Having stepped into a brand-new year, you are probably in the phase where you are contemplating about how to lead life a little better than the year gone by. Currently where credit is omnipresent, managing credit well is a major feat that can improve the quality of life and help you improve your CIBIL score. So, to make the new year a tad happier here are some tips to manage your credit better.
Use credit judiciously
It is a fact that credit is easily available these days, and you probably receive more than one call in a day to avail of personal loans and credit cards. But just because credit is available, does not mean you must avail of it. The number one rule of credit usage is applying for credit only when you need it. Introspect hard and well before opting for any fresh line of credit. You should be completely sure of your repayment capabilities before taking any loan or credit card.
Budget and keep track
When you are using credit, you need it keep a vigil on its usage. This is the thumb rule of managing your finances and credit well. If you are having trouble noting down every spend, there are many modern personal finance apps that help you budget your finances and even keep track your credit card spending, that can help you contain your spending and avoid going overboard.
Make timely repayments
This is one of the most important factor that influences your credit score and will help you increase your CIBIL score in the long run. Therefore, ensure that whatever line of credit you have availed of make timely repayments on the same. Pay close attention to your due dates and automate your payments. Also, ensure that your savings account is replenished before the stipulated date. Even a single late repayment not to mention habitual late payments will reflect poorly on your credit score.
Keep a watch over your credit utilisation
Credit utilisation is the amount of credit you use as against the amount of credit made available to you. This is also an important factor that influences your credit score. To enhance your credit score you should ensure that your credit utilisation is low. Ideally it should not exceed more than 30% of your overall credit spend.
A good mix of credit
One of the factors that influence your credit score is the kind of credit you have availed of. Too many lines of unsecured credit such as credit cards and personal loans make your credit profile weak. To improve CIBIL score, it is essential to have a good credit mix with a balance of secured and unsecured loans. For instance, a home loan or vehicle loan with a couple of credit cards would be deemed fit as a balanced credit portfolio.
Don’t close old credit card accounts
Sometimes when you have too many credit cards, you may be tempted the close the old credit card accounts because they are no longer of use to you. But this is a cardinal mistake. One of the factors that influences your CIBIL score is the age of your account. Thus, even if you are not using your old credit cards do not close them as they are adding on to the age of your credit account. Besides, closing old credit card accounts is also tantamount to bringing up your overall credit utilisation.
Don’t apply for too much credit in a short span of time
If you decide that you need after careful thought, do not apply for too many lines of credit all at once. Space out your credit applications, keeping a gap of at least six months to a year. Not only does each credit application bring down your score a little on account of a hard inquiry, you may be thought of as credit hungry by a prospective lender by applying for too many lines of credit within a short time frame.
Monitor you accounts and credit lines regularly
This is an important part of keeping in good financial health. Keep all your bills and credit card statements in one place, monitor your bank accounts and ensure that your credit lines are being serviced the way it should be. Keeping a close watch over your bank accounts and credit lines will ensure that you notice any discrepancies at once, if need be and will help increase credit score.
Keep track of your CIBIL report
You may think that you are doing everything to maintain good credit health, but checking your credit report every occasionally, will ensure that no errors or discrepancies creep in, often for no fault of yours, as banks handle a large amount of data that is passed on to the credit bureaus on a regular basis. Checking your credit report at least twice annually is highly recommended.
Keep in touch with your creditors
Life may throw a curve ball at you at any given time and it is impossible to predict the future. If you find yourself in a financial bind and unable to service your credit lines for some reason, get in touch with your creditors immediately. If you have maintained a good service record so far, your creditors to set up alternative payment options that may give you some temporary relief.
Following these simple tips will improve your CIBIL score and ensure that your CIBIL score remains high. This is turn will ensure that you have access to cheap and timely credit when you need it.
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