Why your credit report remarks matter more than high credit score?

So, you have been reading a lot about CIBIL these days and you have got the impression that having a high credit score like 800 or 850 is a key to get your kind of loan?

If that’s the case, let me break your myth that having a high credit score is not a guarantee that you will get a loan from a company. Look at the following comment and you will understand what I am talking about

Dear Sir,

I have taken the PL of Rs.1.5 L from HDFC and get settled of amount Rs.15 k in 2013. In March 2015, I checked my CBIL score, it is 813 however loan status is settled.

Recently I applied for PL of Rs.5 L in ICICI but it gets rejected based on previous settled loan. I don’t get this, when my CBIL score is 813 then how its get rejected. Kindly guide me how could I get PL as its v.urgent for me.


What is CIBIL remark and score?

In case you are new to this CIBIL concept. I suggest you read this article or watch this video below from the Cibil team.

It will help you understand the concept of the credit bureau and credit report. Once you view the video, then you can move ahead.

Your credit report remarks matter more than your Credit Score

Let me share with you a personal experience. My brother had taken a bike on loan a few years back and I was with him in the Bajaj showroom where I asked the executive if they really looked at CIBIL score (CIBIL was new around that time). The executive shared with me that they don’t look at a credit score, instead, they look at the remarks on the report and that is what matters most along with your other factors.

It was really a new thing for me to know that a credit report does not have that much Importance compared to the credit score in your loan approval process.

Credit remarks vs. Credit Score

Let’s understand both the concepts and the meaning of these two things

What are Credit Remarks on your report?

If you have 3 different kinds of loan accounts (1 home loan, 1 car loan, 1 credit card). In that case, you will have the remarks for each of these loan accounts and the current status. Imagining you have closed the loan accounts, the remarks may say “Settled” , “Written Off” or “Closed”, out of which the first two are bad remarks. At times, if you are not able to pay off the loan, the loan guys will try to persuade you to settle the loan with a lesser amount and close the chapter.

However note that it’s a short term solution to just get away with the problem. Eventually, the remark will be marked as “Settled” or “Written Off” and in future when another lender looks at your report, he will come to know that you didn’t pay the full/partial amount of loan outstanding.


At this point in time, even if you have great salary or a good credit score (we will look at it below), they are going to reject your loan application.

What is a Credit Score?

Credit score is a number between 300 and 900, which signifies your credit worthiness and how likely are you to default on paying your loan installments. A low credit score means that there are higher chances of you defaulting on the loan payments. This credit score calculation is a trade secret and no one knows the algorithm of how it’s calculated, but there are various factors that are considered by the credit bureau which its calculation.

So one can still have a high credit score (the chances of paying their future EMI’s regularly), but still their past remarks will have a greater impact on their loan evaluation process. While a score of 750+ is desirable (as per CIBIL around 79% loans were given to those with CIBIL score of more than 750), don’t think that just because your score is higher than 750 means that you will surely get a loan.

cibil score 750

In the same way, if yours is less than 750 (like 600 or 720), but if your credit remarks are clean, you will most probably still get the loan, considering you qualify on other parameters like (salary, other EMI etc)

So while credit score gives a future insight, the credit remarks gives insight into the history.

4 other factors because of which loan application rejection can happen?

  • If you are a guarantor for a loan which is already defaulted. Though you have not taken the loan directly, your application might get rejected if you have become the guarantor of a loan by your friend/relative and they have defaulted.
  • If you are too dependent on credit already (means if you are over-leveraged). Imagine if you are already paying 50% of your income on EMI’s and have many different kinds of loans running. Even then your application might be rejected.
  • You don’t have enough tax payment history. If you have not been paying your taxes regularly, then it’s tough for the company to ascertain your paying capacity, hence, make sure you file your returns regularly and properly
  • Too many unsecured loans, if your loan portfolio has too many unsecured loans (credit card, personal loans) then it’s not a good sign and makes you look a credit hungry customer. This might lead to rejection.

So what’s the learning?

So what’s the learning out of this?

The main thing you should focus on is to make sure that your credit report does not contain any bad remarks and if there are any, then you should take actions to rectify it. It will by default help you in improving your credit score. Don’t get obsessed with increasing the credit score. If your credit score is above 700 and your report is clean, you are 95% good to go. Beyond that, if your score is higher, it’s a great thing. But don’t over-focus on it.

Before applying for any kind of loan, make sure you apply for your credit report and score before few months and analyze it to find out if you need to fix it or not. Over the long run, just keep paying your dues on time and do not abuse your credit utilization and you should be good in the long run.

Let me know if you have any queries about this.

ICICI launches “Smart Vault” – Robotic technology in bank lockers

ICICI Bank has recently launched “Smart Vault” which is a cutting edge robot managed locker service. There is almost no intervention with the bank staff and the security is very high. Watch the video below to understand how it works.

Here is how the “Smart Vault” is operated

  1. Locker owner will swipe their debit card and enter their ATM PIN
  2. There is a biometric authentication required
  3. You will then enter a private room where a robot will bring the locker in front of you
  4. You can open your locker with a unique key, provided by the bank. For added safety, you may also choose to have an additional personal lock on your locker.
  5. Once you are done, you can keep your belongings back in the locker and robotic technology will take it back
  6. You may leave the locker room once the “Thank You” message flashes on the kiosk screen

The vault uses robotic technology to access the lockers from the safe vault and enables customers to access their lockers at any time of their preference,” the statement issued by ICICI Bank, country’s largest private sector lender, said.

In case a customer has more than one locker, the interface allows customers to choose which locker they want to operate.

The lockers will come in different sizes and the cost will depend on the size of the locker and the city location where the locker is located (linked to real estate prices)icici smart vault size

As of now this smart vault is launched in Delhi, but soon it will replicate in other cities as well. Its a great thing because its a new innovation from ICICI bank on the locker service.

What do you think about Smart Vault service and the robotic technology used? Would like to avail such kind of lockers by paying a higher premium rents?

EPF withdrawal made super easy – No Employer signature needed

Here is a great news for all EPF account holders. EPFO has come up with new and revised forms using which EPF withdrawal process is now super easy and can happen without employer signature or any involvement. Now you can directly submit the EPF withdrawal forms and the settlement will happen directly into your bank account.

Earlier, the EPF forms were first sent to employer for their verification and signatures, which used to take a lot of time and many a times employers used to harass employees because they had the power to block the EPF withdrawal. However with these new changes, withdrawing from your EPF account is going to be very easy and fast and now it makes a lot sense, because EPF should not be linked to employer anyways. Few months back, with the concept of UAN, the EPFO had anyways delinked the EPFO from the employer to some extent, and this move looks like an extension to that.

new epf withdrawal process

New Forms – 19 UAN, l0-C UAN and 31 UAN

EPFO has issued 3 new forms which will be used for as follows

  • Form 19 UAN – You can fill this form to withdraw from your EPF at the time of retirement or leaving the job. Taking our money from the EPF is allowed only if you are unemployed for 2 months. So in case you just change a job and join a new company within 60 days, you can not offically withdraw from EPF, You need to apply for EPF transfer in that case
  • Form 10-C UAN – You can fill up this form in order to withdraw from your EPS amount. EPS account is a seperate account linked to your EPF which is for the purpose of pension. Note that one is allowed to withdraw from EPS only if your EPF is not more than 10 yrs old.Check more details on this here.
  • Form 31 – UAN – This form can be submitted if you want to partially withdraw from Employee providend fund (EPF) account for the purpose like marriage, house buying or medical emergency. There are different rules for different situations. You can check more details on this in this article

Note that there exist forms 19, 10C and 31 already (without the word UAN), but now the new forms end with the word “UAN” to differentiate between old and new forms.

Who can fill up & use these new EPF forms?

Here is the catch!. The new EPF forms can be used by only those employees who fulfil following two conditions

  • UAN must be active and should be linked with aadhaar number
  • Your KYC details (especially bank account number) must be verified by employer using digital signature

If the above two points are true for you, only then you can use these new EPF withdrawal forms

new epf withdrawal forms

Step by Step process of withdrawing money from EPF account

Let me help you with the steps of EPF withdrawal now. For the sake of explanation, we will consider the case of Form 19 UAN, which is used to withdraw the EPF money once you leave the job or are retired. The same process is used for the other forms as well.

Step 1 – Make sure your UAN is active and KYC details are verified

These new forms can be used only by those whose UAN is active and all the KYC details are verified by employee as explained above.
Hence, the first step is to verify your eligibility. For that, you can go to http://uanmembers.epfoservices.in/ and login with your login and password and then go to Profile->Update KYC Information, where you can either update the details or check them. It looks something like the below example (thanks to my close friend who has passed his details to me for creating this snapshot)

check uan status

In case, you have more than two UAN allotted to you, then you should discard one of them and should be using the latest one provided to you by the current employer.

Step 2 – Fill up the EPF Withdrawal form and send along with cancelled cheque

Once you have verified that all the details are fine. You can then fill up the form. Below you can see form 19 UAN as an example. One has to provide the Mobile number, UAN number, date of leaving, the reason for leaving the service (make sure you choose it properly, because TDS will be applied depending on that reason),PAN & full postal address.

Note that apart from this form, you also have to attach the cancelled cheque of the bank account which is mentioned in the UAN KYC details.

EPF Form 19 UAN for withdrawal
Step 3 – Send the form to the EPF jurisdiction office

Finally, the last step is to submit this form, along with the cancelled cheque to the EPF office which comes under your jurisdiction. The simple way to find the exact address of the regional EPF Office is to go to http://search.epfoservices.org:81/locate_office/office_location.php and enter your state and district of the office where you work/worked. You will get the full address. You can then courier the documents to that address.

epf jurisdiction

The above 3 steps will help you to withdraw from EPF money easily. If you want to withdraw your complete EPF amount, then you need to fill up form 19 UAN and form 10-C and send both of them.

BONUS – Fill up form 31 UAN to withdraw from EPF for purpose of buying house

Let me also share one very important thing related to buying house or repayment of house loan through EPF amount. Form 31 UAN can be filled for partial withdrawal for the purpose like buying house, repaying home loan or things like medical emergency or marriage at home. For more on this, please look at this article.

You can see the snapshot of form 31 UAN below. If you look at 4th and 5th point, you can clearly see that you can take the money directly in the name of the “agency”, which can be the builder or the company which is helping in construction of house. The cheque can be taken for that.
form 31 UAN

EPF Withdrawal process to be online very soon

I hope you are now clear about these EPF withdrawal forms and how to fill them up. Note that very soon these facilities will become online, it’s just a matter of time. Once that happens, the process will be much smoother and fast, because things will become online.

Let me know if you have any doubts or any questions on this topic. Do you think these forms will help in EPF withdrawal a bit faster?

No claim rejection for life insurance policies older than 3 yrs – IRDA

There is very good news for those who have bought life insurance policies (especially term plans). From now on, life insurance companies will not be able to reject claims for any policy which is 3 yrs old.

Yes, you read it correctly.

no claim rejection for life insurance policies older than 3 yrs

No Claim rejection after 3 yrs

If your policy is 3 yrs old, no matter what happens, the life insurance company will not be able to deny the claims. There was an amendment in the sec 45 of the Insurance Act 1938, and due to that now onwards a policy can’t be denied a claim because the policy-holder gave some wrong information.

As per IRDA, the company has 3 yrs in hand to detect any misrepresentation or misstatement from the customer side and reject the policy. However, once this period is over, the insurer will have to settle the claims.

What this means is that those investors who were highly suspicious of insurer’s intention and always kept looking at the claim settlement ratio numbers don’t need to worry now.

While this seems to be great news, one should think of what kind of implications will arise out of this change. I can think of a few of them

1. It will not be easy to buy life insurance

The major impact of this change will be that now the medical tests might get more details checking a lot of things. Till now insurers were bearing all the costs, and I think it will happen in future also, however, I think this will result in higher premium amount, which I think investors will not mind because now there is a guarantee of claim settlement

2. Chances of Fraud in the life insurance space

Already, there are many frauds that happen in life insurance space from the customer’s side. I remember an episode of Crime Petrol, where a man planned his death so that his family can get the life insurance money, however, he didn’t get the money because he was not able to execute the plan.

However, with this new change – the chances of fraud and misrepresentation can increase. Imagine a smoker or a person involved in risky activities. A lot of people like these to not disclose these facts because their application might get rejected or the premium might rise. So a lot of people suppress disclosing this fact and it’s going to be a hard time for companies to figure out these things. There will always be few cases which will not come under their radar.

What do you think about this latest development? If you hold a life insurance policy already, how do you see this new change?