Is paid advice better?
21 Oct 2013
Edition: Page 10
There is nothing any credit repair clinic can legally do for you,
including removing inaccurate credit information, which you can’t do
for yourself for free.
Their fees could be substantial, ranging from hundreds to thousands
of dollars,” says the website of Experian, an international credit
Today, banks and non-banking financial companies (NBFCs) rely on
credit scores and credit reports to approve or reject loan applications.
If you have a good credit report, lenders would be eager to offer you
personal loans, credit cards, car loans, etc.
However, if you have a low score, your application would be rejected.
For those who need help with managing debt, there are various
agencies offering such services.
While some charge a fee for this, others don’t.
Abhay and Disha, credit counselling centres sponsored by Bank of
India and ICICI Bank, respectively, do not charge fees.
They offer counselling on dealing with debts and improving credit
scores and reports.
Companies such as Credit Sudhaar and Credit Vidya offer these
services for a certain fee.
Mohan Jayaraman, managing director, Experian Credit Information
Company India, says, “There is fundamentally no such thing as a credit
There is nothing an agency can do that you cannot do yourself.” While
Credit Information Bureau (India) Limited, or Cibil, refused to
comment for this story, a spokesperson said the company wasn’t
associated with any credit repair company.
If you are looking to improve your credit report and score, should
you approach an agency that offers free services or one that charges a
fee? The most important factor borrowers should remember is nobody can
change your track record, Jayaraman says.
“Most people contact repair agencies or counselling centres when they
are going through a problem.
But it is better to call the credit bureau or bank directly.
If it is a genuine error, it can be rectified.
If there is a problem and you are unable to pay your loan, you can
speak to your bank to find a solution,” he says.
Abhay’s V N Kulkarni says a counselling centre only provides guidance
and advice; it wouldn’t approach the bank on your behalf.
It would tell you which bank official to contact for the resolution
of a problem (for instance, the nodal officer, not the branch manager)
and advise you on structuring your application.
“The data flows directly from banks and lenders to credit bureaus.
Neither we nor other agencies can do anything to rectify it.
Customers can find out their credit scores and the problem by
themselves, whether it is a payment overdue or an error,” he says.
While Credit Sudhaar offers such services (facilitating interaction
between a customer and the bank official concerned), for a fee, its
officials also approach the bank or credit bureau on behalf of a client.
For this, the client has to give a limited power of attorney to
The fee ranges from Rs8,000 to Rs16,000, depending on the package.
Customers also have the option of paying the fees in equated monthly instalments.
Credit Sudhaar is also empanelled by several banks and NBFCs to run
their financial literacy and credit counselling centres, where
counselling services are offered free of charge, says Arun Ramamurthy,
co-founder of Credit Sudhaar.
In this case, the services offered are guided by the policy of the
respective bank or NBFC.
“We also offer value- added services such as identity protection and
Today, the services by agencies like Disha and Abhay are not enough
to meet the needs of borrowers and that is where organisations like
ours can help,” Ramamurthy says.
Click on the website of Credit Vidya and an advertisement pops up:
“Like us and win a chance for a free Cibil transunion score and free
credit report.” But the report isn’t free — you have to pay Rs470 to Cibil.
“This is just a chance to get a report free.
We hold some contests and if you win, you may get it free,” says
Madan Mohan, chief counsellor at Credit Vidya.
Credit Vidya charges Rs899 for analysing a credit report and telling
customers of the problems.
For additional services such as advising customers how to improve the
score, the fees range between Rs2,000 and Rs7,000.
As of now, the company only has online presence; there is no personal
contact between counsellors and customers, says Mohan, formerly a
counsellor with Disha.
The services include suggesting remedial measures such as approaching
banks in the case of a written-off loan and requesting the bank to
revise the rating.
In this case, too, it is not necessary the counsellor would visit the
bank or intervene on behalf of the customer.
This might sound similar to the services offered by Abhay but Mohan
insists it isn’t.
“Services like analysing the credit score are specialised,” he says.
Explaining how Abhay operates, Kulkarni recounts the case of a
borrower who, despite earning a salary of about Rs80,000 a month, had
run up a huge credit card bill.
“We found his wife travelled three-four times a year to Kolkata and
the credit card was used to purchase the tickets.
So, we counselled his wife to reduce her travel.
Then, we advised him to take loans against shares he had invested in
and pay off the credit card bills.
Thus, he was able to swap his highcost debt with low-cost debt,” he says.
On how Credit Vidya operates, Mohan cited the instance of a school
teacher who was denied an education loan for his son, on the basis of
a credit card default.
But after Credit Vidya was able to prove the school teacher did not
have a credit card at all, the bank sanctioned the loan.
Banks would only discuss any loan restructuring with the borrower
concerned and not entertain any third party on behalf of the customer,
says Shyamal Saxena, general manager (consumer banking-distribution),
India and South Asia, Standard Chartered Bank.
“Banks will deal with each case on the basis of merit.
But if some customers have loans from more than one bank, they may
benefit from external advice,” he says.
Kulkarni says for debt counselling, “The only thing required is
logical thinking.” So, before you sign up for a paid service, ensure
it would truly add value.
If not, maybe the first step towards managing your finances is opting
for a free service.
WHAT THEY OFFER
Credit Sudhaar Fee: Rs8,000 to Rs16,000 Services: Compilation and
analysis of reports from credit bureaus such as Cibil, Experian and
Equifax; eight parameter credit health map; social credit score (shows
how creditworthy you are from a social perspective); mobile
application (gives credit tips, news feed, reminders about loan
repayment dates) Disha Financial Counselling Fee: Nil Services:
Guidance about credit, budgeting, money management, how to take
informed decisions on products, how to avoid incurring debts that
cannot be repaid; personalised and confidential advice; alternative
means of debt management Abhay Debt Counselling Fee: Nil Services:
Drawing up a suitable repayment solution; counselling sessions on a
one-to-one basis and drawing up a rehabilitation programme Credit
Vidya Fees: Rs1,999 to Rs6,999 Services: Credit Planner, EMI saver,
Score Builder; Cibil report, virtual credit advisor, virtual support,
debt counselling, smart alerts, online dispute centre
WEIGHING THEM ALL
| Bank-sponsored debt counselling centres do not charge fees for
advisory services | Borrowers can approach the lender directly,
request for loan restructuring or rectifications in credit report |
Credit repair agencies charge fees for advisory and additional
services | Charges range from Rs2,000 to Rs16,000, depending on the
services offered | These could be helpful if you have multiple loans
from different banks