Just like optimum blood pressure, sugar and the likes are the measure of your physical health, a good CIBIL score is a measure of your financial health and you must do the needful to keep your CIBIL score at a satisfactory level.
Have you just joined a job and are thrilled about the fact that you are finally drawing a full salary? As empowering as it may seem to have your own money, this is the time to reign in your impulses. Inculcate good financial habits that lead to a good CIBIL score right from the start.
Here's how to go about with it.
If you are the new kid on the block in your office and are being lauded for your bright prospects, you have obviously done something right! Getting a hefty salary when you are in your early twenties may indeed make you feel very powerful. You want to buy nice things for yourself and your family and live life king size. You think there is a lot of time left for to worry about "dull and boring" things like credit score. But you are indeed far from the truth.
Just like optimum blood pressure, sugar and the likes are the measure of your physical health, a good CIBIL score is a measure of your financial health and you must do the needful to keep your CIBIL score at a satisfactory level.
Here are some tips for you to inculcate good habits that will help you maintain a good CIBIL score.
1. Don't change your lifestyle just as yet
If you have been living frugally like a student all these days and have come into money, resist the urge to change your lifestyle all of a sudden. Don't go about buying a host of pretty things to spruce up your home and splurge on parties and outings with friends. Continue with the same lifestyle that you had as a student and concentrate on repaying your education loans.
Don't postpone such payments as it is mandatory for any individual to pay off his student loan as soon as he gains employment. Non-repayment or delay in repayment of your student loans will have a negative impact on your Cibil score.
2. Get a credit card
You may have often been told that using a credit card can be disastrous for your CIBIL score. But this is only a half truth and is applicable to those who recklessly spend on their credit cards.
The truth is that if you use your credit card judiciously and make timely repayments on the same, you can use it to build a good CIBIL score.
There are quite a few credit cards that are tailor-made for young adults and come with a low or a zero fee structure and a quite a number of rewards.
By using such a credit card wisely you will be able to build up a good CIBIL score, little by little. A good CIBIL score is your ticket to credit at competitive rates of interest when you are in need of the same.
3. Never make late payments
While using a credit card, make sure you are making your payments in full each month. Never buy anything on your credit card that you think you cannot afford to pay in cash within a limited time frame of 15-20 days. It's incredibly easy to overshoot one's affordability and keep purchasing stuff on your new and swanky piece of plastic.
But before you know you have exceeded your affordability and wallowing neck deep in debt, and are paying off only your minimum amount due each month that is only taking care of your interest component and not reducing your principal outstanding balance.
This has a negative impact on your CIBIL score and brings it down steadily.
4. Keep an eye over your credit utilisation
Let us reiterate that it is very easy to get swayed by the power of plastic money. If you get into the habit of regular payments, the credit card issuer is likely to award you a higher limit or the maximum you can spend on your credit card. But don't take this as a green signal to spend as much as you can.
In fact make it is practice to keep the total utilisation of your credit under 30 per cent. A higher credit utilisation is a veritable trap of overwhelming debt that will be detrimental to your CIBIL score in the long run.
5. Don't come across as credit hungry
Once you are on the job drawing a good salary, you are sure to receive many calls from the personal loan or credit card departments of banks, especially during the festival season, when you are in the mood to splurge! But be very careful and don't take the bait, unless and until you really need credit.
Don't go about applying for too many personal loans and credit cards all at once. Applying for too much credit will result in to many "hard inquiries" on your CIBIL report.
Every time you apply for fresh credit, the bank requests CIBIL to pull out your CIBIL score to assess how creditworthy you are. Each time there is hard inquiry on your CIBIL report, your CIBIL score comes down by a notch and does not instill confidence in a lender about your repayment capabilities.
It is very important for young people to keep an eye on your CIBIL score right from the time you join your job. Do not neglect your CIBIL score as you are sure to access credit sooner than later.
A good CIBIL score will open up doors for you then. Besides, maintaining a good CIBIL score is a by product of good financial habits that helps you build wealth in the long run.
Photograph: CollegeDegrees360/Creative Commons
The author is Co-founder and Director Credit Vidya.
