Tag Archives: Credit Score

How Banks Evaluate Personal Loan Applications

personal loan

Personal loans can be a great arrow in your financial quiver for consolidating higher interest rate debts, like credit cards or short-term loans, or financing a major purchase or unexpected bill. With predictability built in, personal loans make it easy to budget for repayment for the life of the loan, and for the most qualified borrowers, repayment can extend up to several years. However, not everyone is eligible for a personal loan through banks or online lenders. Because personal loans do not require collateral – an asset, like a vehicle, a home, or a bank account the lender can use to recoup losses due to default – the application process can be stringent. Here are the most common factors banks review when evaluating a personal loan application.

Credit Score

credit-score

The first place lenders look when receiving a new personal loan application is the borrower’s credit history and score. Credit information is like a financial fingerprint in that it provides a clear picture of who a borrower is in terms of money management and timely debt payment over an entire lifetime. When credit history is clean, and a credit score is above 700, banks are more apt to offer a personal loan with the lowest possible interest rate and budget-friendly repayment term. If credit score and history are on shaky ground due to past late payment, a recent bankruptcy, or a foreclosure, lenders either decline a loan application or charge far higher interest rates to protect their potential for loss.

Employment History

employment

Some banks ask for employment history on a personal loan application, in an effort to understand a borrower’s track record of earnings. When someone has had significant gaps in jobs over the last few years or has had several different employers in a short period of time, lenders may view the borrower as higher risk. Steady employment and increased income over time is what banks are typically looking for to qualify a borrower for a personal loan.

Current Income

IncomeAbove and beyond a borrower’s past financial record, banks want to understand current income. Borrowers with steady earnings from a conventional job are perceived as a lower risk to most lenders, while those who are paid by commission or a bonus structure are less reliable in theory. Banks also want to understand the reliability of the income stream a borrower has, and how that stacks up against other outstanding debts that require a monthly payment. Even when income is steady, borrowers who have several other monthly payments due may not be a strong fit for a personal loan through a bank.

Amount and Purpose of the Loan

The last common factor in reviewing a personal loan application is two-fold: the intent of the borrow and the amount funded. First, personal loans may have some restrictions on what items or expenses they can be used to pay, typically excluding paying off another loan or financing education-related costs. The most common uses for personal loans that are deemed suitable by a bank include debt consolidation, a large expense like a family vacation or holiday spending, or business financing. Second, banks always review the amount of the loan requested and compare that to the borrower’s income and other monthly obligations. For most personal loan applications, no more than $35,000 can be borrowed at one time.

Using a personal loan to manage your finances can be a smart way to leverage your borrowing ability, but take note that banks are going to review your loan application carefully. Before applying for a personal loan, make sure to have documentation relating to your income, a list of previous employers, and a clean credit history to improve your chances for approval.

How to Improve Your Credit Score

How to Improve Your Credit Score

Do you ever think about your credit score? Chances are you have if you are in the market for a new car or even to buy a house. Your credit score doesn’t seem important when you are young and don’t have a lot of responsibilities, but it is. College students are famous for racking up credit card debt in college that will stick with them until later in their life and ruin their credit.

If you are thinking about your credit score, you are probably trying to come up with ways to improve it. Doing this is actually not as hard as you probably think it is, but it will take some work in both the short and the long term. A lot of this depends on how bad your score is to begin with, but there is no mountain too high to climb in terms of credit.

Four Ways to Improve Your Credit Score

Be Fastidious with Your Credit Report – Don’t just look at your score and throw your report away. There could be damaging things on it that are incorrect. Consumers have the right to challenge anything on their report that they thing doesn’t belong. You might be surprised at how much your score goes up when even small debts are taken care. They really add up. Credit agencies are more than willing to work with you to help get rid of these if they are proven to be wrong.

Start with High-Interest Accounts – If you have multiple loans or credit accounts you are trying to pay off, start with the higher interest ones. This makes sense because the higher the interest rate, the more money you are going to pay to get rid of it. People don’t always realize how much interest really racks up on their credit accounts.

Get a Credit Card – A lot of people have probably told you to never have a credit card because they are trouble. There is some truth to this, but in order to have a good credit score, you must have some credit in the first place. The only way to build your credit score is to borrow money and pay it off. This will also create a history that lenders can look at to see if you are a viable option for a loan. In short, you can’t have a good credit score if you don’t have any credit. This seems obvious, but a lot of people don’t understand it.

Free Credit Scores in India now a reality

credit score

Credit and credit scores are becoming increasingly important in our lives. Whether it is access to loans, better interest rates or for job offers, CIBIL scores are being used in almost every sphere of our lives.

A common question that crops up is:

How do I get my CIBIL score ? Or from any bureau for that matter.

You can obtain a FREE credit score by following these simple steps:

  1. Visit www.freescoreindia.com. Register by providing basic information regarding your name, E mail and current city of residence
  2. Provide your PAN number, Date of Birth and Aadhar Card number. In case you do not have your Aadhar number, you may upload a copy of any other address proof that you may have such as passport, ration card, rental agreement etc
  3. Validate your identity

credit scoreAfter you submit this basic information, your credit report and score will be generated. A notification is sent to you once the report is ready. All you have to do is login to the website to get access to the latest in the world of credit and credit score. You also get access to several savings opportunities which will help you to manage your credit and save money. Every customer gets access to a customised space on the website which has a wealth of information on a person’s credit profile, various financial tools such as loan calculators and score simulators, customised offers on home loans, personal loans and credit cards and the latest news, launches and product offerings in the world of finance.

Now, getting a credit report is no longer cumbersome. The entire process is completely free. No credit cards, no hidden charges, completely secure and you can opt out anytime.

It is to be noted that the credit report provided is from Equifax which is among the largest credit bureaus in the world and among the 4 licensed to operate in India by the Reserve Bank of India.

Written by Arun Ramamurthy, founder of freescoreindia.com which is India’s premier credit management platform.

Getting a personal loan irrespective of your credit history

personal loan

Sometimes we get into financial mess that may not be created by us. If you are one of them and are feeling trapped, there is an easy way to get out of this mess. Sometimes you get frightened thinking that the lenders will turn down your proposal because you are a bigger risk to their finance. Now you don’t have to go through such difficult financial situations. Recession has left its toll on many of us. People who never thought that their credit will get bad are now facing this tough situation. You can easily apply for a loan with different loan companies. You just have to do a search on the internet, shop with different companies and figure out the best deal in your favor.

What makes a loan high risk? This is that type of loan which is applied by a borrower who has bad credit and is in tremendous need of cash. Just do a search on the internet as per your requirements and you will find different lenders. Although they may not specialize in this type of loan, but they can approve your loan requirement. These lenders have a fair idea about such requirements of the borrowers. It does not matter whether you own a car or a home, to put as collateral, you still have the chances to get approved. All you need is a steady income and an active checking account, and many lenders will be willing to do business with you.

Based on the collateral that you have to put against the loan, you can apply for a bigger amount. An unsecured loan that is offered without collateral can range between $1,000 to $25,000 and you can pay it back between 1 to 25 year time frame.

creditWhen you are applying for an unsecured loan, it is obvious that the interest rate will be a lot higher considering the risks involved with it. Hence, it is better to pay back a small loan quickly than letting the interest charges kill you slowly over a long period of time. Hence, you should borrow a small amount, so that you don’t end up paying a lot in interests and fees. And once this loan is getting paid off, it will improve your credit history. Once your credit score is back up, then you can get better deals from the lenders.

Application process is very easy. You just have to get online, fill the application form and your loan will be processed. Make sure that you have fully read the terms and conditions in the contract copy to avoid any confusions at the later stage.

Protecting Your Credit during the Bustling Holiday Season

In the Mid November there are two busiest shopping seasons of the year Black Friday and Christmas. Millions of people in America are saving money to spend for the up coming sales. During holidays many people tend to destroy their credit score. Here are some guidelines which would probably help you to sustain your credit score.

During holidays while shopping you will find many shop keepers would offer you credit card deal for short term at low interest rate. However it is not advisable to go for these kind of offers which is not worth the long term risk. Do not go for these offers because most of the department stores do not compare the credit score as the other types of credit score.

Make a tight budget to limit your spending. It is very easy to say than doing it, if you want to keep your credit score in good condition than you must control your self from spending unnecessarily. You should also be aware of the fact that you are not crossing the limit of 30% of balance offered by most banks. If you exceed the limit then there is warning signs which are put into your credit history. This can definitely hamper your credit score; it is advisable to purchase anything which you can pay in full in your next payment.

Always remember to pay your bill on time, it also very important to know your billing due date, many people make mistake by paying their bill late. Now again you have to make a habit to pay your bill religiously in return you will remember to keep the money for your monthly payment. Many people do not know that their payment history is very important and it comprises 35% of the credit score. When you think about it you will realize that the portion is quite large. As we know that the holidays between November and January are the busiest schedule. In this period people tend to spend the most on their credit card and this is the time when people end up paying late with their credit card bills. If you remember and follow these tips then you will go a long way towards protecting your credit.

Following these tips on protecting your credit score is extremely important. Your credit score is an aspect of your life that can play into what type of car you drive, whether or not you get approved for a house, or if you will be able to afford professional movers for your next relocation; so it’s important to keep your line of credit as immaculate as possible.

Smart tricks to improve your credit score

The three digit number called credit score plays a significant role in your life. From buying a home to getting a job, your credit score can play a vital part in some very important things in your life. So do you have severe credit blemishes? Stop worrying because you have plenty of company. A large number of Americans have credit scores poor enough to get them disqualified for getting loans with reasonable terms. However, you can definitely improve your credit score. Wondering how? Just read on.

What you should do:

• Your credit score is calculated on the basis of your credit reports. But your credit reports are certainly not error proof. So get copies of your credit report and check whether everything is all right. You can visit http://www.annualcreditreport.com for the said purpose.

• If the amount you owe is close to the credit limit then your credit score is likely to be affected. Your scores should be limited to 30% or less of the cards limit. You must understand that even if you make full monthly payments, your credit score can suffer if you rake up big balances.

• If you are a good customer then your creditor might agree to remove one or two negative items from your credit history. Things are tough if you have a more troubled account. However if make a series of timely payments for a long then your lender may agree to erase previous delinquencies.

• If your credit score is going down because of your outstanding debts then better try to pay off your debts as soon as possible. If your debts are too overwhelming then you can take the help of a non-profit credit counseling to work out a debt consolidation plan.

• If you have just cleared off your debts then you can apply for a new credit card to build a decent credit history. If you are denied a regular credit card then you can get secured credit card. If used judiciously it can help you to develop a good credit history.

What you should not do:

• Avoid making late payments. They have a negative impact on your credit score. It is a funny thing that late payments have greater impact on bad scores than good ones. If you have multiple negative items on your credit report then one more will not hurt it significantly. But if you are trying to fix a bad credit score then better stay away from late fees.

• Never ever ask your creditor to lower your credit limit. It reduces the gap between your balances and gap between your balances and the credit limit. This can certainly hurt your credit report. Sometimes, while applying for a loan your creditor asks you to lower the balance and you are compelled to do so. But make sure that you don’t do it unasked.

• Debt consolidation can have negative impact your credit score. It is always better to have small balances on few cards and than a big balance on one card.

• If possible stay away from debt reduction programs like debt settlement. Bankruptcy of course ruins your credit report and seems to stay on your report forever. It should be your last resort.

So keep in mind the above points and start building your credit score from today!

Using a law firm for credit repair

Your credit rating is the most important factor in front of anyone. You will need to have a good credit standing when you are applying for a job or when you are looking for some financial debt help from the banks and other prestigious financial institutions. Your credit can dictate the house you live in, the car you drive in. The information contained in your credit report is used for many different life events. Your credit scores will go down if your information providers have reported some negative remarks to the credit bureaus. It doesn’t mean that the negative items cannot be fixed. There are reputed credit repair companies that can help you mend a broken credit score.

 

 

Taking the help of a law firm to repair your credit is a good idea. These law firms have been helping people with bad credit to remove the negative items so that they can regain their financial worthiness. With the help of the law firm, people who earlier had bad credit are now able to have normal productive new lives as unverifiable and erroneous information were immediately removed from their credit report. These law firms use the credit repair review which finds out why you were denied in getting a new car, a home or a new career.

According to the FTC, an average person can usually spend at least 100 hours just to fix one negative item on his credit report. Anyone can get an inaccurate negative item removed from his credit report by contacting the credit bureaus, but doing so, you have to go through a lot of red tape and call each company reporting on your credit report. Most of the times, the credit grantors will give you a run around that can delay the whole process. These law firms in such situations seem to be a great relief as they work with credit agencies and the credit bureaus with the objective of removing the negative items on your credit report.

When you are looking for a company to fix your credit report, give more preference to a law firm because they have their licensed attorneys and they know the laws as per the FDCPA and the FCRA. They can not only empower the customers with knowledge and work out possible ways to fix their credit ratings, but can also take legal actions against the credit grantors and credit bureaus if they seem to be violating the laws and reporting inaccurate information even after providing proof.

There are different services available with credit repair from ala carta to monthly membership levels. There is a plan for all kinds of people who are looking to fix their credit ratings. If you are interested, law firms can set up your account within the same day and start the credit repair process after you provide them the latest copy of your credit report and put a request on the items to be investigated.

Credit repair process with the law firms is simple and easy. You just have to sit back and relax in the comfort of your living room. You can stay posted on the status of your account by logging into the online account with them. If you feel that your score is out of control then you could benefit from a credit repair review and have an experienced professional aid you with your credit problems. If you feel like someone else is driving your score, than you could definitely benefit from their knowledge.

Credit repair is within your power

A number of people are falling behind in their monthly payments to different creditors because of the rising costs in gas, food and also due to increasing unemployment. With the recent stressed economy, many people are finding hard to make ends meet. They are continuously missing their monthly payments, thereby causing havoc in their credit report.

Although credit repair can be quite a challenging job, but it’s not at all impossible as many people think so. There are legal law firms that specialize in credit repair services and improve your credit ratings. If you are getting late on your monthly payments to your creditors, these specialized law firms can negotiate with your creditors and arrange a payment plan after lowering the interest rates. They will stop any kind of late payments that might have shown up on your credit report if you were expecting to get late.

When you hire a credit repair service, check the company with the local authorities so that you know about their legitimate business and their work experience in getting results for the customers. With the changing laws and regulations, you need to make sure that you are working with a law firm that can keep up on all the changes. Browse through the internet and do a search on “fix my credit score” on the popular search engines. You will get a variety of credit repair companies and the features that they have to offer. Do a thorough research on the company before signing up for their services. You need to make sure that you are signing up with a legitimate company who will not put you deeper into debts, since you are already struggling to come out of this mess.

Hiring a company that is not judgmental is also important. It is very frustrating to fall behind in the monthly payments. A law firm that can not empathize is less likely to stand by your side and provide adequate service.

Once you have gotten your credit fixed by the credit repair service, it’s important to maintain your improved credit scores. Always check your credit report at least once in every six months and see if there are any inaccurate negative items getting reported on your credit file. Never miss your monthly payments with the creditors otherwise it won’t take too much time to fall in the same spot from where you have just come out.

Understand and fix your FICO score

When anyone applies for a loan or a new credit, many lenders go through his FICO scores and review his credit history. If you are having a poor credit rating, you may not qualify for the loan or even if you do so, you will be charged very high interest rates because of the low FICO scores.

As per the laws, Fair Issac and Company is not required to disclose how they calculate the FICO score. The content on the credit report weighs heavily on the calculation.

The FICO score system is quite straightforward. You will be able to get better interest rates and attractive offers from different lenders if you have high FICO scores. Besides, you will also get qualified for higher loan amounts because of the scores.

Someone having a FICO score of less than 500 has limited options if he is applying for a mortgage loan. There are many sub prime mortgage lenders that specialize in bad credit mortgages, however you will have to pay a premium for their services.


If your FICO score is between 500-600, you will get competitive financing from the market. You may be required to pay points up from in order to qualify. Points are prepaid interest that you must pay when required, at closing. A “point” is 1% of the total loan amount financed. This is not a payment on the loan balance, in many cases this is an up-front fee your lender is requiring for you to qualify.

Someone having a FICO score in between 640-700 has very good chances of finding a mortgage with very good interest rates and the terms and conditions improve dramatically. You always have the room to negotiate with the lender for better interest rates and fewer fees because of the FICO scores that becomes a bargaining chip for you.
If your FICO score is more than 700, then the mortgage lenders will be falling over themselves for your business. You can qualify for almost 125 percent of your home value. Based on your FICO scores, you should be able to negotiate with the lender that you should not be charged any kinds of fees or penalties whatsoever. With this kind of scores, you must always compare loans, credit card, compare mortgages offers.

The FICO scores are calculated on the basis of the information reported on your credit report. Make sure that all the items reported on your file are correct. These records are maintained by three separate companies and are prone to errors. You must always pay down the balances on your credit cards and close any accounts you do not need. You should also ensure that the payments are done on time and the creditors are reporting your payments to the credit bureaus. You should not carry large balances on your credit cards. Do not make any large purchases while shopping for a mortgage, and do not let lenders access your credit until you have selected the best mortgage. Your FICO scores will get damaged because of too many credit inquiries by the lenders.