Top 5 good habits to maintain a good CIBIL score

If you are a newbie job holder you must be pretty excited about your salary. It is only natural that you want to buy expensive things for yourself and your loved ones. The thought of getting a fixed salary every month can be more enthralling but at the same time, you should have a hold of your emotions to control your expenses and start good financial habits. Having a financial discipline will help you in the long run in terms of a good CIBIL score. In addition to investments like fixed deposits, mutual funds, real estate, etc, your CIBIL score is also a key measure of your financial health. You must take adequate measures to maintain a high CIBIL score.

Here are the top 5 good habits you need to inculcate in order to maintain a good CIBIL score:

1. Don’t change your lifestyle all of a sudden:

If this is your first job, you will feel quite powerful with all the money flowing into your account every month. This is the time to control your emotions and not go haywire with spending your money. It is too soon to make big changes to your lifestyle instead, you can tweak it step-by-step. Make sure you are having a hold of your expenses and not go overboard by splurging on parties and buying stuff that is not important. You should instead make it a priority to pay off your student loan and maintain a stable lifestyle. It is ideal to pay off student loan as soon as you get employed and avoid delays. If you are not repaying your student loan or are delaying it without a reason, it will have a negative impact on your CIBIL score.

2. It’s time to get a credit card

One of the most common myth attached with credit cards it that using one will affect your CIBIL score. However, that is not always the case. If you have been inconsistent and reckless about your credit card spend, it will surely bring down your CIBIL score. However, if you are using your credit card wisely by making paying your bills on time, it can be quite helpful to boost your CIBIL score. Several banks launch credit cards that are specifically aimed at students or young adults, after taking their need into consideration. Majority of such credit cards come with a low or a zero fee structure and also offer a decent amount rewards and benefits. If you use such a credit card wisely, it will gradually help you in building a good CIBIL score. If you have a higher the credit score, it increases your chances of getting quick loan approvals, home loans, personal loans, car loans, low-interest rate credit cards, approval for higher credit limits, and so on.

3. Never make late payments

Once you get a credit card, it important to use it wisely. You have to be extremely prompt as well consistent with your payments. Make sure to pay all your utility bills and EMIs on time. Delaying or missing payments every month will have a negative impact on your CIBIL score and bring it down. You should avoid spending on things you are certain you cannot afford. Most of the people, lose the track of their credit card spend in a month and continue to increase their credit. Such irresponsible and uncontrolled credit card spending behaviour will unknowingly drown you in debt. Once you start accumulating debt, you start to pay it off with a minimum amount due each month. Such irresponsible repayment behaviour will lead to a low CIBIL score. Your repayment history accounts for 35% of your CIBIL score.

4. Maintain a low credit utilisation ratio

Although a credit card is a tool that gives you a great financial independence, it can also mess up your financial goals as it can lure you into going overboard with your spending. Displaying a consistent repayment behaviour can get you a higher limit on your credit card. In order to maintain and build a higher credit score, you should limit your credit utilisation ratio. A credit utilization ratio is the ratio of your credit card balances in respect to your credit limit. This means the utilization amount should be lower than the credit limit of your card. Experts usually suggest that to maintain a credit utilisation ratio of 30%. Higher credit utilization ratio shows that you are overusing your money and will not be able to pay back the balance amount. Hence, if you are using only 10-15% of your credit limit it will be beneficial for your CIBIL score. Your credit utilisation ratio accounts for 30% of your CIBIL score.

5. Avoid hard inquiries

A hard enquiry takes place by the lenders like banks or non-banking finance companies (NBFC) when you apply for a loan. Each time there is a hard inquiry on your CIBIL report, your CIBIL score comes down. A multiple number of hard enquiries can decrease your credit score. Hence, make sure to limit the number of hard enquiries. You should never come across as credit hungry.

It is important to start maintaining a good CIBIL score and thereby create a good credit history at an early stage. You should not underestimate the importance of having a good CIBIL score.