"Credit can be your worst enemy if not managed properly" Ms. Kalpana Pandey at Moneylife awareness program

The general awareness regarding credit score is extremely low. Many people have a low credit score and carry several myths related to credit score in their minds. In addition, many people's financial lives are in tatters due to poor financial literacy. Moneylife Foundation conducted the seminar along with CRIF Highmark, which provides credit bureau services, in order to empower people on these issues. The seminar was held in order to make people financially literate, help them avoid financial mistakes at any cost and help improve their Credit Score.

Sucheta Dalal, Managing Editor of Moneylife, kickstarted this 3-part seminar speaking on the mistakes that affect your financial life and how to keep money safe from financial mistakes, Ponzi schemes, email fraud etc. Many people have lost their hard-earned money on multi-level marketing (MLM), chain marketing and chit fund schemes such as Herbalife, Saradha, Rose Valley, SpeakAsia, Gold Quest or QNet. When it comes to financial products, Sucheta Dalal said, “If it seems too good to be true, it probably is.” Highlighting the importance paying credit card dues on time, she said, “If you get a credit card and pay it on time, it’s perfect for you but not when want to roll over your dues.” She also shattered the myth about gold loans being useful. Pledging gold has emerged as a popular method of taking loans. Comparing two scenarios – selling gold and buying it back vs pledging gold, she illustrated how selling gold was superior to pledging it.

Debashis Basu, editor and publisher of Moneylife, explained the pitfalls of the four most popular forms of Indian investments – bank fixed deposit, insurance, gold and real estate. He pointed out that to save and invest smartly, one needs just a few products. He showed the average expected returns of various asset classes including gold, real estate, mutual funds and equity. Based on one’s financial goals, investment horizon and tax bracket, people should invest in a mix of equity and fixed income products, he advised.

Kalpana Pandey, CEO and Managing Director of CRIF Highmark, enlightened the audience on maintaining, improving and rectifying credit report. Credit can be your best friend as it provides valuable capital in times of need, but your worst enemy if not managed properly. She explained the various types of credit and educated the audience on how banks choose the customer, the amount and terms under which credit is given, and the period of which credit is extended. Explaining the role played by credit bureaus, she said, “A credit report is single record of your past credit history.”

Ms Pandey highlighted that a credit score is a quantitative way of evaluating a customer. “A credit score is a 3-digit number summarizing your credit report, which can be in the range of 300-900. It indicates the credit-worthiness and discipline of a borrower. The score can be in different ranges, which indicates the chances of approval of the loan and the terms under which the lo a n is sanctioned. A score of 300-500 is a poor one, which indicates high chances of a loan decline and poor terms of loan. A score of 700-900 is a good credit score, leading to quicker approval and better terms for the borrower. Some people carry the myth that a credit score remains constant. Ms Pandey clarified that the score is not static and it keeps on changing.

She also explained the details of the computation of credit score. She emphasised the importance of checking credit score regularly, highlighting the specific events when you need to check your credit score. Many people get their credit report, but wonder as to what are the details that need to be looked at in the credit report. You need to check whether all loans stated in the report belong to you, incorrect details like Permanent Account Number (PAN) appearing the credit report and updates such as closure or settlement missing. In addition, you also need to check for any other discrepancy.

The session ended with an interactive session on credit report where an inquisitive audience posed a number of questions related to credit scores. The queries covered a gamut of issues like grievance redressal, data parity and credit scores across different bureaus. When asked a question about data availability across different bureaus, Ms Pandey said that Reserve Bank of India (RBI) has ensured that data availability is same across all the credit bureaus. Moneylife Foundation has played a role ensuring all bureaus get the same data from financial institutions.