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A credit score can be defined as a 3-digit number between 300 and 900 that describes the credit merit of a credit card holder or of an individual who has taken a loan. In order to grant a loan in India, the potential lenders use the credit scores calculated by CIBIL TransUnion, Experian, Equifax or CRIF High Mark. Several lenders consider CIBIL score to be the benchmark for granting a loan to a borrower. Credit scores help to depict the credit and repayment history, utilization of credit, tenures of previous debts, and so on. Although the banks in India have their individual limit to grant loans, your chances of getting a loan approved is higher if your credit score is 900.
A credit score is a representation of your creditworthiness in a numerical format. It is calculated by the four credit bureaus in the country- TransUnion CIBIL, Equifax, Experian Credit Information Company and High Mark Credit Information Service. Each credit bureau has its own proprietary algorithm they use to compute credit scores. They take into consideration several factors including credit history, repayment behaviour, among others, at the time of calculating the credit score
A credit score falls in the range of 300-900. If your credit score is closer to 900, you will have better chances of getting a good deal at the time of applying for a loan or a credit history. Majority of lenders like banks and non-banking finance companies consider a credit score of 750 and above as ideal.
A credit score is a 3-digit number that ranges from 300-900. It is calculated by the credit bureaus in the country. Generally, lenders like banks and non-banking finance companies (NBFCs) consider a score of 750 and above as ideal. Each credit bureau uses its own algorithm to compute credit scores. It is calculated after taking into consideration factors such as payment history, credit utilisation, credit age, and credit type. Let’s take a look at all of these factors in detail with the level of impact they have on your credit history and score.
Payment history is one of the most important factors that affects your score. If you have been consistent in paying your bills/loan EMIs, it suggests that you are a responsible borrower and are at a lower risk of defaulting. A responsible credit behaviour will also make you eligible for preferential rates on loans and quicker approval on your applications. Making late payments, missing payments, etc. Will lower your score by several points.
Credit usage is the second biggest factor that affects your credit score. A credit utilisation ratio refers to the total amount of credit you have used in proportion to the cumulative total credit limit available to you. Credit utilisation ratio is calculated by diving your overall outstanding balance by your total credit limit. According to experts, consumers should ideally use only 30-40% of the credit limit to maintain a high score.
To better assess your creditworthiness, your history with credit is also considered when computing your score. If you have handled your credit in a responsible manner in the past and continue to service payments on time on your active credit lines, it will positively affect your credit score. A long credit history helps lenders take a sound decision on whether to offer you credit or not. Therefore, it is advised to keep credit cards with a long history open compared to cards you have recently acquired.
It is important to maintain a good balance of secured as well as unsecured credit. A credit card is an example of unsecured credit while a secured credit can be a car loan or home loan. A mix credit helps to boost your score. Although, it has a lower impact compared to other factors, you should not ignore it. Your total accounts reflect the experience you have with handling both types of credit. You should avoid borrowing only one type of credit in large quantities as it could hamper your score.
Along with the type of accounts, your credit inquiries (hard inquiries) are also taken into consideration while calculating your score.
It is advised to check your credit score on your own before applying for a loan. You can check your credit score for free on BankBazaar.
Your Credit score is a three-digit number that reflects your credit history. The report is prepared by various credit agencies based on the information provided by the lenders. The data or information is utilised by the agencies to prepare the report. This may include your payment history, number of credit accounts, and the length of your credit, among others. Banks and other financial institutions consider this score before giving you a loan or credit card.
Any score above 750 is considered as a good score. So, if you don’t have a good Credit score, lenders may shy away from giving a loan. Here’s how you can improve your score.
There are multiple ways to improve your credit score. Here’s some of them:
Is your score trending downwards though you have a good payment history? It could be because of an error in your report. For instance, it may happen that you have cleared one of your loans but it’s still reflecting in your report. This may hurt your score a tad bit. Hence, it’s advised to go through your report periodically. If you spot any discrepancies, bring it up to the credit agencies. Eliminating such errors can boost your score.
Continue using your older card to have a stronger and lengthier credit history. Of course, if you find that it’s getting difficult to make timely payments, you have no other option but close the card. Remember that a credit card account, which you have been maintaining for over a period always helps to boost your score.
Your score will take a hit if you don’t repay in due time. Every time you default, it gets recorded in your report and eventually hurts your score. Always remember that your creditworthiness reflects your repayment history. Hence, to improve your score, keep making timely payments.
One way to deal with this is by setting up standing instructions. In that way, you won’t miss the repayment dates.
Maintain a healthy mix of secured and unsecured loans to be on the safer side. Multiple unsecured loans can have a negative impact on your score. Now here’s an important factor that you need to remember. In case you haven’t borrowed money before, you won’t have a credit history and that may have an adverse effect on your score. And without a good score, you will find it difficult to get a loan from banks.
The number of loans against your name can have an impact on your score. Hence, it’s recommended to take one loan at a time. Clear it off and take another loan. Also, ensure not to over-utilise your credit card. As in, keep the utilisation ratio between 20% and 30%. This will help you make repayments comfortably without any financial pressure.
As mentioned earlier, your credit utilisation ratio can make or break you financially. If you over-utilise, your score may drop. You can get in touch with your bank to customise your credit limit based on your expenses.
The interest rates are lower for long-term loans and so are the EMIs. It will make it easier for you to make repayments and minimise the chances of defaulting. However, note that you will be paying more as interest for long-term loans compared to short-term loans.
Your Credit score plays an important role whenever you apply for a loan or credit card. Here’s how it is advantageous to have good Credit score.
Every financial institution will check your score before granting you a loan. If you have a good CIBIL score, the lender will consider you as a low-risk customer. This automatically betters your chances to get a loan.
If you have a very good score, say above 800, the lender may choose to offer you impressive rates on your loan. Having a good score puts you in the good books of the financial institutions. That way, you can negotiate the available rates and get a good deal.
Most financial institutions will check your score before giving you a credit card. So, if your score is on the higher side, getting a card won’t be that difficult. That’s because your credit history will show all the timely repayments you have made against your card or loan. And banks prefer customers who diligently pay their dues on time.
So, check your Credit score periodically to see if you need to work on your score. If you are falling short of the 750 mark, you can apply the above tips to boost your Credit score.
Owing to the credit ratings downgrade by ICRA, Shares Mcleod Russe of l hit a 52-week low of Rs.19.80. The credit rating agency downgraded the company’s long-term rating from ICRA AA- to lCRA A. Meanwhile, Mcleod Russel’s short-term ratings were downgraded from ICRA A1+ to ICRA A2+ with a long-term negative outlook.
The ratings were downgraded by ICRA as a result of deterioration in the company’s profitability on account of lower price realisation on tea. This was mainly due to the rising production costs that have kept the capital structure stretched and debt coverage indicators under pressure. ICRA has also moved the ratings to the 'Issuer Not Cooperating' category due to non-submission of monthly 'No Default Statement' (NOS) by the entity. The rating is now denoted as ICRA B- (Negative)/ICRA A4 ISSUER NOT COOPERATING, the company added.
20 June 2019
A latest report from the credit rating agency ICRA has revealed that small finance banks (SFBs) are likely to grow at 25-30% over the medium-term. The report added that the growth is possible if SFBs can arrange additional external capital of Rs.4,000-Rs.6,000 crore till FY23.
The operating expense ratio of the bank deposits has been high mainly due to factors like setting up and upgrade of existing branches, systems upgrade, and the hiring of manpower. These banks have witnessed growth in assets under management, deposits, and better return on their equities, besides mitigating business risks through diversification. The banks reported an annualised growth of 33% in the asset under management by December 2018 which stood at Rs.64,325 crore.
ICRA added that it expects SFBs loan portfolio to grow at 25-30% over the medium-term. Meanwhile, the microfinance share has been declining to around 40% by March 2020. The SFBs would require external capital of Rs.4,000-6,000 crore till FY23 for meeting the projected growth rate. The credit rating agency also stated that these banks were able to diversify their product mix, which resulted in a decline in the share of microfinance as an asset class to 44% as of December 2018 from 60% as of March 2017.
These banks have made good progress with deposits, accounting for more than half of their total borrowings as of December 2018. These banks' asset quality indicators have improved with gross NPAs declining to 5.8% as of December 2018 from 9% in March 2018.
18 March 2019
Credit rating agency CARE has revised the ratings of Kesoram Industries. The ratings have been downgraded owing to “significantly higher than envisaged losses” in the first nine months of FY19. The ratings were downgraded as the losses had further weakened the credit and financial risk profile, added the credit rating agency. Kesoram’s long-term facilities were revised from CARE BBB to Care BB+ with “under credit watch with developing implications. Meanwhile, the short-term facilities were revised down to A4+ from A3+, under credit watch with developing implications. BB indicates instruments having moderate risk of default.
CARE downgraded the ratings on Friday when Kesoram Industries informed Securities and Exchange Board of India (SEBI) and the stock exchanges that Kumar Mangalam Birla, chairman of Aditya Birla Group wanted to become a public shareholder by shedding the promoter tag.
18 March 2019
Post IL&FS debt fraud, credit rating companies have put several companies under ‘rating watch’ in the past one year than in the last 12 years, according to a report from the Economic Times. The IL&FS fiasco has increased the concerns of the company's financial health. Last year, a number of housing finance companies suffered crisis owing the IL&FS crisis. As per data from the Securities and Exchange Board of India (SEBI), the total worth of corporate bonds under ratings watch has touched Rs.10 lakh crore in FY19 and now constitutes nearly 10% of the total corporate debt. In 2017-18, corporate bonds worth Rs.2 lakh crore were put under ratings watch.
Sectors like non-banking finance companies (NBFC), real estate and construction have come under tremendous pressure and are therefore being put under watch by credit rating agencies. Post the IL&FS crisis, rating agencies have become strict and started taking action.
9 March 2019
Rupee depreciation to a record low level has resulted into a rise in the Foreign direct investment (FDI) in India. In October 2018, the country’s FDI was at the highest level in six months as the benchmark stock index declined. As per the latest data from the Reserve Bank of India (RBI), Gross FDI inflows were $6.54 billion in October, the highest since $6.7 billion in April. Fall in the equity market and opportunistic buying doubled with the weakening rupee were some of the main reasons, India witnessed high gross FDI inflows in September and October, said Saugata Bhattacharya, chief economist at Axis Bank. In addition, there were a couple of large corporate acquisition deals in the previous months and possibly some early IBC (Insolvency & Bankruptcy Code) resolutions. The rupee became Asia’s worst-performing currency on 11 October 2018 as it hit a record low of 74.48. However, this meant that a single dollar would have fetched more of the local currency, making sense for multinational companies to bring capital into India where they have units. Madan Sabnavis, chief economist at CARE Ratings stated that FDIs come based on opportunity and availability of investible funds. India still is fast growing with hospitable FDI rules, and the country offers better prospects especially for the long term. In November, the World Bank said India had climbed 23 positions in its Ease of Doing Business Index to 77th p
9 January 2019
In a bid to control defaulters, Bank of Baroda (BoB) is being extra careful of it retail customers. Over 50% of the bank’s home loan borrowers have minimal risk with high credit scores. Moreover, it is also offering the lowest rates in the market at present thereby giving a tough competition to the bigger banks like State Bank of India and HDFC Ltd. Bank of Baroda was one of the first banks to base the interest rates for home loans on the Cibil scores. The rate of interest varied from 8.65% to 9.65% depending on the CIBIL score. Thanks to the tighter norm of checking the CIBIL score, BoB has improved its portfolio. The bank had 57% borrowers with a CIBIL score of 760 and above. Retail loans at BoB were growing at 33.55% over the previous year. There was an exponential increase in the auto personal loans as both of them registered an increase of 39% as on half year ended September 2018, as compared to the previous year. The bank expects to grow at a similar pace in the second of the fiscal. The total retail non-performing assets (NPA) of the bank are at Rs.1,827 crore, which is 2.40% of its total NPA pool. This is an improvement from March 2018 when the bank's retail NPAs were 2.83% of the total NPAs.
In the first 6 months of FY19, BoB has 75% of new customers with a CIBIL score of 760 and above, said Virendra Sethi, general manager in charge of retail loans at BOB. In addition, Bank of Baroda is also
Working on expanding its education loan portfolio and has reported a 24% rise in sanctions. The highest growth in this segment is seen in loans to students from premier colleges and loans to fund their studies in foreign countries. The total outstanding retail loans of the bank at the end of September 2018 was Rs.76,252 crore, of which home loans were at Rs.49,345 crore, auto at Rs.6,660 crore and education loans at Rs.2,285 crore
27 December 2018
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