30-Jun-2018 written by : FSI-Team
Awareness among today's youth is unparalleled. Never in past the youth who have just started to work understood the importance of financial well-being so effectively. Their aspirations are to buy a property, a car and to take an international holiday. What is more important is their understanding that to achieve all this they need to be on right side of credit bureau. They want to give a flying start to everything that is important in life and the mindfulness on credit score is reasonably higher despite the fact that till recent past this was almost unknown to the Indian populace.
This should be the first thing to do. Apply for a credit card since this is the best way to kick start your journey of good credit score. The approval rates on people applying with the bank where they have salary account is much higher, so apply for your first credit card with the same bank where your monthly salary gets transferred. Once you have received and used the card for a few month, then you should apply and procure two more credit cards. The optimal number of cards to maintain is three.
In the quest to possess more cards, do not apply with multiple credit card companies at the same time. Every time you apply for a credit facility, the bank pings the credit bureau and it gets captured on your credit report. Please remember multiple inquiries in a short span of time are going to hurt your quest of establishing good credit profile.
Judicious use of credit card is must. Do not over spend on the card since it can lead to you getting over exposed to credit than what you can actually pay. Start by paying your monthly bills and then repaying the credit cards in full.
When you have large limits available on the cards, it is natural to get lured to buy products with large ticket size. But avoid these transactions. As a thumb rule, limit the usage to 30% of the credit limit. This is going to aid your cause of building the score.
Do not revolve the credit on your cards. This is advised for two reasons. First the interest rates levied on outstanding amounts is substantially high and second that it will push your credit card use to over the prescribed limit of 30%.
This is one factor that has led people to default on their cards. Do not charge your friends’ expenses or purchases on your card. Or do not take a loan to fund his requirement. In quite a large number of cases, these go bad and you would have little option to either pay up for the expense or to default. This may even lead to a situation where you may be required to opt for personal score without CIBIL score.
There are multiple consumer loan companies. You can use these loans to buy that mobile phone, television or any other gadget that you intend to own. But before you get it financed, do check if the lender will report these loans to the bureau. Only take loan from the lenders who confirm to be reporting the trade line.
If required you may opt for a small ticket personal loan as well from the bank. Since variety of loans also help, this personal loan will help in building the credit profile over the period.
In case you have taken a student loan to fund the education, do ensure that timely payments are being made every month. Any default on one hand can spoil your credit score, prompt payments will help in moving the score northwards.
Follow the basics and you shall be able to build a good credit score. Do keep a track on the movement of your score by applying for the free CIBIL score. As per regulation, the bureaus are obliged to extend you a free report once every year.