defaulter or a person with healthy credit.
My question to you and all people on this blog is that is there a place where people or some 3rd party website which maintains a record of the lender ?
Say comments like these and ratings are recorded for the lenders. For e.g. : Citibank is a good lender and has fair practices, ICICI and Bajaj Finserv have goon armies to recover debts irrespective of your personal problems they will threaten to recover their dues.
The reason I am asking that is that a person looking for loans could review such a report before applying to get a loan/financial aid !
Your enlightenment and response shall be much appreciated !
Regards
Navin
I hv come to know tht my name is included in cibil(negative list) but I hv no information on which company’s / Bank oustanding at me , pl confirm.
Hi Mr. Gopal… Please buy your CIBIL credit report online and you’ll get to know yourself what all is there in your report. https://www.cibil.com/online/credit-score-check.do
Dear shiv I took two wheeler loan from icici bank dated 19/10/2006 which I have settled on 28/2/2013 & bank has given me NOC . now in my cibil report it show settled , DPD also reflect ooo with 36 months report ,I contecte icici bank coustomer care regarding the matter they suggested me that pay waiver amount to remove ‘settled ‘ tag but they can’t remove DPD portion of report, they also suggest me go for theircredit builder programme. my cibil score is 613 I do not have any Loan at present. Now suggest me how I can improve cibil score.
Hi Arjun… DPD is a factual information of your credit report and no lender can get it removed from the report. You can improve your score by paying off the whole of the outstanding balance ICICI Bank is demanding. Also, a good credit history itself is the best way to improve your CIBIL score.
dear sir if i pay waiver amount to bank is my cibil score improve ? suggest me other way to improve cibil score.
Yes, paying the whole of the outstanding balance will gradually improve your CIBIL score. Please check this post to find ways to improve your score:
http://www.onemint.com/2012/08/14/cibil-credit-score-negative-factors-and-ways-to-improve-your-score/
Hi Credit Score is 624 as of today earlier it was 595. I had a written off status on my CIBIL report which I had cleared off by paying the total amount due. I have received the NOC from the bank. Please let me know the banks in chennai which will be able to offer my personal loans. Also let me know if I can use the NOC to further increase the points or if I can use the NOC to get loans from banks.
Hi Jaya… Please buy your CIBIL credit report online and check whether it still carries the written-off status. If yes, you can get it rectified by raising CIBIL dispute resolution request with NOC as the proof. Please check this post:
http://www.onemint.com/2012/09/14/cibil-dispute-resolution-process-rectification-of-discrepancies-in-credit-report/
You will have to check it yourself which banks in Chennai would offer you personal loans based on your profile and credit history.
I had taken a cibil report and found that when i applied for personal loan from ICICI Bank online.No one ever contacted me for collecting any document but an inquiry in CIBIL was carried out by ICICI Bank. Is it justified act from Bank’s end ? or shall i initiate legal proceedings against bank.
Hi Vikash,
If ICICI Bank has any genuine proof that you only applied for a personal loan online, then they are justified in raising the enquiry and you have no case to initiate any kind of legal proceedings against the bank. It is just an initial check point. Physical documentation is required once the bank is satisfied about your credit history and wants you to go ahead for the loan application.
Hi Shiv/Gaurav.
I have a cibil trans union score of 797
I have improved it over last 2 yrs and I had a “writen off” status with a citi bank CC where I couldnt pay them in time coz of financial issues that time..But I myself contacted them and paid fully all the dues…I mean all single paise.
Still they are using “writenn off” status.
can we do something here? can we ask citi or cibil to take it off to show my report more clean!
would it create an issue while applying a home loan?
pl advice me…many thanks.
Hi Suman,
Please check this post:
http://www.onemint.com/2012/09/14/cibil-dispute-resolution-process-rectification-of-discrepancies-in-credit-report/
You can get your CIBIL report rectified by Citibank by following the procedure mentioned in the article. You have all the rights to get your report rectified and it will not create any issue while applying for a home loan.
Hi Shiv / Gaurav, I have been using a lot CC’s for past couple of years. The oldest of all was CITIBANK. I got the entire outstanding “RESTRUCTURED”. It was converted into EMI’s for 47 months. Last year(2012) I had to stop the payments as I was moving to a different city. Payments were stopped from May 2012. Now, recently I had applied for a Home loan and I had a word with the Credit Manager of the respective Home Loan Bank. They refused the loan. Primary borrower was my wife and I was the secondary or joint borrower. There are few things I want to clarify:
1. My Transunion Score as on 31/03/2011 was 601. Will this loan application have any negative impact on my wife’s track record in CIBIL. I am not sure if this bank has uploaded this enquiry in CIBIL stating that it has been rejected.
2. I have contacted CITIBANK to clear all the dues as soon as possible. So that I can try for a home loan again. What would be your recommendation?
3. I need to apply for a home loan, please suggest some measures which can help me in getting the home loan successfully.
Hi Shiv,
Your reply will be highly appreciable..
Hi Bhupesh,
1) I dont think it will have any major negative impact on your wife’s credit history, but an enquiry for a loan will definitely get captured in her credit report.
2) It is always better to get your credit report clean as soon as possible. It will help you improve your credit score gradually.
3) If your wife is earning and her credit history is clean, then apply for a home loan in her name. You may consult a financial advisor to analyse your case.
also one more query, sir my DPD shows mostly 000 and STD at times and also in between once XXX …what does it mean? i would be grateful if u can letmeknow the same
Just check this post to understand more about your credit report:
http://www.onemint.com/2012/08/03/cibil-credit-information-report/
DPD stands for Days Past Due and suggests the number of days a due payment was late, after the due date of payment.
DPD as 000 – Payments made on time.
DPD as XXX – Not reported by the lender(s).
DPD as STD – Payments made within 90 days after the due date.