Check your credit score after the holiday season to avoid surprises

23-Jun-2018 written by : FSI-Team

3 Tips to Get Your Personal Loan Approved

With the ongoing summer vacations on full swing, it is possible that you have taken off to a cooler place for some respite from the dreadful summer heat. In your relaxed frame of mind, it possible that you are off guard and have incurred a few extra expenses on your credit card that are beyond your vacation budget.

When small expenses add up

“After all it’s only a few extra thousands that will not make a difference to my debt obligations” you tell yourself and you intend to repay the extra amount as soon as you come back. You may have even taken on a fresh credit line such as a new credit card, to fend for your holiday expenses. The fact that it can lead to a low CIBIL score, is farthest from your mind!

Now imagine this. You come back home after a couple of weeks, only to find that an important home appliance has broken down. Since you are already short on funds, you book an appointment with a mechanic on an app and promptly make a payment with your credit card again.

Once you get back to the grind at work, you forget about repayments and are in for a shock when your credit card bill arrives at the end of the billing cycle! You find yourself in a situation where you are unable to clear the total outstanding all at once and think you will be exonerated by paying the minimum amount due. We hate to break it to you, but you have stepped into a debt trap! And it will only keep exaggerating, if you cannot manage to clear the total outstanding soon! What is worse is your credit score will take a hit.

Redeem yourself post the holiday season

To avoid nasty surprises like this on the financial front, it is wise to check not only your credit card spend but also your credit score, after you return from your vacation. If you have maintained a good repayment track record thus far, it is unlikely that you will have a low CIBIL score right away, but if you had taken on a fresh credit line, such as a new credit card right before you went on your vacation, your CIBIL score will have dropped by a tad.

This is because, your CIBIL score drops on account of a “hard inquiry”, or a request by a financial institution to view your CIBIL records when you make a fresh credit application. Thus, if you are already in a situation where you have taken on additional debt during the holiday season, make amends by making repayments on your credit card right away. Try and pay the outstanding amount in full, by cutting corners elsewhere, so that you do not end up in a debt trap because of your holiday expenses.

Ensure good financial health

Further, make it a point to check your credit score after the holiday season to ensure that your credit score has not been hampered, because of your holiday splurging. You can utilise the facility of one free credit score check from CIBIL to ensure that your credit score has not taken too big a hit post the holidays.

Here are some hacks to ensure that you don’t pay a price for your holidays later.

  • Take a personal loan- Instead of racking up credit card debt when you are holidaying, take a personal loan that you can repay in a short time frame. Though a personal loan is a fresh credit line as well, it is cheaper for of debt that you repay through fixed EMIs. This will not hurt your pocket, as much as repayment of total outstanding amount on your credit card all at once.
  • Invest to build a holiday fund- Plan your holiday finances well in advance and set up a savings mechanism at least six months to a year ahead of your vacation. You can choose systematic investment plans (SIPs) of mutual funds to accumulate enough savings to glide through your vacation, without any worries of racking up debt on a credit card, or repaying a personal loan post vacation.
  • Keep a watch on your credit score- Finally, keep a vigil over your credit score. Instead of reviewing your credit score pre or post your vacation, carry out an annual free credit score check to ensure that your credit health is in order. This in turn will ensure that you have access to credit when you are really in need of the same. Your credit score, is a barometer of your financial health. It is thus mandatory for you to maintain good credit health at all times.



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