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How to fix low credit score?

Credit health improvement firms handhold customers through each stage of their programmes till their credit health is enhanced

ALMOST a year ago, Sukalyan Basu was running from one bank to another, desperately looking for a mortgage loan. But his application was getting rejected by all banks, one after another. Then through some of his friends he came across a professional company that worked in areas of improving one's credit health and he in fact signed up with this company. His credit score at that time was 623, forcing most private banks refusing to lend him. He then had to go to a known NBFC (non-banking financial company) for a loan and managed to get his loan done at the rate that was 1.5 per cent more than what private banks were offering.

Obviously that meant that he would have to shell out close to Rs 15 lakh over a period of 20 years. The professionals then worked on his credit health and got his score up to 815. Now he is going in for a loan with a MNC bank at a much lower rate.

The same company came across another customer, whose credit report had a delinquent account tagged, which he claimed was not his. He didn't know about this and had applied for loan for his son's education. He had already visited the bank and also the bureau to get it rectified but nothing happened. After trying all by himself for months, he had to sign up with a professional company, which in turn, helped him get this account off his credit report and now he is getting to send his son abroad for higher studies.

These two incidents will have to be seen in the wake of the fact that Credit Information Bureau (India) or Cibil, founded in August 2000, has now been playing a critical role in India's fi nancial system. Whether it is to help loan providers manage their business or help consumers secure credit faster and at better terms, the use of Cibil's products have led to a massive change in the way the credit lifecycle is managed by both loan providers and consumers.

Cibil collects and maintains records of an individual`s payments pertaining to loans and credit cards.

These records are submitted to Cibil by banks and other lenders, on a monthly basis. This information is then used to create credit information reports (CIRs) and credit scores, which are then provided to lenders in order to help evaluate and approve loan applications.

Credit score and CIR not only helps loan providers identify consumers who are likely to be able to pay back their loans, but also helps them to do this more quickly and economically.

This translates into faster loan approvals. Cibil officials said that the bureau works towards catalysing growth of credit in the country through solutions that enable wellinformed credit decisions, technology that enables superior information availability and people that provide high quality services. The importance of an individual's credit score or credit health can therefore be hardly over-emphasised.

Credit health is a state of complete financial well being. The absence of indebtedness merely does not necessarily mean being credit healthy. Optimum utilisation of the credit facilities to leverage yourself without falling into a debt trap is necessary for your social as well as emotional well being. Credit health has several components including a good track record, a good credit score, good income-expense ratio, absence of delinquency, healthy debt burdens loads, the ability to access credit on favourable terms and a host of other parameters that Cibil and other professional companies have researched over the years.

Credit score has relevance in almost every facet of life from loans, rates of interest on loans, telecom connections, jobs, rental markets through to insurance pre mia. People have now started checking credit health of their would be spouses before marrying and before renting out their flats / houses to future tenants.

An individual's credit health is measured by a three-digit number on his bureau report.

Higher the score, the better is his credit health. A score of 750 and above is considered good. A person's credit history is a record of how he/she has used and managed credit in the past.
Every financial transaction in one's life involving credit is recorded in one's credit history ­ from one's payment history on one's credit card, to one's history on paying off one's car loan, to any suits that may have been filed on him/her.

Professional counselors said that everybody makes mistakes. That's why there is an eraser on every pencil.

If an individual is willing to keep walking and walking down the right path, there is no reason why can't one be shown the right path to enhance his credit, protect his credit and improve his credit health.

Unfortunately, there is limited awareness of the concepts of credit, credit health, credit scores, etc, among the general population. In fact, Credit Sudhaar has recently conducted a survey that revealed that 86 per cent respondents had not heard about any credit bureau and 92 per cent were unaware of their credit scores. Only 4 per cent had checked their credit scores in the last one year. That's not all.

Almost 98 per cent respondents could not deci pher a sample credit report when they were shown one and 91 per cent people who default on credit are unaware of any of the negative consequences of their actions. Overall, credit awareness and credit protection, according to the survey, are extremely low. But the good news is that as people become aware, they want to improve their scores/credit health.

As individuals approach professionals to bail them out in this regard, these professional counselors in their turn help people restore, protect and enhance their credit health. Their expertise lies in using a combination of analytical tools, a state of the art product suite and multi stage guidance to handhold you through the various stages of a credit life cycle and make you a credit healthy individual.

Various services offered by these trained counselors include:

credit health improvement and tracking like compilation of reports from all bureaus, analysis of multiple reports, error tracking and reconciliation, eight-parameter credit health map, score improvement module, debt reconciliation/settlement and assistance in loan processing.

On the operations front, Wadhwani said, credit health improvement companies offer unique programmes and guidance to assist one to avail loans, credit cards and other credit facilities on more favorable terms through enhanced credit health. To resolve a customer's credit issue, companies first aims to interpret credit reports accurately. It follows it up with a process of identifying errors with the credit reports, if any, and then does a comprehensive analysis. In the final phase, these companies lay down a detailed roadmap for the customer to improve his or her credit health.

These companies also handholds customers through each stage of their customised programmes till their credit issues are resolved and credit health is enhanced.

The process of credit health improvement, of course, does not come free. Just to give an example, Credit Sudhaar, at present, offers three service plans towards credit health improvement, like gold plan with a fee of Rs 7,500 per annum, platinum plan with a fee of Rs 11,000 per annum and the titanium service offered to customers at a fee of Rs 16,000 per annum. The key features vary according to the plan. The titanium service has the unique aspect of four distinct protection covers, which help to eradicate day-to-day credit health worries. This includes identity theft protection, fraudulent charges protection, lost wallet protection and ATM assault and robbery protection. These programmes will, over time, help customers to avail loans, credit cards and other credit facilities on more favorable terms through improved credit health.

The bottom line is credit score is a crucial indicator of an individual's credit health. Most lenders use it for determining loan payment potential of an individual. Not just loans, but jobs, insurance premiums and so many other important things now depend on your credit score. It is therefore important to remove all discrepancies from your credit report to improve your credit health.
Sensitising people about their credit behaviour and score always help them manage their finances well and improve their credit health.

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