In the News

Is paid advice better?

Is paid advice better?

21 Oct 2013
Business Standard

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 information company.

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 repair company.

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 Credit Sudhaar.

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 money management.

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

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