Friday, 22 April 2016

Good CIBIL score management guide for youngsters

Credit is something that has become a part of the wool and the warp of our lives today. From groceries to gadgets one tends to buy everything on credit today and the younger generation of Indians are comfortable and compatible with the idea of an EMI being a part of their lives. In a scenario like this, it becomes extremely important for youngsters to build a good credit score from the beginning and make a continual attempt at increasing CIBIL score. A good CIBIL score of 750 and above (out of 900) is imperative to access timely credit at competitive rates of interest.
With the RBI having made it mandatory for all banks and finance institutions to check an individual’s credit score as a part of their credit assessment process, it is likely that your loan application or credit card application will get rejected if you do not have a satisfactory CIBIL score. If you are wondering what you should do in order to improve your CIBIL score and how you can manage your finances in a manner that it enhances your credit score, we have some answers for you today.
Get a credit card
You may have been warned by your elders or come across articles that tell you that credit cards are potential debt traps and thus you think you are better off without one. This in fact is only half the information. If you have just started out independently and have drawn your fist few salaries and are keen on building good credit, do not shy away from comparing different offers from credit card companies to get your first credit card.
If used judiciously a credit card can be the perfect tool to build credit. However, before you make a credit card application, do bear in mind that you have to carry out adequate credit card comparisons before you decide which is the best credit card for you. Compare things such as fee structure, reward points and interest rates before you finally apply for credit card. Once you have your credit card in hand, also make sure that you spend small amounts on it and pay the outstanding amount in full before the completion of the billing cycle. If you maintain this financial discipline, you are well on the way of steadily increasing your CIBIL score. 
Make timely repayments
These days, young people are prone to availing of credit to improve their quality of life. Therefore 20 somethings paying a car loan EMI along with a small personal loan as well as maintaining a credit card is nothing unusual at all. While taking on so many credit lines, sure exudes your confidence do make sure you are not biting off more than you can chew and are not skipping repayments on even one of these credit lines that you have availed off. Making timely repayments is the best way to ensure that your CIBIL score remains high and you even get to enhance your credit score if you maintain a good track record of repayments over a prolonged period of time.

Maintain a good mix of credit
Apart from making timely repayments on all your loans and credit cards, you must see to it that you are maintaining a good mix of credit. Leaning towards too many unsecured loans such as instant personal loans and low interest credit cards may seem like a lucrative option to you, but it in fact does not do any good to your CIBIL score. In order to improve your CIBIL score, you need to maintain a good mix of credit, that is a combination of secured and unsecured loans.
Do not seem credit hungry
As mentioned earlier, youngsters today are quite comfortable with the idea of taking loans to improve their quality of life. The easy availability of credit and aggressive advertising by lenders makes it seem all very easy, but the truth is really far from it. Taking on too many loans and credit cards may not just spell trouble for you because you may be overleveraging yourself, it has a detrimental impact on your CIBIL score as well.
Each time you make a fresh credit card application or a take on an easy personal loan, your CIBIL score takes a dip on account of a “hard inquiry” made by the concerned lender. Every hard inquiry pulls your CIBIL score down by a bit. Too many hard inquiries will also make you seem “credit hungry” and will not put you in good stead when you are really in need of credit. Having a credit card to begin with is fine, but do not apply for too many credit lines unless you are really in the need of the same.
Check your CIBIL score and report periodically
Lastly, but not the least, it is very important for one and all to keep a strict vigil on the CIBIL score and CIBIL report. You must check your CIBIL score and report at least twice annually to ensure that no errors or discrepancies have crept into it. Sometimes, because of the large volume of data that banks usually handle, some unwanted errors or misinformation about your loan or credit card accounts make way into your CIBIL report, thus bringing down your CIBIL score. You must therefore make it a habit to keep a hawk eye over your CIBIL score.
Maintaining good CIBIL score or good CIBIL score management is all about maintaining good financial discipline. Once you have the basics in place it will not be rather easy to maintain a good CIBIL score, thus opening up doors when you are in need of credit.

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