Rejections are painful in whatever shape and size they come, whether it is the dinner date you wanted to set up, a promotion you have been eyeing or the flat you so wish to rent. All processes that ‘assess and evaluate’ you before letting you experience the desired outcome come are based on a set of information and decision parameters, if you fare favourably, chances are you will pass else one stares at the agonizing ‘rejection’.
But when it comes to personal finance and especially loans, rejections are even more painful since most of the times, you don’t even know ‘Why you were rejected’, as financial institutions are not obliged to inform you of the reasons that prevented you from availing an otherwise ‘instant’ loan or ‘guaranteed credit card’.
Most of the times, informally you may get to know that you either don’t have a credit score at all or your score is insufficient/low and therefore the bank or non-bank finance company decides to reject your application.
Credit score – what if you don’t have a score at all?
Credit Score is a numerical estimate of your credit worthiness, or simply put, credit information companies like CIBIL Transunion, Experian, CRIF and Equifax etc, compute a score based on the following key points
- Number of loans or credit cards you hold
- Age of your first credit
- Your repayment behaviour/delays or written off loans if any
- Current outstanding balance
- Utilization of credit that is available to you
But there is an interesting situation here, for one to have a credit score, a bank or NBFC should lend money to you through a loan or a credit card and this information needs to be recorded with a Credit information company.
So, what if you have never borrowed money from an institution or have never been approved? In both the situations, it becomes a chicken and egg conundrum, without a formal loan, there is no formal credit score!
It is not surprising that over 80% of Indians, who apply for loans from banks and non-banking finance companies are rejected and, in several cases, lack of credit score is a key factor driving such rejections.
Is there a way one can create their own credit histories without access to formal loans?
Say hello to Social Finance
Lending and borrowing money among your trusted network of friends, family, business partners and office colleagues, is the oldest and largest source of personal loans in India with millions of people transacting among each other every day.
Most of the times, such transactions don’t get recorded as a ‘loan’ since one tends to transact in cash or bank transfers, but with no supporting records demonstrating timely repayments by a borrower, even if all dues were duly paid on time and the loan was closed on mutually agreeable terms.
This is where SaveIN– India’s first social finance led neo-bank is revolutionizing this large market by letting people create their own credit histories, enabling them to transact and record all such informal personal loans on their personalized SaveIN platform.
Lenders and borrowers from within a social network, can discover each other on the platform and agree on loan conditions in a digital and transparent manner. Once both parties, agree, the lender can transfer the money directly into verified bank account of the borrower through digital payment channels. Upon the due date of repayment, the borrower can repay the applicable amount back to the lender from the SaveIN platform, leading to automatic closure of the loan and thereby creating a successful repayment record for self – a ‘personal credit history’.
SaveIN, that is actively building a consumer-focused neo-bank, is creating India’s largest alternate credit repository, with an objective to put users in charge of their financial health, thereby expanding the penetration of banking and formal credit solutions to millions of Indians, who remain credit-underserved. Having launched the social finance platform, SaveIN is now working to launch banking and other personal finance products for its fast-growing user base, in partnership with other financial institutions.
Imagine, all the informal loans that you have given or availed over the years across your social contacts, could have been used to create your personal credit history, without the need to depend on a bank or other financial institutions.