Improve your credit score, get that loan

Sachin Shah, 42, a Mumbai-based self employed individual running a computer hardware business, approached his bank in 2012 for a top-up loan on his existing home loan. He was, however, in for a rude shock. The bank denied him the loan, and said they were not comfortable with his credit score which stood at 707.

On the advice of a friend, Shah approached Credit Sudhaar, an entity that helps people improve their credit rating. Amazingly, they helped him perk up his credit score of 859.

“In my case while I had paid my dues to them (my bank), they had not updated it at Cibil. Credit Sudhaar helped me get it resolved after which I got my top-up loan,” said Shah.

Few year back, it was fairly easy to get a loan or a credit card purely on the basis of your income. But now an individual’s credit character carries an equal weightage when a bank decides to offer a loan or a credit card.

Its not uncommon to find a person, who while seeking a loan or a credit card, is informed by the bank that they are not comfortable with his credit rating and they would not be able to provide him with the loan.
It comes as a revelation for many who till now was unaware of his credit rating. Many do not know what a good rating is or what can bring down his credit score. In many cases its a Catch-22 situation where you won’t get a loan till your rating improves and your rating won’t improve till you get a loan or a credit card and use it responsibly.

Express Money explores the nitty gritty of credit rating and what Credit Sudhaar did to improve Sachin Shah’s score. Also, can you do it on your own?

What do I do?

Arun Ramamurthy, co-founder of Credit Sudhaar, which currently has a client base of 3,500 after one year of operation, claims that they help individuals in restoration, enhancement and protection of their credit scores.

At the restoration stage, any person who comes to know that a bank or a financial services firm has declined to provide him the desired credit can seek their help.

The customer approaches Cibil (Credit Information Bureau India Ltd), pays a fee to get his credit history details, which tells if he has any outstanding with a bank.

After this, the individual can approach his bank and reach a settlement on the outstanding amount or get the ‘outstanding’ tag removed in case the bank has forgotten to update Cibil even after the payment was done.
An individual can do this on his own, but many seek the help of Credit Sudhaar as they help in interpreting the credit report and also in reaching a settlement with the bank for the outstanding payments.

“If an individual had made mistakes in the past, we handhold the person and help him restore his credit worthiness,” said Ramamurthy.

He says that a credit score of less than 700 is considered below par and creates problem when an individual seeks fresh loan.

Even with ratings of around 725-730, an individual will not get the loan at competitive rates and the bank may charge him higher interest.

Enhancing your credit

People with bad credit score are at a risk of not getting a chance to improve their credit rating because it becomes difficult to get a loan or a credit card in the first place. Here is where Credit Sudhaar plays a key role.

When a client joins a credit health improvement programme, the firm provides him/her a loan of Rs 15,000-20,000 through its NBFC called Credit Sudhaar Finance. The client gets a chance to show a good repayment history on the loan. Cibil, which takes data from banks and NBFCs, updates the information on the client’s profile and, over a period of time, his/her credit score improves.

In March 2013, Credit Sudhaar tied up with DCB Bank to provide credit card to such customers against a fixed deposit with the bank. The customers are allowed to spend up to 90 per cent of the fixed deposit value.

“The fixed deposit acts as a lien and by using the card responsibly, the customer can improve his credit as the data is updated by all credit bureaus,” said Ramamurthy. He says that in a three to five months a customer can get his credit restored and can move on the path of credit enhancement.

Credit protection

You may have a healthy credit score but what if you fall victim to financial, identity and data theft. Ramamurthy feels that this is the toughest aspect among the three stages.

Around four months back, Credit Sudhaar tied up with Tata AIG General Insurance. The insurer took four of its products from their Personal Extended Protection Policy to offer it as a suite to its customers. The products include — identity theft cover, fraudulent charge cover, ATM assault and a lost wallet cover.
In case a customer’s identity is stolen and someone takes a loan or credit card in his/her name then the identity theft covers all your legal expenses and financial loss on account of leaves taken for fighting the case.

Within the fraudulent charge and ATM assault, all your liabilities on account of getting credit card stolen or forcible withdrawl of money from ATM are covered by the policy.

Under the lost wallet cover, if you lose your wallet then the scheme covers the cost of replacing all your cards.

“We do not sell these policies in retail as these are small ticket products and thus sell it to banks and to agencies like Credit Sudhaar where we get bulk clients,” said Gopa Menon at Tata AIG General Insurance Company adding that he has received good response from Credit Sudhaar.

The services of Credit Sudhaar have become popular. They already have 3,500 clients in just one year of operation. For the credit restoration programme the charge is Rs 11,000 per annum and for the full service of credit restoration, credit enhancement and credit protection, the firm charges an annual fee of Rs 16,000.

Do you need Credit Sudhaar?

Financial advisors say that if you know your Cibil rating has gone down or there is an issue with your rating, then you can directly approach Cibil online.

One can fill up an online Credit Score Request Form and pay Rs 470 as fees to get your credit report.
With the credit score in hand one needs to get in touch with the bank or financial institution where you have a pending issue to resolve the same.

Even for credit enhancement, one can directly approach the bank and take credit card against a fixed deposit with the bank to move on a healthy credit enhancement path.

“Ideally the system (banks and other credit providing firms) should create alerts for people. Banks should inform their customers that if they do not make their payments on time, their rating will dip by this many points. So we need more awareness on what helps in building good credit and what actions can lead to its deterioration,” said Surya Bhatia, a Delhi-based financial planner.

However, in the absence of awareness and knowledge on what can hit your credit, Credit Sudhaar may come as a handy advisor. At an organisation level, they seem to be the only one offering a credit health check-up service as of now.

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One thought on “Improve your credit score, get that loan

  1. My loan was rejected. Credit Sudhaar was my choice. Initially they were slow. But their counsellors were able to handle all my queries. I will give Credit Sudhaar a positive review

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