04-Oct-2017 written by : FSI-Team
It is always good to have your financial life sorted. If you pay attention and manage your finances responsibly from the beginning you will have nothing to worry later in your life. The day you get your first credit card or your first loan, you will find a place in the credit bureau records. They keep track of all your payment details and the way you manage your debts. That will form the basis of your credit score. Your credit score is weighed against a standard benchmark by most lending institutions before approving a loan.
Here are 5 ways to become a responsible adult with good credit habits. If you adopt these fundamental principles you will have an impeccable CIBIL report and score.
The biggest mantra of leading a stress free life is to live within your means. You should make a monthly budget and spend less than your monthly income. Your expenses should never exceed what you can afford to pay when the bill arrives. Avoid impulse buying. Unfortunately it is easier said than done. When people get their first credit card, they often get tempted to use the card to its limit to buy all that they need. They think that they can keep paying the minimum balance and defer the payment to a later date. Never give in to this temptation because this kind of lifestyle isn't sustainable. One should always remember that credit card is not free money. Anything that you do not pay by the end of the cycle will carry a very high rate of interest. Learn to manage your expense to avoid any financial troubles in future.
Life is unpredictable. Unexpected things happen and one should always be prepared to handle them. Ensure that you have a savings fund of three to six months of living expenses to fall back on in case of any financial emergency. If you do not have this, you will resort to using a credit card or taking a loan to make ends meet. This is not a healthy sin at all.
Promise yourself that you will never spend more than what you can afford to pay at the end of the month. Credit card balances attract a very high rate of interest. If you do not pay your bill in full, chances are that you will soon fall into a debt trap. A responsible person always pays the balances in full each month and avoids interest payments.
Credit utilization ratio is the ratio of the amount of credit that you have utilized as compared to the total credit limit. Keeping this utilization to 30% or below is a healthy sign. If you max out your cards, it gives an impression that you are overly dependent on credit, even if you pay the balance in full.
The most favourable sign that will signify that you are responsible with your credit, is if you make all the bill and EMI payments on time. Your payment patterns get recorded in the CIBIL report and carry a 30% weightage in determining your credit score. Missed or late payments not only attract a late fee, but they also hurt your credit score. Delinquent accounts are serious negative remarks on your CIBIL report which will create a negative impression in the minds of the lenders. The best way to ensure that you are always on top of your payment schedule is to set up automatic payments and the money will be withdrawn from the account automatically.
Last but most important aspect of being a financially responsible person is to monitor your credit rating regularly. Even if you are doing everything right to ensure an excellent credit score you must still check your CIBIL report once a year. Doing so will give you a clear picture of where your credit stands. It will also help you verify the records of the bureau and identify any signs of fraud. Since your CIBIL report speaks volumes about your credibility you must make sure that it reflects the true picture. Any suspicious activity should be reported and rectified immediately.
If you take care of the above things you will be on your way to become a responsible adult who has his finances under control.