Thursday, 2 June 2016

Having High Credit Score is as good as investing in Provident Fund

Provident fund is a term that spells financial security and to an extent a kind of sanctity also in the financial parlance. All working individuals compulsorily contribute to the provident fund (PF) right from the first pay cheque they get and continue to do so till the day they are working. The provident fund occupies a kind of financial reverence because no individual wants to touch it till they have exhausted all other options of funding and want to use the PF only in case of extreme urgency. Something else can also offer you the same financial safety despite it not being a saving option; in case you are wondering what it is, we are referring here to the credit score.

Similarities between a Good Credit Score and Provident Fund:
We discussed a little about the PF above, now let us have a brief look at what a credit score is. Credit score is a three digit number that is calculated based on a person’s credit history and credit behavior. There are various factors and variables that contribute to this score which is also known as the CIBIL score in lay man’s language. This score is the first step to getting a loan, without a healthy score the application could be rejected outright and a good score could also get you better loan deals.  Just as one focuses on keeping their provident fund safe they should also concentrate on how to keep the credit score healthy and if required concentrate on how to increase CIBIL points too? So why are both important for an individual?

*      Offers Financial Security: In case one requires emergency funds for a medical condition or sending one’s child abroad for education then a good CIBIL score could come to your rescue. One could use a personal loan or education loan for abroad to access funds that can help them in fulfilling their dream. Without a good CIBIL rating borrowing from organized channels might not be possible and one might be forced to dip in their savings of which PF is one staple option. Both CIBIL rating and PF come to your financial aid when required most. Soon a healthy credit score could also be a must for getting a job in the financial sector or higher management levels.

*      Help in Fulfilling Dreams: Everyone has dreams for themselves as well as their families too; both PF and a good credit score can help one in fulfilling them. So if one is looking for home construction loans or auto loans then a good credit score is a must. Saving through a life time can sometimes not be sufficient to buy a house as the costs also go up with time; in such a scenario one might be forced to borrow from their PF. This is where a good score comes in; with the help of a healthy credit rating when could easily take a home loan without having to touch the PF and can get a good deal on the loan too. So the dream of a car, fancy holiday or to own a house can be fulfilled with either the PF or a good CIBIL score.

*      Independent of one’s income levels:  Irrespective of how much one earns a PF or a good CIBIL are both viable options. As said earlier PF contribution starts with the first pay cheque whether one earns 10000/month or 1 lakh a month. Similarly a good CIBIL score has nothing with how much is the income level of a person; a person with modest income levels could be credit healthy and one with very high disposable could be struggling with low scores due to being an irresponsible borrower.
So be credit healthy, it is as essential and as useful as your provident fund when required. Both are great tools that offer financial security and help in fulfilling one’s aspirations.

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