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Stoa Digest #119: 💰 Earn your Eligibility 💰
Don't do the easy thing and take a bet on yourself.
It’s exam season!
We’ve got our C12 and C13 fellows diving headfirst into their exams this weekend. Wishing you all the very best with your exams.💪🏻
We’re also gearing up for our 15th General Management Cohort, and if you haven’t heard; we’ve just launched a new program for Marketing & Growth!🔥
We thought we’d let you know about our referral program for folks in your network that you think would really benefit and make the most of Stoa, you can find the link to refer here:
PS~ We’re running an early bird offer and if someone in your network avails both the early bird and referral offer, they can be a part of the program in under 3.2 L.
Do check out the link to know more.
So, a few years ago, I had an accident. I needed to have surgery and, at the moment, didn't have the capital to cover it myself. I had insurance, but I could only make an insurance claim post-surgery.
At the time, I wasn’t technically a salaried person, even though I had a monthly source of income.
So I thought, why not get a personal loan? The cost of the surgery was within 3L. I remembered how I would get calls every month asking if I wanted a personal loan; now came the time to take them up on the offer.
I went to my local bank and met the branch manager. He sat me down and we discussed pleasantries for a few minutes before I conveyed my ask. I said I needed a personal loan so I could pay off surgery along with details. He listened patiently and said, let me check what we can do. He turned to his computer, clicked a few buttons, and said, “Well, Shelton, you are not eligible for a personal loan.”
Well, this surprised me, as the calls I would get from the same bank a few months prior claimed I was eligible for loans above 2-3L.
So I asked him, well, what’s the problem?
For one, he said, you aren’t salaried currently. There are a few income transactions, but that can't be considered as salary.
On the other hand, he said, well, you don’t have a good credit score.
That left me baffled a bit. I didn’t have a credit card or any prior loans, so I didn’t fully comprehend how I had a low credit score. How was I not worth receiving credit?
I had investments. I had paid all my bills on time. I didn't own a credit card. I had no EMI’s ongoing or no other forms of borrowing. (I admit, at the time, I took this very personally)
So after leaving the bank disappointed and feeling some shame, I thought I’d speak to people smarter than me to understand this better; here’s what I learned.
Your creditworthiness is determined by borrowing money and paying it back on time. You can only increase your line of credit by borrowing more money and paying that back in time.
Imagine my bewilderment upon learning that the only thing that was stopping me from borrowing money was the fact that I hadn’t borrowed money previously in any capacity.
Now, this didn’t make sense to me at first but then I realized, I wanted to borrow or draw a line of credit from the bank without collateral at a lower rate of interest.
Usually, other borrowing mechanisms via banks force you to put up collateral. This could be gold, silver, borrowing against investments, or borrowing against savings/FDs.
Many times the rates of interest are quite high as well.
This is how I learned about CIBIL and Credit Scores. If one does not have a prior credit history, usually their credit score is 0 or -1. It essentially means that there is no information on whether an individual is credit-worthy or not.
So building a good credit score is necessary not just to enable you to borrow lines of credit easily (for when you need them), it’s also a system of trust between you and the lender. (in this case banks/NBFCs)
From the interwebs: The Credit Information Bureau (India) Limited (CIBIL) is the most popular of the four credit information companies licensed by the Reserve Bank of India. CIBIL Score is a 3-digit numeric summary of your credit history, rating and report, and ranges from 300 to 900. The closer your score is to 900, the better your credit rating is.
One of the ways to gradually build a good credit score is by getting a Credit Card. Now, I won’t get into the pros and cons of having one. When I was in my early twenties, I despised them, now I see them as a necessary evil.
*It is usually recommended that you utilize 30% of your Credit Limit on your card and consistently clear your dues before the payment date.
EMI’s are tricky, each EMI you take up is a line of Credit. If you make too many purchases in a short period with EMI’s that will affect your credit score.*
Eventually, in my quest for upward social mobility, I conceded and got a credit card. Surprisingly easier than I thought.
~ Shelton, Team Stoa
🐝 Community Buzz 🐝
We had a super insightful fireside event last week with the folks at Ather! Here’s a glimpse of what went down -
⏯ For Stoans by Stoans ⏯
An interesting case study on landing pages. A must-watch for designers!
A great thread on the difference between building a business and running one.
The strategy behind Wendy's discord server.
A great watch on what goes into building a brand.
The backstory of how a cancer scare resulted in building a $275 million Biotech Company.
until next time, fam!