If you approach your lender with such a situation, they will suggest a loan settlement. And it might feel like the best option. But its effect on your line of credit is worth considering before taking the step.

Loan Settlement and Its Impact on your Credit Score

If you cannot pay your term loan due to unavoidable reasons, you can approach your lender with your side of the story. The lender will do a complete assessment of all your assets and determine whether what you are claiming is true or not. Once the lender confirms that you really cannot repay your debt, you can ask the lender to give you some time off before restarting the payment, or the lender might offer you a Loan Settlement.

In a loan settlement, the lender agrees to settle for an amount that is less than the actual amount to be repaid. This amount is usually the amount paid by you to date, including the interest rates. Suppose you have taken a loan of Rs. 45 Lakhs. You had to repay it within the next 7 years. This is your year 4 of repayment, and you are no longer able to pay the EMI. But the amount repaid by you till now, including the interest rates, is Rs. 30 Lakhs. In a loan settlement, the lender will agree to settle the loan for Rs. 30 Lakhs, and you will not have to pay any additional amount.

This decision is not reached lightly. The lender sits and talks with you and gathers proof of your inability to repay term loans. They consider a waiting period of six months before taking this decision. Then finally, you get to settle the loan with the bank.

The lender gives you a certain time to collect the settlement amount and pay the lender. However, this may be in your favour. It is not. Because it negatively impacts your CIBIL Score. And having a negative impact on your CIBIL score is not always worth the settlement.

When you agree upon a loan settlement, the loan is ‘settled’ and not ‘closed’. When a lender agrees to settle a loan, the information is sent to CIBIL and other similar agencies that maintain track of your credit score. When you accept a loan, financial institutions assume that you would be unable to repay what you promised. This has a negative impact on your credit score.

On settlement of a loan, your credit score can decrease by 100 points. CIBIL keeps this information on your record for the next seven years. So if you apply for any form of credit within seven years of the loan settlement, financial institutes could deny it. The reason is your inability to close your last debt.

On average, financial institutes consider a CIBIL score of more than 750 for lending a loan. When you opt for loan settlement, your score can easily go below 750. That will make you not eligible for a loan from most financial institutes.

How to remove loan settlement status from CIBIL Score?

Even if you get a negative impact on your CIBIL score due to a loan settlement, you always have the option of turning it around. Suppose your financial condition improved a bit within 2 years of the loan settlement; then you can work your way to improve your credit score.

There is one final approach you can try to raise your CIBIL credit score to be eligible for more loans. You can request a repayment plan with the lender of your previous debt. The lender will mark your loan as closed once you have repaid the total loan amount. Loan closure is not the same as loan settlement. In reality, loan repayment has a beneficial effect on your credit score. In this manner, you can mitigate the negative impact of loan settlement on your credit score.

How can FlexiLoans help?

FlexiLoans has designed a very specific system for MSME business loans and lines of credit. The repayment options give you enough time between the withdrawal of the amount and repayment so that you don’t feel burdened. The best part about FlexiLoans Line of Credit is that you have to pay interest only on the amount that you have withdrawn. For example, you have a credit limit of Rs. 300,000. If you withdraw Rs. 50,000 from it, then the interest rates will only be applicable on that Rs. 50,000.

An outstanding team at FlexiLoans will help you at every turn. You don’t need to make repeated trips to the FlexiLoans office to get your loan accepted. The official FlexiLoans website has an online form for everything. We provide efficient and competitive financial services.

Representatives at FlexiLoans will advise you on the best course of action that will have little to no negative effect on your CIBIL credit score.

FAQs

Q.1 By how many points does Loan Settlement affect CIBIL Score?

Ans: Loan settlement could affect your credit score by up to 100 points. But it would be best if you also considered the financial events that lead up to loan settlement. They could also have a negative impact on your CIBIL Score. So, a loan settlement could affect your CIBIL score by more than 100 points.

Q.2 Why is my credit score less than it was before Loan Settlement?

Ans: Loan Settlement is a diversion from the original contract signed between you and the lender. Upon settlement, the lender gets less money than promised. So the lender reports it to CIBIL and other institutes that track your credit score. Not paying your debt in full has a negative impact on your credit score. And thus, you will find a drop in your credit score after loan settlement.

Read More:

Check Cibil Score By PAN Card

What is Days Past Due(DPD) in a CIBIL Report

Ideal CIBIL Score for Obtaining a Loan

Company Credit Report (CCR)

Experian VS CIBIL

What Affects Your CIBIL Score?

Credit Card Payments Impact Your Credit Score

The post Effects of Loan Settlement On Your Credit Score appeared first on FlexiLoans Finance, Business Loan Blogs, Tips & Guide.

The primary eligibility criterion for every business loan application is the three-digit CIBIL score. The CIBIL score reflects the creditworthiness of the loan applicant. One must review their CIBIL report before applying for a business loan. Sometimes, discrepancies in the CIBIL score report can affect the borrowing ability of an applicant. Such issues warrant a dispute and resolution. 

Every business loan application will undergo mandatory credit verification through credit bureaus. Most lenders prefer a minimum score of 750 for processing loans for business. FlexiLoans processes low CIBIL loan applications to extend credit facilities to businesses.

Before applying for a business loan, it is best for the applicant to check their credit report. The credit report helps applicants to dispute and resolve issues and increase their chances of business loan approval. This article provides details about CIBIL disputes and how to resolve them.

What is a CIBIL dispute?

A CIBIL report is a handbook for a person’s credit history. Credit bureaus source data from different lenders like FlexiLoans to generate credit reports. Lenders and credit bureaus are interdependent. Lenders seek applicants’ credit reports, and credit bureaus seek credit information to build a profile—the credit profile links to the PAN (Permanent Account Number).

Post loan approval, lenders regularly provide bureaus with borrower activities. Standard inputs are timely repayments, missed EMIs, loan approval dates, payment defaults, pending repayment, etc. While reporting this information, incorrect information passed by lenders can hurt the credit score. The discrepancy is not limited to credit information but basic details like name, date of birth, contact information, etc. A CIBIL dispute is the process of identifying and resolving issues in a credit report.

Types of CIBIL disputes

Two types of CIBIL score disputes arise on individual and company credit reports. Lenders report different parameters on individual and company profiles. Knowing the issue category can provide a more straightforward and early CIBIL dispute resolution.

Individual disputes

• Personal details

Common issues can arise, such as a name being misspelled or incorrect contact information. For example, the misspelling of Tejashree as Tejashri will need a name rectification.

• Duplicate account

Sometimes, there might be multiple reporting of loan accounts. These duplicate accounts hurt the credit score to a great extent.

Company disputes

• Account or company details

These are common disputes concerning company-related details like name, address, contact details, directors information, credit types, loan amount, etc.

• Duplicate account

This issue is due to reporting the same loan account multiple times.

• Ownership

The owners of a business are part of the company’s credit report. These disputes arise due to the mention of an unrelated owner mentioned in a company report.

• Incorrect information fields

Some company-related information fields are mandatory in a company credit report. Disputes raised for resolutions about corrections and updates are possible. Common disputes arise due to inaccurate information concerning the following.

• Company Name – misspelt/incorrect.
• Company structure.
• Address – City/State/Pincode.
• Registered company address.
• Directors/Promoter/Partner/Proprietor name.
• Contact numbers – Telephone/Mobile.

Applicants must refrain from raising disputes about some details. These factors are not in the hands of an individual. Examples are loan approval and sanctioned date, loan account number, etc.

How to raise a CIBIL dispute?

There are two methods to dispute an issue and resolve it. One can do CIBIL correction online or offline.

CIBIL Complaint Online

• Step 1: Go to the website www.cibil.com. In the Menu, find ‘Dispute Resolution’ and select Consumer or Company Dispute Resolution.
• Step 2: Register or on the website after choosing the dispute category.
• Step 3: After a successful login, fill out all the required details.
• Step 4: Fill out the dispute form and select the dispute sub-category. Provide the necessary details and apply.
• Step 5: It will take some time to resolve the dispute. Have patience and check the CIBIL dispute resolution status regularly.

CIBIL Dispute Offline

Individuals and companies can dispute the CIBIL score report asking for a resolution by writing to the below address.

TransUnion CIBIL Limited, 

One World Centre, Tower 2A, 19th Floor, 

Elphinstone Road, Mumbai – 400 013.

CIBIL Dispute Resolution Process

Following is the CIBIL dispute resolution process.

• Upon receiving a dispute form, CIBIL verifies the issue.
• If the error is in personal details like name and date of birth, CIBIL requests the applicant for supporting documents.
• If the problem is with former and current lenders, CIBIL conveys the issue to the concerned lender.
• The lender accepts the dispute (if any and verified) and conveys changes to the credit bureau.
• The changes after resolution will appear in the following credit report.

Conclusion

CIBIL disputes are common in the credit industry. Issues in the credit report can be from both lender and the individual or company. The lender updates a few problems during internal auditing, and some the individual must dispute. However, it helps to self-check credit reports and dispute issues, if any.

FlexiLoans online platform eases the process of business loans. Generally, lenders prefer high credit scores as eligibility for a business loan. FlexiLoans provides low CIBIL business loans to MSMEs, small businesses, and women entrepreneurs if your business is good. Apply for a business loan on our website and track the loan application status live.

FAQs

Q 1. What is the CIBIL dispute resolution time?

It may take up to 30 days to resolve a CIBIL dispute. The resolution process is also dependent on the credit institution. The delay in response by the lender will affect the resolution timeline.

Q 2. How to apply for CIBIL correction online?

The official CIBIL website has a designated portal to raise CIBIL disputes. One can register on the website and highlight an issue for resolution. Applicants can also track the CIBIL score resolution status on the website.

Q 3. Can I visit the CIBIL office and raise a dispute personally?

No. Only CIBIL dispute applications received online and through the post are acceptable. Even personally delivered mail is not accepted.

Q 4. Can CIBIL update/delete any information from my credit report?

CIBIL does not update or change details in the credit report. CIBIL updates data only when authorised external sources authenticate information and changes. The external sources are credit institutions and official documents.

The post What is a CIBIL dispute? How to Resolve Issues? appeared first on FlexiLoans Finance, Business Loan Blogs, Tips & Guide.

Your credit report is an essential tool that lenders use to determine your creditworthiness. Even landlords, employers, and insurers use it. You may also have come across the term DPD or Days Past Due when checking your CIBIL report, and it is a crucial factor that lenders look at when assessing your creditworthiness.

In this article, we will explain:

• What is the full form of DPD?
• What does DPD in finance means?
• What is the DPD full form in banking?
• How it affects your CIBIL score?

What is DPD in Banking and DPD full form in banking?

The full form of DPD in banking stands for Days Past Due. It is a metric used by lenders to assess an individual’s credit risk. DPD is the number of days that have elapsed since the due date of a particular credit account.

For instance, if you have a credit card with a monthly payment due date of the 5th every month and you make the payment on the 15th, your DPD would be 10.

DPD in banking is an essential factor that lenders consider when evaluating loan applications. A high DPD indicates that an individual is a risky borrower and is more likely to default on loan repayments. On the other hand, a low DPD suggests the individual is a responsible borrower and is less likely to default on loan repayments.

How does DPD affect your CIBIL score?

Your CIBIL score is a 3-digit number that ranges from 300 to 900. It is a numerical representation of your creditworthiness. A high CIBIL score indicates that you are a low-risk borrower and are more likely to repay your debts on time. On the other hand, a low CIBIL score indicates that you are a high-risk borrower and are more likely to default on your loan repayments.

The calculation of your CIBIL score uses several factors, including your credit history, repayment history, credit utilisation ratio, etc. One of the key factors that affect your CIBIL score is DPD.

If you have a high DPD, it will negatively impact your CIBIL score. It indicates that you are not a responsible borrower and are more likely to default on loan repayments.

On the other hand, if you have a low DPD, it will positively impact your CIBIL score. It signals that you are a responsible borrower and are less likely to default on loan repayments.

It is important to remember that your CIBIL score is not static – it can change over time based on your credit behaviour. If you have a high DPD, you can improve your CIBIL score by making timely payments and bringing down your DPD.

What is a good DPD?

A good DPD depends on the type of credit account. For a credit card, a DPD of less than 30 days is considered good. A home loan DPD means less than 90 days is considered good.

It is important to remember that your DPD means should not be too low or too high. If your DPD is too low, it may indicate that you are not using your credit limit, which can hurt your CIBIL score. On the other hand, if your DPD is too high, it will hurt your CIBIL score.

How to improve your DPD?

If you have a high DPD, you can improve your CIBIL score by following these steps:

1. Make timely payments: 

This factor is the most important step to improving your DPD. Make sure you make all your loan repayment with 90 days of the due date. If you have difficulty remembering to make a payment after 90 days, you can set up reminders on your phone or calendar.

2. Bring down your credit utilisation ratio: 

Another factor that affects your CIBIL score is your credit utilisation ratio. It is the percentage of your credit limit that you are using. For instance, if your credit limit is Rs. 1 lakh and you have used Rs. 50,000, your credit utilisation ratio would be 50%.

It is important to keep your credit utilisation ratio low – ideally, it should be below 30%. If your credit utilisation ratio is high, it will hurt your CIBIL score. You can reduce your credit utilisation ratio by either paying off your debts or increasing your credit limit.

3. Keep your credit accounts active: 

It is important to keep them active even if you are not using them, and this is because lenders consider closed and inactive accounts when calculating your CIBIL score or DPD In Loan. If you have any inactive accounts, make sure you close them before they start impacting your CIBIL score or DPD Loan.

4. Check for errors in your credit report: 

Sometimes, there may be errors in your credit report or your Day Past Due payments. These errors can impact your CIBIL score. If you spot any errors, dispute them with the credit bureau.

5. Maintain a good credit history:

One key factor that affects your CIBIL score and what your DPD In Cibil Means synonymous is credit history. Lenders assess your creditworthiness based on your past repayment behaviour, and good credit history will improve your chances of getting a loan at a lower interest rate.

You can build a good credit history by making all your loan repayments on time and maintaining a low credit utilisation ratio.

Following these steps will help you improve your DPD and, in turn, your CIBIL score. A high CIBIL score will make it easier for you to get loans and credit cards at favourable terms and rates in the future, along with a record of good STD in CIBIL.

FlexiLoans is a leading online provider of business loans in India. We offer quick, easy and paperless loans to MSME. We are committed to providing fast, convenient and transparent access to credit.

FlexiLoans offers a variety of loan products that can be customized to meet your specific needs. In addition, we have a vast network of financial partners, and our loan officers will work with you to find the best loan solution for your business.

With FlexiLoans, you can get a small business loan in as little as 24 hours. We offer competitive interest rates and flexible repayment terms. You can apply for a loan from anywhere in India by answering some questions online.

We are here to help you grow your business. Apply for business loan today!

Conclusion 

DPD meaning in banking is an important factor that lenders consider when assessing an individual’s creditworthiness. A high DPD indicates that an individual is a risky borrower and is more likely to default on loan repayments. 

On the other hand, a low DPD indicates that an individual is a responsible borrower and is less likely to default on loan repayments. You can improve your DPD by paying your bills on time and keeping your credit utilisation low, and this will show lenders that you’re a responsible borrower.

The post What is Days Past Due(DPD) in a CIBIL Report? appeared first on FlexiLoans Finance, Business Loan Blogs, Tips & Guide.

A CIBIL score ranges between 300 and 900; any score above 700 is considered good enough to apply for a credit card or a loan. The CIBIL score is the first and foremost aspect considered by financial institutions before approving any form of a loan.

In order to check your CIBIL score by PAN card online, a valid PAN card is a must. Many facilities are available online to check CIBIL scores for free by PAN card.

Which are the credit bureaus in India that offer credit scores?

The following credit bureaus offer credit scores in India:

• CIBIL
• Experian
• Equifax
• CRIF Highmark

As per the Credit Information Act, once a year, every credit bureau provides the facility to check CIBIL scores online by PAN card free of cost. So we do not have to pay to pull our credit report.

What are the benefits of having a good CIBIL score when applying for collateral-free business loans?

• Quick loan approval
• Easy documentation
• Low-interest rates
• Flexible repayment tenure
• Flexibility to negotiate the loan’s terms and conditions

Why check CIBIL score by PAN card online?

The credit bureau can quickly obtain an individual’s financial details through a PAN card. But whenever you share your PAN card details, ensure that the credit bureau does not share your details with anyone.

What is the impact of a PAN card on the CIBIL score?

PAN card refers to Permanent Account Number; it is different from the CIBIL score. PAN card is connected to financial behaviour. Following disciplined financial behaviour boosts the CIBIL score.

What are the different types of CIBIL errors you should check before applying for any unsecured business loans?

• Identity errors: These errors are related to identity, addresses, or PAN details.
• Duplication errors: Sometimes, duplicate financial transactions reflect in the CIBIL report.
• Fraudulent account transactions: Sometimes, wrong transactions are recorded in the CIBIL report.
• Account errors: Any account that is closed, but still reflected in the report as open, showing late payment in your report, or reflecting wrong dates of payments.

How to check my CIBIL score by PAN card?

• to the official website of the credit bureau or any of the financial institutions from which you wish to check the CIBIL score.
• Once you , click on the option ‘Online Check CIBIL Score by PAN Card Free’.
• Enter details like date of birth, gender, name, etc.
• The next option that will appear on the screen is to provide the TAX ID number.
• After entering the TAX ID number, share the PAN details. It will list out the details of all of your financial transactions.
• Click on ‘Submit’ to get your CIBIL score.

What are the other ways to check and get a CIBIL report?

Free CIBIL score by PAN card facility is available at a bank’s website. We can also use a third-party app to check the same. They offer a free CIBIL score check facility using a PAN card. All nationalised banks and private banks provide the facility.

How is CIBIL calculated?

The CIBIL is calculated based on the last 6 months’ financial transactions that took place in your name. The data is calculated considering your repayments, credit card dues, length of credit history, and your credit mix. You can fetch your CIBIL data using your PAN card details and determine where you stand financially.

What factors affect my CIBIL score whenever you apply for an MSME or business loan?

Repayment history

If you are making late payments or defaults, then it will negatively affect your CIBIL score.

Multiple hard inquiries

If you are applying for credit frequently, it will impact your credit score. Every time you apply for a credit card, the financial institution will review your credit report, which is counted as a hard inquiry.

Higher credit card utilisation

If your credit card utilisation exceeds 30%, your CIBIL score gets impacted.

Right credit mix

Make sure your credit mix is a combination of secured and unsecured loans to leave a positive impact on your CIBIL score.

How can I improve my CIBIL score?

• Always pay your bills and loan EMIs on time whenever you have taken any loan, like a business loan or MSME loan.
• If you are a frequent credit card user, it is wise to increase your credit card limit because spending above your limit will also hamper your credit score.
• Keep credit utilisation ratio to a maximum of 30%.
• Avoid revolving your credit account and paying the minimum amount of dues. Try to pay in full. Keep your credit utilisation ratio max to 30%.
• Check your credit report regularly to avoid any errors in the report.
• Opt for both secured and unsecured loans.
• Do not apply for credit cards frequently.

Conclusion

The credit report has a summary of all credit activities. If we follow good financial habits, the CIBIL score will always be good, i.e., above 700. To stay financially fit and healthy, always follow healthy financial habits.

FAQs

1. Is holding two PAN cards a punishable offense?

Yes, per the Government of India, every individual must have only one PAN card. Only then can you check your CIBIL score with a PAN card online.

2. If my PAN card got misplaced, will it impact my CIBIL score?

No, losing the PAN card has no impact on the CIBIL score. You can apply for a duplicate PAN card.

3. How to check CIBIL score without a PAN card?

Besides a PAN card, one can check the CIBIL score online using an Aadhaar card or passport.

4. What will be the CIBIL score in case of a new PAN card?

The CIBIL report will show a red flag in your financial transactions if you recently applied for a new PAN card.

5. What happens if you are added to the defaulter’s list?

Being added to the defaulter’s list will have a negative impact on the credit history. Always make payments on time. You can set reminders for yourself to avoid missing out on payments.

The post Check Your CIBIL Score by PAN Card Number Online appeared first on FlexiLoans Finance, Business Loan Blogs, Tips & Guide.

Your credit score is the most important aspect in determining whether the lender will trust you when you request any kind of loan, including an MSME loan, business loan, collateral free loan, or an unsecured loan. CIBIL, a TransUnion subsidiary, is an RBI-approved credit score organisation in charge of creating credit ratings for businesses and individuals based on information and data given by banking and financial institutions.

CIBIL rating enables a person to apply for financing options like mortgages and credit cards. A high CIBIL rating makes credit more accessible, and a low rating makes it tougher to get credit.

But what is a CIBIL score? Here’s everything you need to understand about the CIBIL score and how it affects your chances of business loan eligibility.

How does CIBIL rate loan candidates, and what is a decent CIBIL score for a loan?

The Credit Information Company (CIC) has changed its rating standards for cardholders and borrowers. This adjustment may result in a significant modification in your credit score; for instance, a score of 724 is now comparable to 701.

The only explanation for the drop is that CIBIL has started evaluating credit history for the last 36 months rather than the previous 24 months. In contrast to the old method, the new algorithm assigns a credit score to those with less than six months of credit record.

The rationale behind updating the scoring algorithm is to keep track of borrower activity for a longer time period to gain a complete picture of their credit history.

What does a good CIBIL score mean?

A good CIBIL score range in India is between 700 and 900. A high rating will result in several advantages, including faster approval, a lower rate of interest on the credit, a significant loan amount, longer payback time, and more. The best CIBIL score can be anywhere above 900. Moreover, numerous lenders will be prepared to sanction your request, allowing you to select the creditor you desire to borrow money from.

What is an acceptable rating for loans?

A high rating for mortgages is just like a good CIBIL rating for any other reason, i.e. any number between 700 and 900. A high score increases the likelihood of your loan application being granted.

A credit score of 700 or higher is advantageous when applying for a business loan, MSME loan, vehicle loan, personal loan, or house loan. With a strong CIBIL rating, you can receive a better offer with a reduced interest rate, a longer payback time, a larger loan amount, and much more. Moreover, a good CIBIL score makes it easier for you if you are looking for a collateral free loan or unsecured business loan.

Furthermore, such a rating will result in a faster and smoother documentation procedure. If your CIBIL score is between 700 and 900, you may expect to borrow up to 80% of the overall property price.

However, because a personal loan is an unsecured loan, such guidelines cannot be established. The loan amount may vary based on the objective of the loan and your credit score.

There is no single number that can help you with an automobile loan. However, it helps to have a credit score higher than 700.

Factors that influence the CIBIL score

• Delayed payment

Even a single late payment might affect your credit rating. You may choose to ignore the transaction and utilise the funds for other emergency purposes. But this repayment delay might make you appear careless when handling funds, adding to a worse credit score. You should use the business loan EMI calculators, which are available online, to manage your timely repayment of business loans.

• Good credit limit utilisation

The lender determines each consumer’s credit limit depending on his revenue and debt-service ratio. The credit limit determines how much money someone may spend on payments after considering his other responsibilities. Your credit rating may suffer if you frequently utilise more than half of your credit limit. It displays your inability to manage money and costs. To keep a good credit score, restrict your expenditure to no more than 50% of your authorised credit limit.

• Several credit requests

You could have an urgent need for funds and request loans from many creditors for a short time. This can portray you as a person in financial trouble. When any lender reports an inquiry to a credit certification agency, the query appears on your credit report, lowering your score. Multiple requests and enquiries suggest that you are thirsty for credit, but they also signal that if a loan is granted, you will not be able to repay it.

How can you keep your CIBIL score high?

We’ve already stressed the significance of a good credit rating. But how can you keep your CIBIL score high? Here are some tips:

• Don’t forget to pay your EMIs and credit card bills on time.

Pay your EMIs promptly, and if feasible, automate them to prevent late penalties and negatively influence your credit score. Use your credit card with caution and pay the full amount owing rather than the minimum amount required each month. Otherwise, your debt will keep accumulating and impacting your credit rating.

• Examine your credit usage.

Don’t use more than 30% of your credit limit to maintain excellent credit. If you have three credit cards, make sure you use all of them to keep your usage under 30%. For instance, if you have three credit cards with credit limits of Rs. 1 lakh each, you should not spend more than Rs. 30,000 on any of them. You may also check your credit score with a pan card.

• Don’t show that you’re needy for credit.

After your loan request has been denied, wait at least 3-6 months before applying again. Applying for too many loans and credit cards in a short amount of time is not a smart idea.

Conclusion

The current scoring system considers the consistent movement of outstanding balances, the proportion of payback to the outstanding amount, credit card payment record, and the number of accounts established and canceled over time, to name a few additional considerations.

A candidate must first have access to their credit report to determine their eligibility for the loan facility. If you have a low credit score, try to improve it before asking for a loan from a creditor. To maintain your score, beware of the situations stated above.

The post Ideal CIBIL Score for Obtaining a Loan appeared first on FlexiLoans Finance, Business Loan Blogs, Tips & Guide.

Company Credit Report (CCR)

The CIBIL rank is not the only parameter that is considered by lending organizations such as banks or NBFCs to deem a company creditworthy or trustworthy enough to offer loans to. This is where you must pan out to see the bigger picture and understand what the Company Credit Report (CCR) is. A Company Credit Report is an intricate document that represents an organization’s financial health and is compiled using data from various credit institutions. Lenders use this report to assess an organization’s creditworthiness before approving a loan. Typically, a Company Credit Report comprises:

• Detailed information about the company’s parent and subsidiary firms, ownership, years of existence, and so on
• CIBIL rank
• A summary of the company’s financial history, covering repayments, collections, and revenue generation, among other things
• Financial information determines the suitable credit levels that lenders are willing to extend to them.

The Company Credit Report of a company is affected by the following factors

1. Duration of the credit history. The longer the credit history, the better it is for the Company Credit Report
2. The Credit Utilization Ratio, which is a metric for the requirement of credit, A higher credit utilization which indicates that a company has high utilization of the available credit negatively affects the Company Credit Report.
3. Repayment History. Payment of an outstanding balance on time is always a positive indicator for the Company Credit Report.
4. The outstanding debt value. CIBIL considers the total amount of debt the company owes to various credit organizations while calculating your Company Credit Report. As a result, it’s critical to preserve only the most manageable amounts outstanding.
5. The duration for which the company has been operational. When compared to start-ups, older companies are more likely to have higher Company Credit Report as organizations that have been in operation for a longer time and have continued to expand should be more respectable than those that are smaller and newer.
6. The Industry that a company functions in. Industries with high business risks tend to reflect negatively on the Company Credit Report of the company.

What Steps Can I Take To Improve The Cibil Rank And Ccr For My Company?

The first step here is to understand the factors that affect the CCR and CIBIL rank of your company, once you do that you can take the following steps to improve these metrics:

1. Maintain a systematic and timely repayment history: All businesses require business loans at one point or another to remain operational and business loans in India are provided by multiple lending organizations, finding loans is as easy as looking for business loans online or completing the MSME registration process. While availing of a loan is important, paying it back is just as important for the survival of your business. Paying back your loans on time and maintaining a good repayment history is one of the major steps of getting a good CIBIL score. Use business loan EMI calculators or business loan interest rate calculators to stay one step ahead.
2. Clear outstanding debts at the earliest: Credit cards and EMIs help a good number of businesses in the country stay operational. If your company relies on these for support, it essentially means that your company has debts and it is important that you do not leave your debts outstanding for long durations. Pay your credit card bills on time and do not default your EMI payments.
3. Keep your transaction reports up to date and accurate: Businesses require a large volume of transactions to stay operational. The large volume of these transactions could lead to errors being made while reporting these transactions. The errors could be on your part or on that of the banks or credit institutions. It is important that these transaction reports are accurate and up to date. This would require your company to work closely with financial institutions and ensure everything is in order.
4. Maintain a balanced credit utilization ratio: This involves taking loans only when required, taking only those loans which you can pay back on time, and not exhausting your credit limit. Taking long loans and paying them back systematically and on time is an additional step.
5. Keep yourself informed about your financial health: Track your transactions, and credit history and check your CIBIL rank often to keep yourself ahead.

Conclusion

In conclusion, understanding CIBIL ranks, CCRs, how they function, and what controls them is the first step you can take in improving your CIBIL rank. Taking steps to improve your credit history is the next thing you have to do. Pay your loans back on time, maintain a balanced credit utilization ratio and monitor your CIBIL rank to stay ahead.

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A significant reason behind the failure of businesses in India is the lack of adequate access to credit. Credit score also plays a major role in building up an image for the business. A business with a low credit score will not have a good reputation in the market and will create many more problems other than financing issues. 

Credit reports and scores are calculated and issued to applicants by credit bureaus. In India, four bureaus offer credit scores. They are known as Credit Information Companies (CICs) and are licensed by the Reserve Bank of India under the Credit Information Companies (Regulation) Act, 2005. The four bureaus are:

• TransUnion CIBIL
• Experian
• CRIF High mark
• Equifax

Out of these four credit bureaus, TransUnion CIBIL score and Experian credit score are one of the most preferred credits which are relied upon by banks and other lending institutions to gauge the financial soundness of loan applicants. Read on to know what is Experian Score and CIBIL score and the difference between Experian and CIBIL scores.

What is CIBIL Score

CIBIL (Credit Information Bureau India Limited) is India’s first credit bureau and also the most popular one. It maintains credit files on 600 million individuals and 32 million businesses. CIBIL credit bureau was set up in 2000 at the recommendation of Siddiqui committee of the Reserve Bank of India and is part of TransUnion, which is an American multinational group. All major banks, financial institutions and NBFC are members of CIBIL and rely on CIBIL score to measure the credit worthiness of loan applicants. CIBIL scores are available for both individuals (on a scale of 300-900) and for business (on a scale of 1 to 10, where 1 is the highest rank for a business).  There are three divisions in CIBIL, namely, Commercial Bureau, Micro Finance Institution Bureau, and Consumer Bureau for commercial enterprises which generates the Credit Information Report and CIBIL business credit score for their clients.

What Is Experian Credit Score

Experian is a 125 years old global credit rating company that offers its services in nearly 44 countries and has processed more than 3.5 billion credit decisions over the years. It is one of the most popular Credit Information Companies in India which provides global information services apart from credit services. It helps banks and other credit institutions by calculating business credit scores, which helps lenders in processing business loans. In a recent report by Forbes, Experian was awarded as one of the most innovative credit scoring companies in the world. The Experian credit score is calculated by taking into consideration various factors like credit type, existing credit accounts, credit utilisation, payment history, credit tenure etc.

Key Difference Between Experian and CIBIL

The key differences between Experian credit score and CIBIL credit scores are highlighted in the table below:

Experian Credit Score vs CIBIL Score

The debate on Experian vs CIBIL can be confusing for those who have no knowledge of the industry. Before selecting a credit agency, we should carefully weigh the pros and cons of both and make an informed decision. The following are some pointers which will give us an insight over the whole Experian score vs CIBIL score debate.

• Experian is comparatively more seasoned

Experian has been in the business since 1996 and has operated in many countries over the globe.

In terms of experience, Experian has a comparatively more exposure. CIBIL on the other hand is newer and operates only in India.

•  Experian algorithm is more sophisticated

Though the methodology used by CIBIL is also decent, Experian uses an algorithm which collects and analyses data effectively to get meaningful interpretations and provides more scope for information to users.

•  CIBIL has wider acceptability

CIBIL is the most popular credit rating for lenders. Nearly 90% of banks and financial institutions in India prefer CIBIL scores as the dependable source for credit reports. Many lenders would prefer to get CIBIL credit score for cross-checking, even if Experian credit score is available.

•  CIBIL has higher customer base

CIBIL has been operating in India since 2000, while Experian got its credit license in 2010. CIBIL, therefore, enjoyed no competition for a long time and developed a huge scope during that time. CIBIL company enjoys more expertise and exposure in the Indian market and surpasses all contemporary credit rating companies by a huge margin.

•   CIBIL is preferred by domestic lenders

CIBIL being for the longest time in the Indian market is well-equipped to handle the Indian business environment. As India is unique in terms of business conditions compared to foreign countries, domestic institutes are found to give higher preference to CIBIL. On the other hand, international institutions like Morgan Stanley, Barclays, and HSBC are more comfortable with Experian.

Summing up

As we have observed above, both CIBIL score and Experian score have distinct roles to offer for lenders as well as borrowers. Both credit rating companies use different benchmarks, methodology, and parameters to define credit score and prepare credit reports. While Experian uses an internationally acclaimed algorithm to arrive at a score, CIBIL is better suited for Indian businesses. For domestic small companies, CIBIL scores will be more acceptable by lenders, while for multinational companies, Experian may be a better choice. However, irrespective of which score is used, it is advisable to keep the credit score updated and attempt to maintain a good credit score.

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What is a CIBIL Score? Why is it Important?

The Credit Information Bureau (India) Limited (CIBIL) is a credit information organization licensed by the Reserve Bank of India. It collates all credit-related information of borrowers all over India and maintains credit files for each of them. When you secure a personal or MSME loan, its data gets registered with CIBIL.

CIBIL maintains your credit file and represents your credit performance through a three-digit CIBIL score. It is the summary of your creditworthiness, ranging between 300 and 900. The higher you score on CIBIL, the better are your chances as a prospective borrower.

The CIBIL score is critical for any person looking for loans. Whether a personal or business loan, the eligibility depends on how much you score in CIBIL.

What is a Good CIBIL Score in India?

The CIBIL scores range between 300 and 900. If you score 700+, you will be considered creditworthy. A score of 900 on CIBIL is deemed to be excellent. However, please note that institutions also sanction loans after factoring in your income, documents, etc,. and not solely on your CIBIL score.

If you are an entrepreneur and are looking for an unsecured business loan, you can search the market for an institute offering the most attractive business loan interest rates.

You can visit the official website of any lending institution to assess your business loan eligibility. The eligibility criteria for all categories of loans like collateral free business loan, MSME loan, etc., are mentioned there.

Taking a loan will directly impact your cash flow. Hence, it would be best to assess the business loan interest rates you need to pay by accessing the online business loan EMI calculator. This calculator will calculate you the EMI amount you need to pay every month.

Impact of CIBIL Score in Covid Times

Amid the pandemic, loss of income due to closure of businesses, loss of jobs have become commonplace incidents. You may be already servicing a loan for business or a Mudra Loan. It will be a challenge to run your business, meet all essential expenses, and maintain your CIBIL score.

The government had offered a moratorium on loans until August 31, 2020. If you opted for that, you will not be required to pay installments during that period; the interest accrued during that period shall get levied onto you at a later stage. Unless you pay the overdue interest, your CIBIL score will be affected.

How to Maintain CIBIL Score in Pandemic at an Acceptable Level?

You need to know the following to maintain your CIBIL score amid the pandemic:

Know Your CIBIL Score

You need to know your credit score and the integral constituents that get factored in in calculating your creditworthiness. It would be best to take adequate remedial measures to improve your CIBIL score. A good score will help you when you need additional funds over the long run. Try and regularize your payments within a CIBIL Score update period, a window of 30-45 days within which credit institutions submit data to CIBIL.

Keep Checking Your Credit Report

It would be best to monitor your credit score in these uncertain times regularly. Keep checking with CIBIL and take corrective measures if you see your score is going down due to some irregularities in repayment of dues. Please note that your credit score signifies how good you are in the repayment of loans. If you compromise on your credit score, it will be challenging to obtain loans for any future requirement.

Clear Credit Card Debts

Paying off your credit card dues during this crisis period is very important. By carrying on this high-interest debt, there is a chance of you falling into a trap, thereby tarnishing your credit score.

If you feel it is becoming an issue in clearing off the entire due, you may contact your bank that has issued the credit card and go for a settlement.

Consolidate Debts

If you apprehend any untoward incident that might result in you missing repayments for the next few months, it is ideal to go for debt consolidation. It is better to close multiple high-interest loan accounts and consolidate the debt into one loan account with a lower interest rate. You may decide to go for a longer loan tenure to keep the EMI at a manageable level.

Try And Avoid Moratorium

The moratorium that was offered during the pandemic came with an implied clause. By opting for a moratorium, you were not supposed to pay installments till August 31, 2020. But, there was no relief on the interest repayment. The accrued interest was always liable to be paid by you eventually. You should only opt for the moratorium if your income has reduced in real terms and you do not have enough reserves to meet essential expenses. But, let opting for a moratorium be your last resort as overdue interest burden would start bleeding you in due course of time.

Avoid Cash Withdrawals From Credit Cards

You are advised not to withdraw cash using your credit card. The cash withdrawal on your credit card comes with additional charges like cash advance fee and late payment fees. As the repayment amount of the credit card will come in with additional fees, it has an adverse effect on your credit score.

Keep A Check On Your Credit Utilization

Financial institutions prefer profiles who use their credit limits with prudence. You are advised to refrain from overspending and stick to essentials only during these trying times. In an ideal situation try and maintain your credit utilization within 30 percent of the limit available to you.

Few Takeaways

• Credit score is a numerical representation of your creditworthiness.
• You need to maintain a healthy credit score so that whenever you may need additional funds for your business, the same may be sought from any lending institution.
• In India, a score of 700+ in CIBIL is considered to be an acceptable score.
• You need to be extra cautious to maintain your credit score in this pandemic situation.
• For maintaining your own credit score, you need to know your CIBIL score.
• You need to keep checking your credit score periodically to maintain acceptable standards.
• It is advisable to clear your high-interest credit card debts as soon as possible. Also, you may opt for a debt consolidation initiative by bringing all your high-interest debts under a single umbrella.
• Avail the loan moratorium offer as a last resort. The overdue interest that will accrue for the months when the moratorium is in force will eventually be added on to your debt burden.
• Refrain from making cash withdrawals from credit cards as they come with cash advance fees and fetch high interest on repayment.
• Keep your utilization of your available credit limit to 30 percent.

It would be best to keep in mind that life goes on, however adverse the situation may be due to the pandemic. You need to sustain your business and look for growth opportunities. Therefore, it is essential not to lose sight of the basic hygiene factor that is a major driver in your business pursuits. One of the most critical indicators that lending institutions look for in you is your creditworthiness. You need to ensure that the credit score you have built up for yourself gets maintained from what may.

The post How To Maintain Your Credit Score During Covid Pandemic appeared first on FlexiLoans Finance, Business Loan Blogs, Tips & Guide.

The CIBIL score measures your creditworthiness. It is like any other unit of measure that indicates your repayment ability based on predefined parameters. The idea is to quantify your repayment strength. The CIBIL score limit is between 300 and 900, and the higher it is, the better. As long as your score is above 750, you have a good chance of getting your loan application approved. The Credit Information Bureau (India) Ltd., an organisation backed by the Reserve Bank of India (RBI), generates the CIBIL score. CIBIL Ltd. collects the Credit Information Report (CIR) from lender banks and Non-Banking Financial Companies (NBFCs). The CIBIL score is generated based on the CIR.

What is the Importance of the CIBIL Score?

The CIBIL score is a vital factor affecting your personal or business loan eligibility. The first thing a lender verifies is your CIBIL score. The loan may still be approved if the CIBIL score is low, provided there is a security cover, and the lender is assured that the borrower will not default. If the CIBIL score is high, the borrower can negotiate a lower rate of interest. Also, they may avail of lower processing fees and other charges. The decision to sanction a loan or credit is solely exercised by banks. The CIBIL score plays no role in it. It merely guides the lender before executing their decision.

What are the Factors Affecting CIBIL Score?

If you wish to know what affects the CIBIL score, the following factors must be kept in mind.

Payment History

It measures your ability to pay dues on time. Timely payment of dues will enhance your credit score. EMIs are often automatically deducted based on standing instructions. These instructions are already given to banks at the time of the inception of borrowing. Try to ensure your salary is credited to your account before the dues mature or have a reasonable balance to clear off the EMIs. In case there is an inadequate balance in your account, the payment will default. It is pertinent to note that the recent delayed payments have a far more negative impact than old ones. The repayment track record carries 30% weightage. A delay in payment of 30 days can erode 100 CIBIL points. So it is one of the most important factors affecting CIBIL score.

Credit Exposure

Credit exposure measures your loan utilisation against the sanctioned limit. The lower the utilisation, the higher the CIBIL score. It carries 25% weightage.

Borrowing Classification and Duration

It is always advantageous to have a secured loan in your portfolio. It not only gives you a better CIBIL score but also reduces borrowing costs. A higher loan duration coupled with a secured loan is the perfect recipe for a good CIBIL score. The parameter carries 25% weightage.

Period of Borrowing

It is calculated starting from the date you got your first loan sanctioned. The higher the period, the better the credit score. It carries 20% weightage.

Other Factors Affecting CIBIL Score

Recent write-offs and waivers have a long-lasting, adverse impact on your CIBIL score. The credit company also assigns value to the income of the individual. As long as 50% of the monthly income meets the monthly loan repayment, the credit score remains intact. Further, having the salary credited on time every month is an advantage.

Making roving inquiries for loan approval is not advisable because it shows the hunger for credit and adversely affects the credit score.

Important CIBIL Scoring Factors

• The CIBIL score is calculated based on at least six months and up to 36 months of past transactions.
• Two hundred and fifty-eight parameters are taken into account to calculate the CIBIL score.
• Your CIBIL score will exist even if you do not apply for a loan.
• It is your right to get a free CIBIL report.
• The CIBIL score may not match with the scores issued by other agencies. It happens because other agencies use different parameters.

How to Improve CIBIL Score?

Below are few methods to improve your CIBIL score.

Develop Consistency

Have a perfect track record when it comes to repaying dues. Never default on credit card dues because they carry a high interest on late payment. Further, prioritise the paying loans on due dates. Developing a rich payment history is the vital key to reach the CIBIL maximum score.

Maintain Low Credit Utilisation

Maintain a credit utilisation ratio of 40%. Further, when you opt for a loan, bid for a high credit limit at the time of approval.

Borrowing Mix

Have diverse loans in your portfolio, such as home, education, and SME business loans and select loans of varying tenure.

Regular Monitoring

Keeping track of credit scores is advisable. It aids in giving the real-time status of creditworthiness.

Reasons for Low CIBIL Score

The following are the reasons for a low CIBIL score.

Paying the Bare Minimum

Paying a small portion of your total dues is never advisable. It may lead to a vicious circle of debt. It is a trait of poor repayment behaviour.

Applying After Rejection

If your loan or credit card application is not approved, pause your efforts temporarily. First, try to improve your CIBIL score, and then reapply for the credit.

Mistake in Credit Score

If there is an error in your CIBIL report, it will unknowingly reduce your CIBIL score. Regularly monitor your CIBIL score and report any discrepancies.

High Percentage of Credit Utilisation

It is never advisable to maintain high credit utilisation. Having credit utilisation above 60% leads to the rampant decline of the CIBIL score. Always opt for a higher credit limit than the sanctioned amount. It not only provides room for extra borrowing without further processing costs but also enhances the credit score.

Small Outstanding Dues

The borrowed amount may be low and not carry any penalty for late payment. It may create a mindset for delayed payment. Remember, the CIBIL score falls equally, irrespective of the amount of delayed repayment.

Improper Planning

It is recommended to have a proper mix of loans. Instead of having only a personal loan, try to segregate it through the appropriate blend of an educational, home, or car loan.

Giving Up Old Credit Cards

We frequently tend to close our relationship with old credit card companies because we get exciting options from the new cones operating in the market. Whenever you give up your old credit card, you also bid farewell to your rich credit history. If you have to close a credit account, opt for a relatively new one. Continue the old credit cards for as long as possible.

What is Settled Status in the CIBIL Score?

You may sometimes be unable to repay the entire amount due to the lender. The bank or other lenders may come up with a restructuring scheme. According to it, you will have to pay a settlement amount lower than what was payable.
The settled status may result in the non-approval of your new loan application as it indicates your inability to repay the full dues. If possible, pay back the entire amount due to the bank where there has been a default. As a result, you will get a full and final certificate. Present it to the CIBIL bureau to improve your credit score.

Tips to Maintain a CIBIL Score Maximum

You can follow these tips to maintain a CIBIL maximum score.

Proper Planning

Make a budget for your monthly expenses. Ensure that your expenses are in line with your income. Try to avoid unnecessary expenses to reduce the credit burden. If you need a loan for education or home purchase, take benefits under Chapter VIA of the Income Tax Act, 1961 to reduce your tax burden.

If you are starting a new venture, availing a loan for business in India is imperative. The borrower money aids in raising the level of operation and achieving economies of scale. It is important that you do proper CIBIL score-related planning so that your business loan eligibility is met.

Credit Caution

Never be tempted to buy a product or service on EMI if not required. Often, people buy things beyond their budget because the EMI option is available. The habit will steadily increase your credit burden and reduce the CIBIL score. As a thumb rule, always ensure that your EMI payments do not exceed 40% of your monthly income.

How to Check Your CIBIL Score?

For checking CIBIL scores, follow these steps.

• Log on to the CIBIL website.
• Create your account with CIBIL, if not already created.
• Verify your identity using a one-time password.
• View your CIBIL score.

How to Recover From a Low Credit Score?

It is a common misconception that once the CIBIL score declines, there is no scope for recovery. Even if you have hit rock bottom, you can still bounce back. Follow the following steps for a speedy recovery.

Clear Off the Dues

Pay off all your outstanding dues as early as possible. If you have outstanding credit card bills, take a personal loan to repay them. Try to consolidate all your borrowings into a single one. Since credit card default carries a high penalty, try to repay it at the earliest.

Restructure Your EMIs

If you have numerous EMIs running, try to restructure them by either consolidating those EMIs or prepaying them. Ensure that your monthly EMIs do not exceed 30% of your monthly income.

CIBIL 2.0

CIBIL 2.0 has been introduced keeping in mind the rapid transition in the business world. Banks and lenders are still transitioning to CIBIL 2.0, which is specifically targeted towards borrowers with a credit history of fewer than six months. Earlier, no CIBIL score was generated for such borrowers. Now, CIBIL 2.0 has parameters that can easily generate the CIBIL score for such borrowers. The range of score is between 1 to 5 points, with 1 indicating “high risk” and 5 meaning “low risk.”

Conclusion

Today, bankers have become very cautious before granting loans on account of rising default cases. CIBIL score and other creditworthiness parameters are properly scrutinised to get a reasonable assurance that the borrower will not default. In such a scenario, it becomes imperative for the borrower to maintain a good credit score. Any default will adversely affect both their current and future borrowing potential. Ensuring credit caution and financial prudence are the essential prerequisites in the process. The ideal way would be to always keep CIBIL scoring factors in mind while financial planning. The CIBIL parameters vary from borrower to borrower and the type of borrowing as well. If you are availing a term loan, the higher the margin deposit, the better the CIBIL score.

FAQs: All About CIBIL Scoring Factors

• Can the CIBIL bureau modify or remove the credit records?

The CIBIL Bureau does not modify or delete any credit history. It only collects credit history from banks, NBFCs, and other members.

• What does “NA” mean in a CIBIL score?

“NA” means that the CIBIL Bureau does not have adequate information to generate your credit score. It may be because you have not taken any loan in the past and should not be viewed negatively. If you have an adequate and regular income stream, your loan will be approved without the CIBIL score.

• What are the disputes that can be raised before CIBIL?

Disputes related to personal information, account information, and duplicated accounts can be raised before CIBIL.

• Does regularly checking CIBIL score reduce score?

No, the Regular checking of your CIBIL score does not lead to a decline in your CIBIL score.

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