13-Jul-2018 written by : FSI-Team
Increasingly Indians are becoming aware of the importance of health. We can see a lot more individuals hitting the roads or gyms or going for various activities like Yoga and swimming to maintain their physical wellbeing. Just like physical health, one needs to manage good financial health as well. Just like one would sweat out to maintain physical fitness, one would constantly need to work on the varied financial aspects to be able to have an economically stable life.
Credit as we all know clearly plays a very important role in aiding our financial objectives. Inability to have timely access to credit can lead to losing out on our endeavor to create wealth (the definition and benchmark of wealth can vary from one person to other) and can even be stressful in case of a personal exigency. Therefore, maintaining a good credit score is as important as managing our physical health.
Factors that make it difficult to manage credit profile:
Multitasking is the buzzword and all of us are hard pressed for time today. Owing to variety of tasks, it not only becomes difficult but a big challenge to be able to ensure meet all our chores without a slip up. On credit front, most of the people have multiple facilities to pay up every month. Slipping on even one account can have negative impact on the credit profile. Especially on credit cards where a systematic repayment like ECS or NACH is not in place, can make it quite challenging. One needs to ensure that there is no delay in repayment of any of the trade lines and there are adequate balance in account prior to the due date.
Another factor that impacts the credit score is credit mix. Meaning that one needs to have a balance of secured and unsecured trade lines reflecting in the bureau report. Not having an exposure to unsecured or secured products can limit the access to loans in the long run, especially when one is looking for a large ticket loan to fulfill a need. Even if one does have all kinds of trade lines viz. secured, unsecured and revolving reflecting on the report, one may not know the adequate balance that would help in ensuring the good profile from underwriting perspective. One may be required to seek assistance from a credit expert.
This is another area where most of the individuals fail. And one product that actually leads to over exposure is credit card. The fact that the credit card companies keep improving the credit limits and a large number of card holders would have multiple plastics to their disposal, topped up with the ability to pay in future leads to over usage of the credit cards. The pandits state that the combined usage should be around 30% and never beyond 40%. To manage this balance is definitely a challenging task given the marketers’ ability to woo consumers to spend more.
Then there are cases where the consumers just get fed up with the mounting debt and close accounts. In some extreme cases, even close all accounts over a shorter period and wow not to take any loan any further. Most of the times, credit cards become the first victim and are surrendered. Closing old cards is completely avoidable. One should continue to hold the cards and use them prudently to keep an active credit life.
Then there are instances where a new credit card offering better features is taken and older credit card closed. This situation is also completely avoidable. The older card should be kept live since the vintage of accounts add a lot of value to the credit score.
Last but not the least, obtaining one’s credit report regularly and checking out if all is well as far as the data is concerned is an activity which most of individuals shy away from. The fact remains that this is as an important activity as any of the above mentioned challenges. This will ensure that your house (credit bureau report) is in order, your score a good and you are able to access good deals on home loan interest rates or any other form of credit.