NEW Credit score regulations RBI you should know

Many people are taking the help of loans to address essential necessities, like purchasing a home or car or addressing an emergency.  You must be one among them if you are reading this article. Different types of loans are available to address different needs of the people. Whether you are taking the loan to purchase a home or car and it can provide financial aid to tackle some emergency, lenders need your credit score to determine your creditworthiness before applying for the loan. The New credit score regulations RBI help you stay informed about your credit score.

What is a credit score?

This is a handy tool for the lender to determine the borrower’s creditworthiness before approving the loan. Impressive credit scores will increase the chances of getting a loan. The person’s payment history and spending habits determine one’s credit score. Most banks consider a credit score above 750 a benchmark to approve a loan. You can have free credit checks at many websites online. If there is a shortfall in your eligibility for the required home loan, you may be required to join your spouse as an applicant. The CIBIL score of the person is a determinant factor for deciding both the loan amount and interest rate on the loan.

New Credit score regulations RBI

Notify customers for each credit report enquiry

Each time you apply for different loans with the banks, they inquire about your credit score with the major credit reporting agencies to check your eligibility and decide other loan terms for you. You will not be informed about this until the bank makes the decision regarding your loan application. Multiple hard inquiries about CIBIL score may have a negative impact on your credit score, which further troubles your ability to get a new loan. The New Credit score regulations RBI to notify a person each time a credit inquiry is made at credit bureaus either through SMS or Email.

How does it help borrowers?

Being informed about a number of credit inquiries helps you make informed decisions while applying for a new loan. You should apply for the loan only when you have a strong need for funds and know that you have a good credit score to be eligible for the loan.

Notify the reason for the request rejection

Each and every transaction related to debt handling is reported to major credit reporting agencies. You have every right to request any information regarding your credit report, like your current score, correction of misrepresented information and more.  The New Credit score regulations RBI  says If the credit institution has rejected any of your requests, they have to notify the reason for rejection.

How does it help borrowers?

Few borrowers have a good practice of checking their credit reports before making a new loan application. You may request the credit institutions to act against any mispresented information. Knowing why the request was rejected helps you take the right action before making a loan application.

Free credit report every year

The credit companies must provide free credit reports to their customers annually. The respective links should be displayed on their websites.  You can also get a free credit score check at multiple websites online.

How does it help the borrower?

Gaining access to the credit reports every year for free reduces the number of credit inquiries. You can also take the right action to address any red flags in the credit report before applying for any loan. You can also take necessary actions to improve credit and keep off unwanted rejections meanwhile.

Notify default information to customer before credit bureaus

The third Credit score regulation RBI is If the customer is about to default on the credit, the bank has to notify the same information to the customer before informing the credit bureau. The default information has to be shared via SMS or e-mail. The loan providers have to appoint nodal officers to address all credit score-related queries.

How does this help the borrower?

Many people end up defaulting on debts when they have multiple debts. The reason could be a lack of management than funds. Notifying the customers about their probability of defaulting on the loan will help them address the issue and keep off the defaults before it is informed to credit bureaus.

Credit information companies are penalised for late reply

As per the new credit score regulations RBI, the credit information institution, has to resolve the complaint within 30 days of receiving it. Otherwise, they are penalised Rs.100/- a day. The total duration is shared between lending institutions and credit bureaus as 21 and 9 days, respectively. The banks will bear the penalty if they fail to inform credit bureaus within 21 days. The credit bureaus will pay the charges if they fail to inform customers within the rest 9 days.

How will it help the borrowers?

The new credit score regulations RBI about penalties will foster quick resolution from both banks and credit institutions. Even the customers who are waiting for the resolution can find a quick way out to solve their problems regarding credit scores.

How can your credit score prove creditworthiness?

Payment history

This is the major component of the credit report that determines your creditworthiness. If you are prompt in the repayment of EMIs and payment of the credit card bills, it will positively impact your credit score and surge up. On the contrary, if there are delayed or missing payments of credit card bills or loan EMIs, it will negatively impact your credit score. By this, the lender will be able to analyse your creditworthiness in repaying the loan on time. You can access the related information through a free credit score check at different sites online.

Unserved debt

Due importance is given to unserved debt when the lender is going to sanction the loan. If you have a chunk of unserved debt, like a number of loans or outstanding bills on various credit cards, it is going to impact your credit score negatively. On the contrary, if the loans in your account are less than the income and you have no credit card bills pending, you will have a positive impact on your credit score. This will let the lender know your creditworthiness as he will be able to analyse the risk of defaulting on the loan before it is approved.

Duration

Extended credit will have a positive impact on your credit score. As long as there are no dotted lines about the mismanagement of the loan, it will undoubtedly contribute to raising your credit score to more than satisfactory levels.

Credit mix

A credit score is also impacted by the credit mix you have. The lender needs you to have the right credit mix in different categories of credit. Though it is not going to bring a huge difference in your credit score, having the right mix under various sections of credit will go a long way, providing your creditworthiness to the lender when you apply for any loan in future.

When you have good creditworthiness, the lenders are more interested in offering the loans to you. You can even get the loan at lower interest rates when your creditworthiness is good. Credit score plays a vital role in determining your creditworthiness, which is essential for the lender to approve the loan.

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