MUMBAI: There are times customers apply for personal loans, educational loans or credit cards and find it surprising when the same is rejected. They might have provided all the relevant documents, have supporting income statements; yet the loans get rejected or credit card denied.
Many a times, borrowers learn about the reasons for the same only after the rejections. Any defaults in the past, delays in EMI or credit card payments, et cetera, are captured by the multiple credit bureaus that function in the country. When banks tap into them to verify the credit record of the client in the past, the past record comes to haunt the present credit score.
Currently, with the slowdown in economy, bankers and other lenders are getting cautious about retail loans. Retail loans, which were considered less risky, become a worry when economic slowdown triggers job losses. Bankers say they are watchful of the credit record of the borrowers. Keep a watch on your loans, credit card payments, EMI schedules and keep a tab on your credit scores.
Credit bureaus such as CIBIL, Equifax, Experian and CRIF Highmark are all licensed by the Reserve Bank of India. Lenders share credit information of their clients to these credit bureaus that collect the data, aggregate it, and use its own methodology and algorithm to arrive at a credit score. They have a three-digit numeric summary of credit score ranging from 300 to 900. If the scores stay about 700-750, it should be good for loan approval.
So, tracking a CIBIL score would help one track and maintain the credit score. Though the scores are based on the credit history, the credit scoring models may be different. Lenders may be accessing more than one credit bureau for the score. Once registered, you can access the basic credit score from CIBIL for free instantly. If one wants a detailed credit score and analysis, all the bureaus charge a fee and deliver reports.
What do bankers look for in new loan approvals or credit cards, especially when they fear delinquencies are on the rise? They basically look at if you as a borrower have been keeping up with the payment schedule, been bargain-jumping from one lender to another frequently, have too many credit cards and keep borrowing from one to pay another, etc. More than the salary, the investor behaviour becomes important for lenders to decide the credit-worthiness.
Don’t miss out on the crucial home loan or an education loan, be disciplined in credit servicing and check your credit scores. In case the score is shocking and there are discrepancies, bureaus have mechanisms to redress them, but checking it up before applying for loans would be helpful.
Under lenders’ lens
More than the salary, investor behaviour is important for lenders to decide your credit-worthiness
They see if you have been keeping up with your payment schedules, been bargain-jumping from one lender to another, have too many credit cards or keep borrowing from one to pay another