How is Your CIBIL Score Calculated?

Today almost no loan or credit card application gets approved without checking the applicant's CIBIL report and CIBIL TransUnion Score. Ever wondered how a person's credit score is calculated? Here's a quick glimpse into what goes into the making of a person's CIBIL TransUnion Score:

What is a CIBIL TransUnion score?
CIBIL calculates an individual's credit score through advanced analytics and assigns a number between 300 and 900 to a borrower, based on his/her credit history. The closer your score to 900, the more confidence the credit institution will have in your ability to repay the loan and hence, the better the chances of your application getting approved. While each bank will have its own credit scoring cut-off based on the credit sanctioning policies, it has been observed that most banks are lending to consumers with a CIBIL TransUnion Score of 750 and above.

How is the score calculated?
While each credit information company has its own proprietary algorithm to calculate an individual's credit score, the most important elements of the score composition are centric around the loan payment behavior of the individual. Your CIBIL TransUnion Score is calculated based on the information in the "Accounts" and "Enquiry" section of your CIBIL Report. The score is calculated based on the following factors:

• Credit Utilization: How much credit is the consumer using?
• Defaulting/Delinquency: How many accounts are past due and by how many days?
• Trade Attributes: How old are this consumer's lines of credit? What type of credit does he have? Does the consumer have a good mix or balance of credit or is it all credit cards?

Here is a breakup of the various factors that impact the CIBIL Transunion Score:

1. Past Performance: Individuals past performance on their debt obligations is the most important criterion and contributes approximately 30 per cent weightage to the score

2. Credit Type & Duration: Type of loan availed whether secured or unsecured loan, and the duration of credit history established contributes an additional 25 per cent to the score.

3. Credit Exposure: The total amount of credit exposure contributes another 25 per cent

4. Other factors: Other factors such as credit utilization, recent credit behavior contribute the remaining 20 per cent to the score.

Your CIBIL Report and CIBIL TransUnion Score not only determine whether or not you qualify for a loan, but it may also have an impact on the terms and conditions on which you can avail the loan. The higher the credit score, the better your chances of availing the loan faster and on favorable terms. It is advisable to check your CIBIL Report and CIBIL TransUnion Score before applying for a loan. Timely payments of loan EMIs is most important for maintaining a good credit history and a healthy credit score.

(Harshala Chandorkar, Senior Vice President - Consumer Services and Communication, CIBIL)

Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.

Story first published on: June 21, 2015 17:22 (IST)

Gold Monetization Scheme: Here's How You Can Earn Interest on Your Gold in India

The government on Tuesday released the draft guidelines for its ambitious gold monetization scheme that aims to cut down gold imports in the country. The guidelines have been notified nearly three months after the scheme was announced by Finance Minister Arun Jaitley in the Union Budget.

Here's how the gold mobilization scheme is likely to work according to the draft guidelines:

1) The scheme is meant to mobilize gold held by domestic households and institutions. Gold collected through the scheme will be made available to jewelers for manufacturing of new jewellery and other items.

2) The scheme will initially be launched at a few places because the government will have to first set-up infrastructure for facilitating easy and secure handling of gold.

3) Gold collected from consumers will first be cleaned and measured at test centres; it would then be melted to test for purity. After the tests, consumers can either deposit the gold for a fee or take it back after paying a nominal fee.

4) The minimum quantity of gold that a customer can bring is proposed to be set at 30 grams.

5) Those willing to deposit the gold will be given a certificate mentioning the amount and purity of the deposited gold. Banks will open a 'Gold Savings Account' on the basis of such certificates.

6) Consumers will be paid interest on their gold savings account after 30/60 days of account opening. The amount of interest rate to be given is proposed to be left to the banks to decide.

7) Both principal and interest will be paid to the depositors of gold, will be 'valued' in gold. For example if a customer deposits 100 gms of gold and gets 1 per cent interest, then, on maturity he has a credit of 101 gms.

8) The customer will have the option of redemption either in cash or in gold, which will have to be exercised in the beginning itself (that is, at the time of making the deposit).

9) The tenure of the deposit will be minimum 1 year and in multiples of one year. Like a fixed deposit, breaking of locking period will be allowed.

10) Gold savings account will be exempt from capital gains tax, wealth tax and income tax.

According to the government, gold deposit accounts will utilise the 20,000 tonnes available within the country and help in cutting down the 800-1,000 tonnes of gold the country ships every year. The last day for submitting feedback on draft guidelines with the finance ministry is June 2.

8 Clever Ways To Raise Money For Your New Startup

Raising money for your new startup isn’t as difficult as you may think.
However getting the right source of funding is slightly more complex. Each source of capital has its own unique advantages and disadvantages.

Here are 8 of the most reliable sources when it comes to raising money for your startup.

8 Ways To Raise Capital For Your Startup

1 – Crowd funding

While crowdfunding is still in its infancy as a means of raising money for your startup its popularity is rapidly increasing. Crowd funding takes it name from the fact that your project is funded by the public using their own personal funds. To start with, you propose the idea that you wish to see funded. People can then choose how much or how little they want to give you. Most crowdfunding sitescurrently use a reward base model where people who invest in a new business venture are given some form of reward such as the product that is going to be produced. However changes to US law will soon allow equity based crowdfunding.

Some of the best crowdfunding websites for small businesses include Kickstarter, Indiegogo, and Fundable.

2 – Angel Investing

After entrepreneurs have made their fortune many of them look to invest their funds back into startup businesses. These are known as angel investors. Some of the worlds largest businesses including Google, Facebook, Skype and Twitterhave received angel investing.

The benefits of receiving angel investment go beyond the purely financial. The advice and connections that a good angel investor can offer can be equally as valuable. Angel investors are willing to take on the risk of a brand new startup. There are a number of angel investing networks which connect entrepreneurs and investors. Some of the biggest networks include Golden Seeds, Tech Coast Angels and Investors Circle.

3 – Family and Friends

Your family and friends want to see you succeed and may even want a stake in your potential goldmine for themselves. However using family and friends as a source of raising money can be problematic. It can create a strain that can ruin personal relationships. It is also worth remembering that over 50% of small businesses fail in their first five years often because of factors completely outside of the control of the owners. Make sure that you are not borrowing money that they can’t afford to lose. Put any lending agreement in writing with the terms clearly laid out even if it is a “friendly” loan.

A number of successful businesses have started out with a loan from friends and family, so don’t shoot this idea down, just be mindful about the pitfalls and burdens that may come about in turbulent times. The risk is high but so is the reward when you are able to grow not only your own wealth but friends and families along the way.

4 – Credit Cards

Credit cards should be viewed as a temporary measure between getting your business started and obtaining other financing such as a bank loan. Given the hefty 10 – 20% plus interest rates on many credit cards they are generally not a good source of loan term capital. That said credit cards have been used by many entrepreneurs when their was no other options available. In the mid 1990s the founders of Google initially funded the company using credit cards. While the founders maxed out their credit cards they used the funds wisely, purchasing second-hand computers instead of new ones and open source software instead of off the shelf.

5 – Bank Financing

One of the most common ways that people raise capital for their small business is through a bank loan. Your banker may request that you have your loan guaranteed by the Small Business Association before approval. The SBA is a government agency who will guarantee up to 80% of the value of the loan for applicants which meet their criteria. Alternatively you may be able to offer some other form of security such as your home to get your loan approved.

6 – Second Mortgage

Second mortgages are also referred to as home equity lines of credit. These loans tap into the locked up equity you may have in your home. To calculate how much you may be able to borrow for a second mortgage take the value of your home and deduct the value of any outstanding mortgage. Be aware some lenders may only lend only up to 70 – 80% of the fair value of the home. One of the biggest advantages of using a second mortgage is that the interest rate tends to be lower than with others form of financing. This is because the bank knows it can always recover the value of the loan by foreclosing on your property if you are not able to meet your interest payments.

7 – Venture Capital

Venture capitalists aim to invest in early stage businesses with high growth potential. Traditionally venture capitalists received equity in the business in exchange for funding it. However these days they typically demand a mixture of equity and debt financing.

The venture capital business is based on the idea of a few big wins making up for a lot of poor performers. In fact approximately 3 out of 4 businesses which receive venture capital fail. Because of this venture capitalists look for businesses which have a lot of growth potential. If the market for your business is more modest you may need to look elsewhere for funding.

8 – Business Partner

You might not have the money to get your business started but maybe you know someone who does. Of the Inc top 500 businesses, 28% received seed funding from a co-founder.

When selecting a partner for your business you need to make sure that their own goals for the business are aligned with yours. As a business partner they will have control over the direction of the business. It is also a good idea to have a buy out agreement in place in case of a breakdown in the business relationship. This should stipulate that the other partner must agree to a proposed buyout within a set time frame or buyout the other partner themselves.

Finally it is worthwhile looking at the lesson of Facebook. CEO and founder Mark Zuckerberg had seen how earlier dot com companies had been willing to give away almost all of their equity to venture capitalists in order to get funded. He wasn’t going to make the same mistake and never gave up equity lightly. His 28.1% stake is now worth $14.9 billion. Be careful to negotiate your own financing terms with equal tenacity even when all you have is a vision for the future. The difference may one day be worth millions.

6 Guy Kawasaki Lessons About Pitching Your Startup To An Investor

Guy Kawasaki is a Silicon Valley venture capitalist, bestselling author, and Apple Fellow. He was one of the Apple employees originally responsible for marketing the Macintosh in 1984.

“You say: “I have lots of great ideas, but I have trouble figuring out which one to try. Let me tell you about a couple.” Investor thinks: “I want to know which idea you’re going to kill yourself trying to make successful, not which ideas have crossed your idle mind.”” – Guy Kawasaki

“Here’s what you should say [to investor]: “This is what my company does…” It’s that simple. What you’re trying to do is get potential investors to fantasize about how your product or service will make a boatload of money. They can’t fantasize if they don’t know what you do.” – Guy Kawasaki

“You say: “I love to think of new ways to solve problems.” Investor thinks: “Is this a high-school science fair?””- Guy Kawasaki

“You say: “My goal is to build a world-class company.” Investor thinks: “How about you ship and sell the first copy before we talk about world-class anything?”” – Guy Kawasaki

“You say: “I don’t know much about your firm, but I thought I’d contact you anyway.” Investor thinks: “You’re a lazy idiot–why are you wasting my time?”” – Guy Kawasaki

“You say: “The last time I contacted you, I…” Investor thinks: “I’m going to fire my secretary for putting this clown on my calendar again.”” – Guy Kawasaki