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‘We can differentiate between a circumstantial and habitual defaulter’

Author: Kumar Shankar Roy/Wednesday, August 8, 2018/Categories: Expert View, The Finapolis Conversation

‘We can differentiate between a circumstantial and habitual defaulter’

Everyone has the right to get loans. But this over-riding philosophy requires that everyone also manage their credit professionally. Often, the problems with the creditworthiness of an individual appear when they are seeking an important loan. Loan applications can get rejected if the lender feels so. The good news is you can improve the credit score. Mumbai-headquartered Credit Sudhaar is today recognised by consumers as a platform that has pioneered credit repair. In an interview with Kumar Shankar Roy, Arun Ramamurthy, director and co-founder, talks about the financial innovations for individuals with impaired credit history, the role of technology in credit underwriting and how your location and habits have an impact on creditworthiness assessment. The IIM Calcutta management graduate, who previously worked for Standard Chartered Bank, Citibank and Deutsche Bank, also sheds light on the time and effort required from somebody with a poor credit to be loved by lenders again. Read on.

What is distinctive about your company’s credit solutions that separate you from competitors?

Apart from being the pioneer to introduce credit repair in India, we have increasingly invested in technology. Today, the platform is not only geared to extend a seamless customer experience but also gives a highly accurate analysis of the existing credit profile. What also differentiates us is our ability to improvise our processes through the ongoing learning in dealing with customers having impaired credit history. Through this continuous process, we are today able to extend a highly personalised solution to the customer.

Our biggest achievement has been the introduction of PLUS loans which is a big differentiator. This product caters to the segment with impaired credit history where individuals are unable to have access to credit from regular lending institutions. Our decision engines are able to provide a decision within 3 minutes even to this segment.

What have you done over the last 12 months so that clients can manage their credit and save money in a better way?

We have introduced a mobile application which helps our customers to have access to all information on the go. Apart from tracking the progression and updates, the application is also able to support the feature of customised advice specific to the customer. We have also tested and implemented a solution for safety on customer data from fraudsters. Apart from this, we are in the process of extending a solution to our customers on keeping track of their expenses and finances.

What’s been the biggest change in your industry in the last five years?

The industry has gone through a complete change over the last five years. From physical assessments of loan applications, the credit underwriting has converted into an algorithm-based digitised platform. Introduction of technological solutions like checking of KYC on the fly, getting to know the income without having to collect documents, availability of alternate data for assessment of credit profile has improved both speed and quality of the decision. Other than this, the introduction of psychometric profiling and improvement in the quality of bureau data has also made a big change to the lending industry. The biggest change hence can be defined as the introduction of technology. 

If I had sufficient capital, what would stop me from competing head-to-head with you in year one?

While capital can help in kick-starting the operation, the differentiator will be the experience and expertise on this customer segment. At Credit Sudhaar we have dealt with thousands of customers and our understanding of their need and what it takes to address it effectively is what will be a differentiator. We have very successfully been lending to individuals who are a complete non-target segment. Our ability to differentiate a circumstantial and habitual defaulter has come in through a systematic study of behaviour and patterns over years. 

Different credit reports have different scores. What is the difference between credit scores from 4 different credit bureaus?

Theoretically, there should not be a difference since the score range to be followed by all bureaus is common. However, owing to the difference in algorithms there might be a slight difference in the score.

The major difference in the scores on credit reports from four bureaus in India could be an outcome of two reasons. First, the difference in data available with the particular bureau. Despite notification from the RBI on sharing data with all bureaus being mandatory for all lending institutions, there are still gaps. The reporting is not happening to all bureaus. Availability of historical data can also be one factor influencing the scores of the individual. The second reason could be an error in the data captured by the bureau.

How much time and effort does it take for somebody with a poor credit score of 300 to become credit-worthy again?

The question on time and effort that would be required to become creditworthy keeps coming up frequently. Various factors will come into play for one to become creditworthy once again. Length of credit history, the kind of loans he has had in the past, current product holding, what kind of default did the person have, the time taken to default from the disbursal are only a few parameters that would need to be worked upon. Apart from these, his seriousness to improve his credibility and following the advice would impact the time taken by him. 

Does religion, location and habits have any impact on a person's creditworthiness in the eyes of the lender?

Religion does not have any impact on one’s creditworthiness. But location can have some impact and habits can have a major impact in the eyes of the lender. The lending institutions may not serve a particular geographical location for various reasons. If the location is unserviceable then the credit facility will not get extended. As far as the habits are concerned, these play a major role in underwriting. Habit is something that one would do regularly or often. Come to think of it, the customers’ credit bureau report is reflective of his habit. It highlights the borrowers’ habits in dealing with his finances. For example, a consistent delayed payment on credit card indicates a habit of not taking deadlines seriously. 

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