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Your history guides your future: Your credit history-A case study

  Thu, Apr 20, 2017     written by : CSF-Team
Credit History

When Brian Lobo got a job at the age of 23 in 2014, a credit card that he got soon after, became his prestige symbol. Be it a Friday night visit to a pub or and expensive make up set for his girlfriend, his credit card funded it all! All was well for Lobo till he did not have any financial responsibilities as his father had still a good five years to go until retirement. Thus, Brian spent 80% of his income in paying off his credit card bills. Credit score and loans for bad credit were things he remained blissfully unaware of.

All was going well, till about a year back Brian lost his dad in a car crash. Almost overnight he was forced from going from a boy to man who now had to support his mother and his kid brother who was yet in school. Under the circumstances, Brian did the best that he could. He worked double shifts, saved meticulously and looked after his family's needs. Within a couple of years or so, Brian had even saved enough to purchase a modest flat in Borivali in the western suburbs of Mumbai.

A chequered credit past

Since he had turned over a new leaf, Brian had little doubt that he would get a home loan easily and finally give his mother some reason to smile, since his father's sad demise. However, fate had different plans for him. The private bank that Brian had a salary account in, that had earlier seemed only too happy to accept his home loan application and even promised him a lower rate of interest, did a U-turn and called him up to tell him that his loan application had been rejected.

Feeling cheated and angry, when Brian went to the home branch of his bank, he was shocked to learn that his past had come back to haunt him. Though he had better credit habits now, his earlier credit usage was a blot on his credit report and he was shown as a defaulter on his credit card. He had an outstanding debt of ₨ 45,000 on his credit card that had inflated to ₨ 60,000 with interest charges and late payment dues.

As a result, his CIBIL score had sunk to the level of 500, and he had landed himself in the loan defaulter list! This was the reason why; the private lender had refused him credit. The bank representative suggested that Brian could opt for loans for bad credit from non-traditional lenders, but Brian was in no mood to listen.

If that was not all, Brian's candidature for a middle level post in an MNC he was eyeing for a while was thwarted as he was asked to submit his CIBIL report along with some other documents post a very good interview he had with the management. At a loss about the turn that life had taken, Brian went into a pub soon after work. There he came across Neville. Neville was an older and wiser cousin of Brian’s who had watched his back ever since he was a kid.

A solution to the problem at hand

After some probing from Neville, Brian blurted out the entire saga of rejections. Till now Brian had not even realised that his CIBIL score was of such importance. He had thus far never bothered to check credit score even once and had no idea that he could even get one free CIBIL score in a year now. Neville explained to Brian that a credit score is a measure of a financial health of an individual and must be maintained at a good level of 750 and above out of 900.

He further explained that lenders think of bad credit as a risk and thus may not want to take one on as a customer. This is the reason why credit card or loan applications get rejected. Baffled about why his employment chances were dwindling, Brian asked Neville about what his credit score had to do with his employment prospects.

To this Neville answered, prospective employers may not look at the credit score per se, but do assess the credit report of a prospective employee to find out how responsible he is about his credit. This is considered a measure for trust or responsibility that a company can place on him. Wiser about his credit score and report, Brian asked what was the next option for him. Brain suggested loans for bad credit as a bad credit fix that could help him clear his outstanding debt on his credit card.

Brian thus opted for loans for bad credit, and procured a personal loan for low CIBIL score that could help him repay his outstanding debt all at once and improve his credit record. He has put his plans to buy a house on hold for a year or so and continues to save up for a higher down payment. Wiser about how careless credit behaviour can negatively impact his credit score, he is doubly careful and repays all his outstanding balance on his credit card each month. Additionally, he now knows that he can access one free CIBIL score in a calendar year and thus he keeps a hawk eye on his credit score and report.

By doing all this, Brian is hoping that he will be able to redeem his credit reputation of the past and finally be ready to apply for a home loan next year. This time he hopes his past credit history will not get in his way!