It’s been more than 100 days since demonetization. The Prime Minister Narendra Modi, scrapped 500 and 1000 rupee notes on November 8th 2016. This move has broken the back of black money and corruption in India. It has halted terrorism in its tracks. A lot of black money is hidden in real estate (houses/property), artificially inflating its price. Prices of properties in India are falling, as the Government is cracking down on black money. Banks, NBFC’s and housing finance Companies, are reducing home loan interest rates. Falling property prices….Reducing home loan interest rates….This is an excellent time to avail a home loan and buy your dream home. Car loan interest rates could also fall. Then perhaps a dream car….
Before a bank lends you money, it wants all the information on your past repayments. This is called credit history. Whenever you avail a loan and make repayments, banks send information on your repayments (how regular you have been in repaying the loan), to credit agencies. These credit agencies are Credit Information Bureau (India) Limited or CIBIL, Equifax Credit Information Services Pvt. Ltd and Experian Credit Information Co. of India Pvt. Ltd. Depending on your repayment track record, these credit agencies assign you a credit score. If you have a good credit score, banks would easily sanction your loan. Cibil gives you a credit score between 300 and 900. A credit score above 700 might get your loan sanctioned.
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A credit information report (CIR), is a comprehensive document, which contains your personal information (details about you such as name/age), professional information (details on where you work) and contact information. The credit report has your loan account information, type of loan (home loan/car loan/personal loan), status of the outstanding loan and the details of your monthly payments.
The credit report also has an enquiry section, which gives details of the banks which have viewed your credit report, to assess your loan application (bank has to decide if you are worthy to get a loan) and also the type of loan (secured/unsecured loan).
Just as a medical report gives the doctor an idea of your health status (how healthy you are), the credit information report, give banks an idea of your financial health. (how likely you are to repay the loan).
Your credit report contains details of your outstanding loans, credit card outstanding balance and other vital information. This information is very important for banks to judge your loan repayment ability. Banks might take a look at your existing loan EMI’s (loan EMI’s you are currently paying), or the outstanding balance on your credit card. Banks get an idea of your repayment ability, from this information. Any clerical error made by the bank where you have availed a loan or even a mistake made by the credit bureau, might ruin your chances of getting a loan.
You definitely need to check your credit report, at least periodically, to make sure there is no wrong/incorrect information in it. If there is any incorrect information/error, immediately contact the bank or credit bureau, and get it rectified.
Received calls from a bank asking you to repay a car loan you never availed? Has your home loan been refused, because the bank says there is a personal loan in your name, which you never took? You are a victim of identity fraud.
What is identity theft? If a fraudster steals and misuses your financial information, you are a victim of identity theft. If you check your credit report regularly, you will be able to detect any loan/credit card dues, which are not yours, but reflect in your name. Inform the bank immediately, if you are a victim of identity theft.
There are two kinds of enquiries which reflect in your credit report, hard enquiries and soft enquiries. Let’s say you have applied for a loan at a bank. The bank would check your credit report, before making a decision to lend to you. This is called a hard enquiry.
If you apply for loans at a number of banks, these banks make hard enquiries and your credit score goes down. Banks believe that you are hungry for credit/loan and not in control of your finances. If you keep checking your credit report regularly, you will have an idea of your credit score. You will think twice before applying to a number of banks for loans.
Remember: When you check your own credit report, it is called a soft enquiry. This does not affect your credit score.
The Credit Information Bureau of India, Cibil, has decided to give all citizens, at least one free credit report a year. Grab this opportunity and check your credit report. This will give you a head start, when you apply for that loan. Be Wise, Get Rich.
Mr C.S.Sudheer is a management graduate. He started his career with ICICI Prudential Life Insurance and later on worked with Howden India. After his brief stint in Howden India, he moved on and incorporated Suvision Holdings Pvt Ltd which is the sole promoter of IndianMoney.com. He aims to build a nation that is financially literate with investment savvy citizens.
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