This is why lenders reject your loan application
In an online chat with Get Ahead readers Harshala Chandorkar of CIBIL answered their queries about loans and credit scores.
Here is the unedited chat transcript:
srinu varikuti: is loans can be given on PF/PPF a/c's as suretyWhat is the % of amount we get as loan on PPFThanks in advance for answering
Harshala C: You can withdraw funds from PF / PPF. There are specific rules for these. It depends on the tenure of the account, the purpose for withdrawal, % of total amount that can be withdrawn, etc. It is best that you contact the bank where you have a PPF account or the EPF office for the PF account.
Vadakkoot Shaj: Are only banks & lending financial institutions default that gets reported by CIBIL or even non payment of mobile telephone bills also gets reported?
Harshala C: CIBIL does not collect details pertaining to mobile payments. CIBIL collects month on month credit history of an individual's loan-related details (home loans, personal loans, automobile loans and so on), credit card or overdraft payments from banks and financial institutions.
mustafa: How can a laon be accepted or rejected based in one's credit score? What if the person had problems earlier and what if now s/he has overcome all those problems and has teh capacity to repay. Why shoudl such a person pay for circumestances that were not in her/his control earlier?
Harshala C: Your CIBIL report and score is one of the parameters which banks look at while evaluating a loan application. If you have had problems in the past and have overcome the payment problems you would have built a positive credit history. After you make consistent payments on the EMIs and credit card dues your score would improve. And banks may look at your loan application favourably.
Amit Shellar: Dear Harshala, my daughter spends a lot on her credit cards. She swipes her card for anything from buying groceries ti an aircondition. She says she is addicted to using her credit card? What is the solution? Is there any rehabilitation centre where she can get rid of this addiction?
Harshala C: Your daughter would have to plan her finances and use her cards diligently. She can ask the bank to reduce her credit limits. This will set a limit on how much she can spend on a monthly basis. If she has too many cards, it would be prudent to close some of the cards. She could get into a debt trap if she spends more than what she can repay.
Lalji Margasahayam: What role does a credit score and credit report play in deciding a person's payment credibility?
Harshala C: A Credit Report is a month on month record of an individual's loan-related particulars (home loans, personal loans, automobile loans and so on), credit card or overdraft payments.
The CIBIL TransUnion Score is a 3 digit numeric summary of an individual's credit history. The Score is derived by using the details found in the "Accounts" and "Enquiries" sections on the Credit Information Report (CIR) and ranges from 300 to 900 points.
An individual's CIBIL TransUnion Score provides a Credit Institution with an indication of the "probability of default" of the individual based on his/her credit history.
Jignesh Kaisth: What to do once a lender refuses personal, auto or home loan? How many months before we can apply again?
Harshala C: Please find out the reason for rejection. Apply for your own CIBIL report and score to check the details on your report and your own score. If you have missed any payments or EMIs, it is advisable that you make timely payments on all your loan obligations and credit card dues. You should wait for 3-6 months to see an improvement in your score assuming you are making timely payments now.
Gambhir Harbir: What are the ten things that banks look out for in a credit report to reject prospective loan applications?
Harshala C: The banks will typically look at your CIBIL report to identify how many loans have you taken, the mix of loans -- secured and unsecured, amount of debt, if there are any defaults, recency of defaults, amount in default, number of days past due (if any), etc. They will also look at your income, monthly fixed obligations & expenses to decide whether you will be able to service the new loan.
Eknath Gangulee: How do I know that my credit score is responsible for my loan being rejected?
Harshala C: Please check with your bank where you have applied for a loan to find out the reason for rejection. There could be many reasons for rejection of a loan. Additionally access your CIBIL report and score to find out what is being reported in your report and what is your CIBIL TransUnion Score.
Dinkar Dosanjh: My personal loan was rejected this October citing my credit report? What could have gone wrong?
Harshala C: If you are successfully authenticated you can download your credit report consisting your credit score and also receive it via e-mail. If you fail the authentication then you can upload scanned copy of your identity proof and address proof on CIBIL's website. The report will then get delivered to you via express delivery.
Review the report thoroughly and identify if there are any inaccuracies. If you find discrepancies then log in to CIBIL's Dispute Resolution webpage: http://rediff.ly/22npj. CIBIL's Dispute Resolution Department will analyze and route the dispute to the lending institutions for confirmation. Please remember that CIBIL can only make changes to your report, once the lending institutions submit the updated/ corrected data.
shyam aswath: Have cleared my all CC dues on 19 Aug 2013, My Credit score was 749 on 20-09-2013. But again when applied for cibil report on 21Oct 2013 credit score was 698. kindly clarify.
Harshala C: There are several reasons why the score could change -- defaults made, new loans opened, etc. When you accessed your report on 21 Oct 2013 did it reflect the payments made for CC dues? Was there any other default reported or made? Please compare your reports to indentify the changes. If there any inaccuracies in the data reported, you can raise a dispute online.
sooraj sv: I have defaulted many times on my credit card and personal loan. Later bank gave me a settlement amount and i cleared the complete amount. For the last 8 years I have no cheque bouncing issue. Can i apply for a home loan now?
Harshala C: Please access your own CIBIL report and score. If you have had a good payment tract record, you will have a high score. Each bank has its own credit policies and also look at other factors while deciding to grant a loan.
Vivek Pathak: 2012 & 2013 was bad due to irregular payments from the party due to which my payments to credit card company's was after the due date, even though i was managing to pay every month. But i am expecting big payment because of which i will be able to clear total dues on my c.c. in totality. Will i still get loan in future?
Harshala C: Please check your CIBIL report and Score. The irregular payments on the credit card dues would have had an impact on your score. Do ensure that you make timely payments on all your credit card dues in future. This will help you build a good credit history. Over a period of time your score will improve. Check you score again after a few months before applying for a loan.
paritosh gupta: hello, CIBIL scores lowers on too much inquiry. It happened in my case. I have never defaulted on a loan ever. How much time does it take to rectify if we hold off further inquiries?
Harshala C: Enquiries have a minimal impact on the score. If you have not defaulted ever on any loan or credit card payments it is likely that you may have a good score. Do access your own CIBIL report and score to check it for yourself.
SUBRAMONIAM R: my credit score is 709. can i be able to get a personal loan
Harshala C: While each bank will have its own credit scoring cut-off based on the credit sanctioning policies, it has been observed that most banks are lending to consumers with a credit score of 750 and above. However do check with your bank if they will give you a loan.
sooraj sv: have defaulted many times on my credit card and personal loan. Later bank gave me a settlement amount and i cleared the complete amount. How to improve my score now as i dont have any credit card or loan now.
Harshala C: Each bank will have its own credit sanctioning policies, basis which they decide whether a loan can be given. Recency of events pertaining to defaults also matter. So it depends when did the defaults take place. Banks also have their own rules for settled/written off loans. It is advisable to access your own report to find the score & check with the banks of your choice whether they will lend.
Deval Vakilna: In past (more then 10 years) if payment problem on Credit card or personal loan, and all Credit Card and Personal loan settled before 5 years then also CIBIL show as Defaulter how to come remove name from CIBIL is any procedure for same.
Harshala C: Please access your own CIBIL report and check what has been reported. You will not be able to remove your name however if there is any inaccuracy in the information being reported we can help you get the inaccuracies recitified. You can log in to CIBIL's Dispute Resolution webpage: http://rediff.ly/22npj to raise a Dispute.
CIBIL's Dispute Resolution team will analyse and route the dispute to the lending institutions for confirmationPlease remember that CIBIL can only make changes to your report, once the lending institutions submit the updated/ corrected data.
Photographs: Uttam Ghosh/Rediff.com