Are you using many credit cards?

A credit card is a loan with a difference. Here, you get credit while you go spending or paying bills. However, the interest rates on credit cards are much higher than that on other loans. The more credit cards you have, the more you may be tempted to spend and the more difficult it will become to keep a tab of how much you have spent and when the repayments are due. Do remember that credit cards are the most expensive types of loans available in the market, and whether you miss your payment deadlines due to an oversight or because you have inadequate funds, you will have to pay heavily.

Credit card cautions

If you plan wisely to use each card to its advantage, but also keep a check on the rising charges so that the debt remained under control. Maintain your credit score over a period of time so that you could remain in the good books of the credit card companies. This is exactly what multiple credit cards holders should do to disentangle yourself from debt. However, if you cannot religiously keep a track on your spending or monitor each card prudently, then multiple credit cards can become a hindrance rather than an aid to money management, so step with caution depending on the kind of spending habits you possess!

Impact on credit report

While credit cards are extremely handy pieces of plastic, ideally, banks in India haven’t set any obligations on the number of cards you can carry. In India, you can easily find customers using four credit cards and the ones that don’t even have a single card. Due to the fact, your CIBIL credit score could be strained due to irrational credit card usage. In actuality, you must keep the number of credit cards which you can afford. Avoid using more than one card if you don’t have a good monthly income source.

Monitor your credit limit religiously

Your lenders will see you as a high risk candidate if you have high amount of outstanding balance to be paid. In fact, credit cards are the easiest way to fall into a debt trap that is a situation in which you borrow just to maintain your existing borrowings. So, to be on the safer side, you need to keep your outstanding balance about 10% to 30% of the overall credit limit. By doing this, you’ll get some relief and will also able to borrow more funds, if the need arises.

Never close your old card

Your oldest credit card age will do a significant role when the banks decide to open a new account under your name. In such cases, you can earn more points for keeping a long-established relation with the bank. The credit history of your old card is always better; and for taking loans, you could use your old credit card. If you wish, you could keep another card also for several other references and shopping online. Don’t ever close down your good old credit cards, even if you’re not using them frequently because they will definitely work towards building your good credit history.

Opt for right Credit Card

The credit card market in India is overwhelmed with attractive offers and deals that are quite tempting for the customers. As per the needs, every sensible card user can acquire several credit cards frequently. If you’re a constant traveller, then you could go for a travel credit card. Petro cards and special cards for getting discounts on restaurant bills are also highly popular in India. Whoever looking forward to multiple card options can decide buying these credit cards for a suitable experience.

Ideally, cards should be used as a temporary substitute for carrying cash. And, if that is the only motive you have when you carry a credit card, you will find that having one or at most two is quite sufficient.

Source- Secondary

No regular income? Then how to build a credit?

Credit is one of those things that we feel that we need to develop if we expect to succeed financially over any period of time. However, building credit can be difficult when your income is irregular. Whether you have a part-time job without a set schedule, or whether you are self-employed and you never know exactly when your next payday will be, getting credit can be difficult when your income varies.

“One of the biggest challenges of building credit on an irregular income is that your income fluctuates, making payments difficult".

Not only that, but your irregular income might make it difficult to qualify for certain loans, especially if documentation is wanted from lenders regarding your situation.

You don’t have to resign yourself to a thin credit file, however. It is possible to build credit even when you have an irregular income. Here are some of the things you can do: 

Get a credit card

Even for those with irregular incomes, one of the best ways to build credit is to start with a credit card.Keep things small. Get a small card and keep your balance and utilization low.

You might be able to qualify for a credit card with a low limit. As long as you use that card responsibly, you should be able to begin building credit. Make small purchases with the card, and pay them off. All of your purchases should be part of your regular budget so that you know you have the money to pay off the balance. As you regularly make payments on time and in full, your credit situation will improve. 

If you can’t get an unsecured card — even one with a low credit rating — you can consider a secured credit card. You will have to provide a security deposit as collateral for your secured credit card, but it will give you something you can start with. As with the unsecured card, it’s important to make small purchases and pay them off on time if you want to begin building your credit.

Another option, is to have someone add you as an “authorized user” to a card. If you have a spouse or a parent with a steady job, you can begin building some credit as an authorized user. However, being added as an authorized user isn’t the same thing as having the card. Some points are always good points, but it’s not the same amount of points as when you have your own card.you have to watch out if the credit card account owner maxes out the card, since it can impact your situation.

Small personal loan

As you show that you can handle small revolving credit card accounts, and begin building your credit file, you can see if you can get a small personal loan. These installment loans can help you establish that you can handle different types of credit. If you have been using a specific bank for a long period of time, and have a good relationship with the bank, you might be able to get a small personal loan. These loans can be useful because they are usually paid in installments, with set terms. Get a small loan that you can pay off over a few months to add another layer to your credit file.

Alternative credit scoring

Another consideration is that alternative credit scoring can help you prove your ability. The  alternative programs can help you get your foot in the door. Other payments made by you like rent, utilities, insurance, and even gym membership are considered as well. This information is verified, and you are assigned a credit rating.

There are mortgage companies, auto loan providers, and others willing to work with companies like this to provide loans to those with thin credit files. If you have an irregular income, but can show that you are reliable in your ability to pay, these programs can help you get your first loan. Then, after you have begun with this first “traditional” credit account, it’s easier to build your credit file going forward.

Don’t get in over your head

The biggest pitfall of handling your credit when you have an irregular income is getting in over your head. It’s easy to think that you will be able to pay something back during a month when your income is higher. But what happens next month, when your income is lower?

When building credit on an irregular income, it’s especially important that you choose your loans carefully, and ensure that you really can repay them. You need to make sure that making your payments is a priority. Build up an emergency fund during the higher-income months so that you have a cash cushion to draw on during the lean months. Ensuring that you can meet your obligations is the best way to keep up a good credit score once you have established your credit.

Source:  Secondary

Develop great habits for an excellent credit score !!

Don't let your financial dreams suffer due to low credit score. Maintaining cibil score is a necessity so as to avoid loan application rejection.

Here are some great credit habits you should follow:

Spend less that you earn

"Never spend money until you have earned it" - Thomas Jefferson

You have heard your parents and grandparents give this advice often enough. It is the simple truth of being credit-wise. Living within your means and spending only what you have earned not more than that. This does not mean that you do not spend on credit cards or do not take a loan but limit the amount to one you will be able to repay according to your current spending capacity. For instance, if you are taking a home loan ensure that the loan size and EMIs that will follow are manageable and do not end up putting you in debt.

Put credit to work but do not rely it

"Expectation is the root of all evil" - William Shakespeare

While credit is necessary for asset building, it should a tool in control, Credit is not cash, It is loan that has to be repaid. While shopping it is all too easy to whip out the credit card and pay. However, the fact remains that the bill will need to be paid at the end of the credit period which is usually a few days away.

Keep paperwork in order

"I am a believer that orderliness begets wealth" - SuzeOrman

Make sure your financial information and records are organized and up to date. Set up alerts on your calendar to ensure that do not miss a payment even if the bill does not come on time.

Have an emergency fund

"By failing to prepare you are preparing to fail" - Benjamin Franklin

An emergency fund keeps you afloat in tough times when there is an abnormally high need for funds or even when there is a gap in earning. It is like a safety net that prevents you from falling into debt. Without an emergency fund, you would fall behind in your regular payments resulting in a poor credit score.

On time, every time

"The bad news is time flies. The good news is you're the pilot."-Michael Altshuler

It is important to make your repayments on time not just most of the time but each and every time. Even one late repayment will have an adverse effect on your Cibil score. One of the easiest ways to ensure timely payments is to set up an auto debit system linking your bill payments to your credit card.

Renew, Revamp and Retain your CIBIL credit score with our power packed service packages !!
Book an appointment and get desired services with an ease.
visit www.cibilconsultants.com

source-secondary