No Credit Score Can Negatively Impact Your Finances

If you aren’t planning to borrow, it seems like it might be pointless to worry about building up your credit profile. After all, if you don’t have a credit score, it doesn’t matter if you aren’t going to get a loan, right?

The unfortunate truth is that this isn’t always the case. In fact, there are many situations in which your credit score matters more than you think. Even though you might not think it’s fair, having no credit score says something about you to financial service providers and others. The lack of a credit score is an indication to others that they can’t trust your ability to be responsible with your finances.
                                             

Financial Setbacks Due to a Lack of Credit Score

Not having a credit score can actually cost you money. A landlord can charge you a higher security deposit on a rental if you don’t have good credit (and having no credit is often seen as just as bad as — or worse than — a poor credit score). You might also find yourself with less than ideal terms when it comes to signing up for a cell phone plan or getting Internet service.

Additionally, in some states, it’s legal for insurers to check your credit score when determining your premiums. 

When you think about the extra costs of not having a credit score, and how they can add up over time, it becomes clear that you could easily be missing out.

When You Decide to Buy Something Big...

The biggest issue you run into, though, is when you decide to make a major purchase that practically requires that you borrow. You might decide to never get a credit card, or even to pay for your cars with cash. But if you make buying a home a priority, having no credit score means you will have a very hard time qualifying for a mortgage.

No one wants to loan tons of money to an unknown entity with no history of making loan payments (and credit cards count as loans). While you might find some lenders willing to take a chance on you, you will likely have to pay a subprime rate to make it happen.

You don’t have to go into debt to build your credit history. If you get a credit card, use it, and then pay it off every single month, you can get a good credit score without the accompanying debt. You’ll be able to further your finances, and get a house when you’re ready.

Visit: www.cibilconsultants.com
Source: Secondary

How to use a credit card?

Keep control of your cards instead of letting them control you. Cleaning up your credit card debt takes time and self-control, but the steps outlined here aren’t difficult. There’s no reason that credit cards can’t be a helpful, convenient tool – assuming you can learn to use them sensibly and responsibly. Use these simple tips to stop adding to your existing credit card debt and start regaining control of your finances.

To start with credit

While getting started with your credit card, don’t make maximum use of credit card immediately.  Instead, make small charges on your credit card and pay the balance in full each month. The motto of a credit card isn’t to buy things you don’t have the cash for, but to begin building a good credit history and instill good spending habits.

Plan your payments

Manage to pay more than the minimum balance every time. It’s tempting to send in the minimum monthly payment when you’re under financial duress, but don’t do it. Not only will you never pay off your bill, but the interest rates that credit card companies charge will actually keep your bill growing every month. Instead, send as large of a payment as you can afford to. Where possible, reduce your spending in other areas to focus on paying off your credit card debt. Building a good credit score takes time so, doesn’t try to rush it. Use credit responsibly and a great credit score will follow.

Review your activity

Monitor your credit card statement thoroughly every month. Don’t take for granted that everything on your credit card statement is accurate. Go through each transaction on your card to be sure that: your last payment was applied correctly, you were charged the right amount for all your purchases, and there are no unauthorized transactions on your credit card.

Self- control

You’ll have to maintain self-discipline and stop yourself from using credit card to make a purchase, but can’t pay your bill in full at the end of the month. Make sure that you put money aside to pay your credit card bill on time and don’t spend it on something else. Initially, manage to use just one credit card, so you can keep a track of your payments easily. Several balances and due dates can cause confusing and lead you to debt and a damaged credit score.

Wise decision-making

Are you ready for bigger purchases? Make wise decisions about purchasing items you need versus those you simply want. Using your credit card responsibly means recognizing which things you need and which you just want. Once you’ve created a habit of paying your complete bill, you are better prepared to use your credit card for slightly larger purchases.

Source- Secondary

Compare credit card offers this way

“The credit card business is super-competitive right now . “People are spending again. Banks are lending again. That’s all led to better deals for credit card customers willing to do their homework.”
Rather than getting a credit card from your bank, or accepting the first credit card offer you receive in the mail,  getting out there and actively searching for the best deals for you. “Go online and see what’s out there. There are plenty of deals to be had,” he continues.

How to find the right credit card for you

Comparing credit card offers isn’t just about looking for certain criteria. The first step is understanding yourself and your needs. “Why do you want the card?” he says. “Are you looking for rewards? Are you trying to rebuild your credit? Do you want a balance transfer?”
The use to which you plan to put the card should be the first consideration when comparing credit card offers. “Knowing what you want from the card is the key to getting the most from your card. “If you never fly anywhere, you probably shouldn’t bother with an airline card.” Start out by comparing cards that meet your needs, and don’t waste your time with cards that don’t fulfill a purpose in your overall financial plan.
Once you know what matters most to you from your card, it’s time to look at other factors. “Pay close attention to the costs associated with the card. Some of the costs of credit cards include:

• APR
• Annual fee
• Balance transfer fees
• Foreign transaction fees

These fees vary widely, according, and you should realize what you’re getting into. If you know that you will occasionally carry a balance, the APR is very important. You should also consider how many rewards you are likely to earn in a year from regular purchases you make. An annual fee might not be a big deal if you have the potential to earn higher rewards that aren’t capped. With the right strategy, your rewards can offset your annual fee and still help you come out ahead in rewards than what you would have earned with a card without an annual fee.
If you are getting a card for a balance transfer, one of the considerations is how long the transfer period lasts. A card with a promotional period of 18 months can be of greater benefit to you than a card with a nine-month intro period. If you know you can pay off the balance in 18 months, it isn’t as important that the regular APR is higher on that card if the nine-month card will start charging you interest much earlier.

Consideration of  the perks is also recommended that come with a credit card. If you are choosing between cards that have similar costs and requirements, turn to the perks to help you make a decisions. “Is there a signup bonus? Does it come with a free credit score? Will the issuer allow you one late payment without charging a fee? Are there special perks such as a concierge and travel discounts?”
                                     

What to do if you are rejected

Of course, applying for a credit card doesn’t automatically mean that you will be approved. “If you get rejected, there’s no need to panic.” “You should try to find out why it happened.”
He suggests reading the rejection letter. You can even call the bank for more information. The rejection letter should include information about why you were turned down, whether it was because you don’t have a long enough credit history or whether your credit utilization is too high. Sometimes the reason given points to a mistake on your credit application or in your credit report. “Fix those problems, and if there are larger issues, commit yourself to putting in the work to build your credit in the coming months.”

You might want to apply for another card if you are rejected, but it’s a delicate balance. “Applying for one card after getting rejected for another is fine. “Applying for five others is not a good idea. It can hurt your credit, and issuers can view it as desperate.”
The process of applying for a new credit card isn’t just about trying to get something you want. You also need to consider the implications of your move, since your credit will be impacted by your inquiry. If you don’t qualify for the card you want, take the time to evaluate your situation and work toward getting your credit in good shape so you qualify next time. “It’s best to take a more strategic, measured approach to credit card applications.”

Visit: www.cibilconsultants.com
Source: Secondary

How much debts are beneficial for you ?

Debt is an important tool which helps you finance large purchases, open a business or even help build your credit score. It is a topic on which different people have different opinions; some find it acceptable till the time you have enough resources to pay it back while some think it is not necessary and that it would become a big liability on your finances.

But we have to remember that debts do help you finance big purchases when you don’t have enough cash flow and it also forms a big part in shaping up your CIBIL score, we just need to know where to draw the line. But when debt become too much? Till How much debt is beneficial for your credit health?

There are guidelines by the lenders on how much debt you should have. Your debt shouldn't exceed a certain percentage of your income. You should have enough income to cover off your debts as well your interests.

When you start missing out on payments, work overtime to pay off your debts, use up your savings- that’s the time when you have crossed the ‘beneficial debt’ line. The debt is no longer beneficial to you and it would start harming your credit score now. Till the time you use it responsibly, debt is a great credit tool but if not it becomes a big dent in your finances.

Before taking additional debt, keep these points in mind.

• The most important one- you should have enough income and savings to cover your payments for the debts( including interest)

• Always go into debt when you are confident you receive a ROI (return on investment).  If you don’t get  good returns, there's no point in going for the debt. Research well on the debt’s ROI value before you go for borrowing.

• Check if you are qualifying for a good interest rate. Calculate the overall charges in the long run. For e.g. - if getting a house at a low interest rate would be better than renting. If you are not getting a good competitive rate, then take a little time look at your options or if you have a bad credit score, rebuild it and then go apply again.

If you'll follow above mentioned measures, then the debt you are going for is not too much, but if you can’t then that debt is obviously gonna too much.

Repair and enhance your credit score by just selecting suitable package available at www.cibilconsultants.com

Source: Secondary

Credit Card vs Debit Card

Credit and Debit Card both are very similar in their usage; the main difference being that in debit card, the money is used from your account where you deposit your money, while in credit card the money is used from your line of credit which you have to repay at the end of each month. So which card gives better benefits than the other? Check the reasons below to find out:

Building Credit Score: 
It is common knowledge how a credit card is very useful in improving and maintaining your score. The only criteria is that you should keep your credit utilization ratio low.While a debit card is obviously not a credit account, therefore it can hurt or help your credit score.

Protection from Fraud:
The liability for fraudulent charges is fixed in a credit card. If your card or card number gets stolen, fraudster cannot steal money beyond a certain limit while in a debit card, the liability is unlimited, depending on how fast the fraud is reported. Your whole account balance is at a probable risk.

Protection during purchases:
During purchases, if you are unsatisfied with the services or products of the seller, the credit card allows you to reverse the purchase charges that have been charged on your card. So that is why in large purchases, even if you can use cash go for a credit card. You can use the cash later to pay off the credit card bill. In debit card, there is no such protection. Money once charged from your account cannot be taken back. Your debit card cannot save you from a poor customer experience.

Perks & Rewards:
Credit Cards offer various perks and rewards for using the card like air miles, purchase points, travel points, gift cards etc. So, even if the credit card does charge you an annual, the rewards would overpower the fees any day. While in debit cards, there are very few cards which can offer such rewards and even if they can offer rewards the rewards aren't of much par with the debit cards.

Source: Secondary