CIBIL score or a credit score, which was explained in the 2nd blog, is basically a deciding factor as to if your loan should be approved or not and if you should be given the credit card or not. To have a better understanding about what should be done when you have bad/poor CIBIL score, lets take an example:
There lived a family of Mr.sharma, who was a hard working person.Mr.Sharma was an honest and hardworking man. He lived with his wife Mrs. Sharma and two sons, Ramesh and Suresh respectively. Ramesh was a brilliant student and secured 3rd position in 10th grade in his entire school. When it came to college admissions, Ramesh got into one of the best college of town, but the fees structure was too high. Somehow after struggling, Mr. Sharma was able to collect the principal amount but was running short of Rs. 1lac
Image Source: CIBIL
Stressed and tensed, he went down the the bank to get a personal loan. A couple of days after the application of loan, he followed up with the bank again and to his disappointment the loan application got rejected because of his bad CIBIL score. He was very upset and tensed as to what should be done next? How to increase the credit score? Who will help me with a loan of Rs.1 lac. A CIBIL score is basically a 3 digit number which ranges from 300-900. The bifurcation is as follows:
The chances of loan definitely getting approved is from range: 750-900
The chances of loan may/may not being approved is from range: 650-750
The chances of loan definitely getting rejected is from range: 300-650
Image Source: CIBIL
Mr.Sharma’s credit score was 600 and hence got rejected. He consulted the bank manager and and asked him for reasons as to why his loans were getting rejected. The manager replied that there can be a various reasons out of which some are:
- Taking too much of credit
- Crossing the due dates for the loan payment
His manager advised him to wait for a year, and improve the score rating and probably then apply for the loan again, because with this score, it is difficult to get loans from any other bank also. He didn’t have so much time to wait since he had to pay his son’s fee. Tensed, he told his story to one of his friend. The friend suggested him to switch to peer-to-peer lending. Potential borrowers meet lenders take and offer loans directly. Mr.Sharma thought that this is his last chance of sending his son to the college without wasting his entire year.
The platform screened the borrower not on the basis of CIBIL score, but on the other parameters as well. Also, another amazing insight which he found out was that the interest rates for the lender was high. Low monthly EMIs for borrowers. On inquiring, Mr.Sharma came to know that the screening is majorly done in 2 sectors:
- Social Connects
- Bank Statements
After a good research on internet, Mr.Sharma came across this company called FinancePeer who helps to improve the CIBIL score based on the above mentioned parameter. The question now was, how will these two parameters work in gaining a good CIBIL score? When he scrolled a couple of pages, he finally found the answer which was something like this:
- Social Connects: This parameter checks how well you are connected with your fellow members on social media handles. Apart from that, it also checks with what kind of people you are connected to. Also, what is their education background and what are their qualification. Whether they can help you to repay the loan if you won’t be able to repay it or not. If suppose you are connected with the CEOs and CFOs or individuals on a higher post in a firm , it will earn you more credit score since if you are not able to repay the loan due to some reason, your connects can help you.
- Bank Statements: This parameter checks your bank details like how actively are you debiting cash from your account? How much are you saving up by the end of the month? Will you be able to repay the loan? How good you are in clearing all the dues like bills? When was the last time you deposited and withdrawed the cash? and many more. All these answers are required because if for eg you are earning Rs.30,000 and you tend to use up all the money by the end of the month and there are no savings then how will it be possible to repay the loan amount. This parameter also checks about how effectively you paying your bills. Are any extra charges you have paid on the bill amount due to late payment or not.
These are the two major parameters. There are about 30+ other parameters including these. Happy and content, Mr.Sharma finally started dreaming about his son going to one the best colleges of town. He gave all the required details to FinancePeer. Next day, he got so many lenders ready to give him Rs. 1lac at the rate of 17-18% for a year. FinancePeer managed the MOU between the selected lender and Mr.Sharma and post the agreement was signed, Mr.Sharma received Rs. 1lac. His elder son is now going to one of the best colleges of town. To know more about FinancePeer,you can visit: www.financepeer.com or connect with us at: firstname.lastname@example.org