3 Ways Parents Could Accidentally Harm Their Child’s Credit

Credit health is as important as your mental or physical health. However many a times we realize the significance of credit health only when it is hurt. A low credit score hurts your credit worth and makes you ineligible to advance the loans.

Let’s find out some of the common mistakes which hurt the score in the beginning of credit building cycle of an individual. Herein we would focus on 3 ways parents accidentally harm their children’s credit report.

  1. Multiple Student Loans
    The escalating costs of school and college fee is one of the major reasons why student loans are as much a fad as a necessity for young aspirants. The parents who fail to incur adequate research on the matter and avail a high cost loan for the purpose, certainly build a huge financial burden right in the beginning of their child’s credit life cycle.

    Many people mindlessly raise multiple loans for students owing to availability of credit facility at lower rate. With enormous amount of debt it would be a huge responsibility for a student to repay a loan after completing their education. As a parent, it is your duty to calculate total fee amount and try to look for the least expensive way to finance your child’s education.

    You also need to build the healthy habit of saving funds in your child. As a parent, it boils down on you to inculcate good financial habits in your child. Raising too much of loan for their education would not be a smart decision if it results in low CIBIL score.

  2. Share your credit cards
    Excessive spending is another key reason for impending balance on credit cards. Before handing over a credit card to a young mind, it is important to help them understand the importance of not having huge balance at the end of every month.

    Being a parent you can also add the kid as your credit card account holder. It will sometimes help them to improve their CIBIL score. But maintaining good credit behaviour would be a must. As an adult you need to ensure that regular payments are processed on time and there is no balance after the due date. Remember your child is most likely to follow your footsteps. If you are not serious about repaying your bills on time, the child is also not likely to pay attention to deadlines. You would seriously challenge your child’s future with bad credit habits.

  3. Credit education
    If you fail to teach right knowledge about finances and credit to your child it is your failure as a parent. You need to make the young mind understand the important aspects related to money management and ways to improve CIBIL score. The first credit lesson starts from home. You need to make the child understand how credit affects their life. You need to make them understand the importance of credit for their education, job to buying a home or car.

You need to teach them how important it is to monitor their credit score multiple times in a year. It is important to let them know how information in their credit report will impact their credit score.

Educate them about the available resources to obtain a free annual report. You can choose to review it along with them so that they learn the intricacies of maintaining a good score. You need to help your child develop a mindset that it is easier to maintain credit health rather than fixing bad history later on.

Last but not the least, do not forget to talk about identity theft threats. For online it is one of the fastest-growing crimes. They should know that sensitive information related to account should not be shared with anyone outside.

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The 4 Things That Affect Your Credit Score

It’s foolhardy to underestimate the significance of CIBIL score. You might be earning a sizeable income and have multiple assets to your name, but if your CIBIL score is not up to the mark, you can lose the very chance of obtaining a personal loan, home loan, or rather any other type of credit from a bank.

Fortunately, it’s never too late to start caring about your CIBIL score calculation. So, if you want to become more careful with your credit usage, it can help to learn about the top 4 things that affect your CIBIL score:

  1. Payment History

Late payments are often the biggest reason behind a low CIBIL score. These include credit card bills, loan EMIs, etc.

When you don’t pay your credit card bills, etc. on time, it reflects irresponsibility towards money management. Moreover, it shows that you can’t be trusted with credit. Thus, credit rating companies such as CIBIL, Equifax, etc. can deduct a large number of points from your score.

If you want to increase credit score in the fastest way possible, then just start paying your bills on time. Set up reminders on your phone if need be, but make sure that you don’t delay a single payment ever.

  1. High Credit Utilization

Credit utilization plays a big role in CIBIL score calculation, but what’s it exactly?

Credit utilization is the ratio of the amount of credit you spend every month on average to the amount of total credit available to you.

For instance, if you have 2 credit cards, with Rs. 50,000 credit limit on each, then the total credit available becomes Rs. 1 lakh. Now, if your monthly expenditure with the cards is about Rs. 60,000, then the credit utilization ratio becomes:

60,000/100,000 = 0.60 = 60%

If your credit utilization ratio is high, then it can have a negative impact on your score. Although the exact threshold varies from one credit bureau to another, usually it’s around 35% to 40%.

So, by lowering the credit utilization ratio you can increase credit score. The following are two ways you can do that:

  • You can stop using your credit cards frequently. Instead, make payments via mobile wallets, net banking, or even cash.
  • Get a new credit card so that the overall limit is increased and the credit utilization ratio is lowered.
  1. Credit Report Discrepancies

When was the last time you checked your CIBIL report? If there are any mistakes in your personal details, banking data, etc. in your report then it can affect your CIBIL score calculation.

To make sure that your CIBIL report doesn’t damage your credit score, it’s important that you go through an updated copy every now and then. The following are some of the things you should look for: unfamiliar credit card/loan accounts; discrepancies in payment history, personal details, etc.; and false tags such as “settled account”, “defaulting”, etc.

  1. Too Many Loan Requests

When you need a personal loan or a home loan on an urgent basis, then it’s natural to assume that submitting multiple applications to multiple banks can greatly increase your odds of getting an approval from at least one lender. However, nothing can be further from the truth.

When you send out the loan applications at the same time, credit bureaus sense an urgency in this behavior which is not good from the lender’s perspective. Thus, your score could take some damage by this.

In other words, rather than increasing the possibility of you getting a loan, sending multiple loan applications around the same time, can, in fact, lower your odds even further.

If you really want to make sure that you get a loan in the first few attempts, then you must check your CIBIL report first. If it’s all good, you can get a loan without a problem. If it’s not, then you can improve it first, and apply for the loan only after that.

So, these were the most common things that can affect your CIBIL score. Be sure to adjust your credit behavior accordingly so that no only you can prevent your score from any damage, but rather increase it even further.

Length of Credit History vs. Late Payment History, where do you stand?

All of us would have had history as a subject in school. And many of us would also have cribbed about why to learn about something that has gone past. However, the fact is that history is something that all of us have a lot to learn from. We can improve our present by reviewing our past. Goes without saying that our present is an outcome of our actions in past and studying our past does help us in taking better decisions at present.

You must be wondering how is this related to your credit profile. It indeed is. There are two important historical trends that make or break your credit score. In fact these two have the potential to either put you at a position where you are able to save lakhs of rupees or can become part of the loan defaulter list. The two important historical trends that we are referring to here are “length of credit history” and “late payment history”. Let us look at these two important aspects and how do they impact your credibility.

Length of credit history

The length of your credit history means that how long you have been holding a trade line. This is one of the most important aspect reflecting on your credit report that makes your healthier on credit front.

To explain it better, let me put you in a situation. Two known people approach you for Rs 10,000 each. One of them has been known to you for a few years now and you are aware of his history of borrowing money  few times and also about his commitment to repay as soon as the salary gets credited. The other one is a new acquaintance who has joined office about 2 months back and you do not have much awareness about his past. Who would you be comfortable in lending your hard earned money? I am sure your answer would have been the first one.

Similarly the length of credit history reflecting on your CIBIL report helps in establishing a comforting factor with the underwriter of the lending institution. A person who has enjoyed credit facilities from various banks for years v/s a person who is new to credit makes a lot of difference in the process of evaluation.

But the loans keep getting closed over a period. The fact also remains that you would want to pre-close it in case you have some funds available with you. So how to manage the length of credit history? Do not close that old credit card that you may feel has become obsolete in terms of its features. Continuing with that credit card will only help in keeping your credit scores healthy.

Late payment history

While the underwriter evaluates your loan application, the way you have managed your credit in past becomes the single most important factor that can lead to approval or rejection of the application. How have you faired against the payments would lead to impacting the outcome.

Again referring to the above example, if the first person who you had known for a few years had only paid other friends after some follow up or has had defaulted on even one friend’s loan (while paying the others in time) you would be skeptical on extending him with financial help. Just like you, even the structured lending institution would be apprehensive of giving a line of credit to an individual who has had default reflecting on the bureau report. Thus it becomes very important that all loans and credit card payments are happening in time without any delay.

Your length of credit and your repayment history are the two most important pillars of your credit profile and must be maintained. In the absence one may not have access to funding at the time of need.

Is a ‘Perfect’ Credit Score Even Possible? Or It’s a Myth?

The credit score is globally accepted as a signpost to a person’s credit worth. Banks and financial institutions consider this three digit number as a hallmark of your repayment capability. They gauge the risk factor associated with each loan application considering the credit score of the applicant.

In India CIBIL score is primarily considered as the benchmark of a person’s credit score. Credit Information Bureau of India and TransUnion CIBIL Limited are some of the other names of CIBIL which is the premium credit agency of India. It is country’s first credit bureau which modeled a systematic credit scoring system for banks and financial systems.

The CIBIL score is calculated between 300 to 900 points, wherein 900 is the perfect score while 300 is the lowest score. The more closer an individual or a business is to 900 CIBIL score, the better is their credit worth in the eyes of a lender. According to CIBIL 80 % of people with 750 or above points are granted loans by banks.

It is worthwhile to consider here if a good score a guarantee to loan approval? And for that matter, is it practical to get a perfect credit score such as 900 CIBIL points? Is it even possible to attain the perfection or it is just a myth?

It is not possible to state an absolute calculation on what causes low CIBIL score and why. So, let’s find out what compounds a CIBIL score to reach to point of understanding for this query.

Credit score calculations factor in too many aspects which are not absolute in nature and may vary from person to person. Every individual and business vary in terms of their credit worth and so does the impact of their financial moves.

However we can inscribe 5 common factors that affect credit score calculation globally:

  1. Repayments
    To maintain a good credit score, timely repayment of loans and credit bills is a must criterion. Indeed it is one of the key factors that define the stature of your score. According to CIBIL reports discipline in credit repayment can boost your score by 30 to 35 percent. Thus diligent repayment could be your first step towards the perfect CIBIL score.
  2. Credit utilization ratio
    As important it is to repay on time as is to keep a check on your credit accounts. You should always ensure that you do not overuse the credit limit offered to you. Those who exhaust their limit every month are less likely to have a good score. Lenders assume that you are short of cash and your financial situation might be not be as sound for a perfect score. So, using more than your credit limit has a negative impact on your credit report. Indeed it is recommended to limit your credit use far below 30% of total approved limit.
  3. Query
    Always ensure that you do not make multiple queries in a small period of time. Every time you make a query for loan or a credit card, it is marked on your credit report. Frequent queries
    on your report signify credit hungry nature and thus make you financially less strong.

 

  1. Credit mix
    Every time you borrow or use a credit product, the lender undertakes a risk. They charge interest rate to cover up this risk. When you borrow against a property or some other collateral the risk is substantially reduced and thus you are offered a better rate of interest. With this said, I hope it is clear why you should maintain a right credit mix of secured and unsecured loans. Too many unsecured loans restrict your score.
  2. Length of credit

The length of credit history also affects the score. The older is the good history the better effect it will have on your credit report. Thus those who have older history are rated better than new borrowers. This is also why when you close an old credit card with good history, it affects your score negatively.

 

Knowing these factors you can ensure a good score during all the seasons of your life. If however you target the perfection, you need to frequently check your credit report and monitor every activity that hurts your score.

3 Strategies to Help You Save Money Now and in the Future

When you are young and just started out in the world, it’s easy to think that money is nothing and spend what you earn. Have you ever given a thought that saving money will not only help you build a secure future but also will add supplement when you make huge plans for life. In this decade we are living in, we are surrounded by a lot of unwanted things and the temptation to have them all. What we do not understand is we are spending a fortune on luxury without giving a thought on the future. These practices lead to bankruptcy and result to taking a loan and if you do not pay your EMIs on time your credit score will go for a toss. Do you know your cibil score calculation? And if you don’t, then steps to enhance your credit score?

How does the temptation to buy or spend on luxury things rises? In every group there will be friend who buys the latest IPhone every year and flaunts it whenever you meet. It gives you a thought, should I buy the same phone to live up to my friend’s standards and end up buying a similar phone. What you do not realize is that, just for sake of status you spent a fortune on a phone which will prove worthless after a year when a new model releases and then you will be going after that phone as well.

Just to avoid such perceptive buying and spending, today we will be sharing you three best strategies to lower your expenses and save for a better future,

Set your priorities straight;

Everyone has their own priorities; the priorities can be of two types and can be categorized into needs and wants. Try understanding your needs over wants, for example buying a car for your commute is a need but buying a Mercedes or a BMW for your commute is a want. You can always cut down on a lot of your wants and start contributing for what your needs are. Make a priority list of things you need with the age when you expect to achieve it. We can set some priority points which are common in everyone’s life and you can start from this,

For emergencies you do not know what can happen at any time, always be prepared for the worse. It can be a broken mobile screen; you lost your job in some company and need at least three months of financial backup, any medical emergencies.

For Education a good education plays a vital role in everyone’s life and where does good education come from? It comes from great educational institution. Instead of opting for an education loan try saving money for the same.

For home buying this is a big step in your life, buying a dream house is no joke, there is a lot of planning and savings involved in the same. If you start saving money from today who knows you may land up in your dream house without hassles of taking home loan.

For retirement after a long innings in your money making life, you will be expecting a comfortable life after retirement so you can save for your retirement and spend the rest of your life in financial peace.

Always plan to save

 We all know nothing is impossible without proper planning; the same goes with financial planning where you are supposed to make plans on savings and track them on a regular basis whether  you are adhering the same.

Build a budget for saving every month is not the same, you may encounter emergencies and you may have to spend your savings but building a budget will not harm you. Build a budget you would like to save from your earnings and stick to it. One tip: try saving in a bank account with no debit card and internet banking so that you do not tempt to use that money for luxury.

Track your expenses after you make a budget track your expenses, where you are spending, how much you are spending. If needed cut some luxury of availing public transport for short distances, go by walk.

Make secured investment these days you can make secured investment like fixed deposits, recurring deposits and so which will guarantee you good returns in short tenure.

Stick to your plan

 It’s just like a new year’s resolution where you promise yourself to get fit this year and workout a good two weeks and after that stop going to the gym and your resolution goes for a toss. If you have made a financial plan stick to it no matter what.

Something is better than nothing is the quote we should stick to, and start saving from today. You do not know what life has for us; it can be sweet pleasures or bitter pain. For such bitter pain be prepared and start saving from today.

Bank Pulling Your Credit Report? Wait, Don’t Freak Out

Unless you seek to borrow funds from your friends or relatives or from a lender who is not a part of the mainstream organized financial structure you cannot circumvent an inquiry into your credit score. Thus whenever an applicant applies for a loan or a new credit card the prospective lender will seek the applicants credit report to assess their credit health and then based on that they will decide whether to accept the application or not. Credit check is not only a part of the screening process used by lenders when assessing potential candidates but it is the first step in that process. So the borrower or an applicant can do nothing about a financial institution seeking their CIR when applying for credit. However is this a cause of worry?

Impact of a Bank Pulling Your Credit Report:

Banks or any other lender seeking the applicant’s report is part of the screening process and is beneficial to both the lender and borrower. Lenders can eliminate applicants who pose a threat of default as may be revealed by their credit score and for the borrower it means a more objective process of screening which is not based on subjective factors. So what happens when a bank pulls the CIR of an individual?

A credit report consists of various sections and each section has information related to that aspect respectively. There is a personal information section which will have details about name, contact details and so on for the person; the accounts details section will have details about home loans, personal loans, auto loans, all credit cards that a person may have and so on while the inquiries section will have details about the inquiries that have been made about the credit score of the individual. Thus which financial institution sought the report of the applicant and when will be recorded in this section.  There are five aspects that are taken into account when the credit score is calculated. Inquiries information is one of the five factors and each inquiry can cause the credit score to fall.

So is there a Cause of Worry?

Despite hard inquiries causing a dip in the credit score there is no reason to worry about it when a bank seeks the CIR. This is due to a couple of reasons; the first reason being that each hard enquiry will cause a dip of only five points or so in the score. The actual impact will depend on some other aspects also; if there are few accounts and the credit history is not very deep then the impact of each hard inquiry will be slightly higher. When there are a larger number of accounts and the credit history is deeper then each inquiry will have a comparatively lesser impact on credit score.

Though hard inquiries are taken into account when calculating the score but their weightage is only 10% thus their actual impact is very less when compared to other aspects like repayment history and credit utilization ratio. Thus if one has been responsible in paying their dues on time in the past and has also been a responsible credit card user their overall score is expected to be good. If there are missed payments, high credit utilization ratio and too many unsecured loans in the credit report then there is not much that can be done. In such a scenario a bank pulling your report will just worsen the score slightly.

So unless one makes reckless applications for loans there should not be a cause of worry.  When calculating the score only inquiries that were made in the past two years are considered which should reduce the stress level for any applicant.

When applying for a loan the applicant should ensure that they check the eligibility criteria of the lender so that they are sure of their application being accepted. Also stay away from applying for a loan or fresh credit unless absolutely necessary, this will save you from unnecessary hard inquiries and any impact on the credit rating.

Employers Are Using Credit Checks for Hiring, Hope you are not missing on Good Jobs!

A CIBIL report is like a financial report card that keeps track of your borrowing behaviour. It details the loans that you have taken, your payment patterns and other details relating to your credit history. This information is for sure useful to the banks who use it to evaluate your credit worthiness before granting you loan. In fact the CIBIL score and report have become an integral part of most bank’s loan approval process. But is this information of any use to your prospective employers? It seems very unlikely that your employer would be interested in knowing such details. He should only be concerned about your education qualification, experience, skills and aptitude required to do the job successfully! Right? Wrong!

You may be surprised to hear this, but there are quite a few companies especially in the financial sector who check the credit history before hiring an individual. You may think that your financial health has nothing to do with your capability to perform a job well, but some employers think differently. So next time you go out looking for a job, you need to worry about one more thing apart from your resume and interview preparation; that’s your CIBIL score and report. This practice of reviewing the credit history as a part of employee background check was prevalent in many western countries. Slowly this is gaining acceptance in India as well especially in the financial sector. It will not be long when companies across all sectors will use this as a standard practice.

For what kind of roles is credit check more prevalent?

Positions with financial responsibility, senior executive positions and roles that require handling of confidential or sensitive data usually involve credit checks. Many private sector banks like IndusInd, Standard Charted and DBS bank check the CIBIL report as a part of the thorough background check that they perform before offering a job. Such checks are usually performed for hiring for sensitive roles in an organization.  The rationale behind these checks is that if a person has defaulted on loan payments or not settled credit card dues since long, he may not be considered suitable for handling customer’s funds. Employers use this data to judge how responsible and financially stable you are.

So if your credit report is not in good shape, now is the time to work on improving CIBIL score. As the job market is becoming more and more competitive, companies are analysing the candidates profile more deeply to select the most suitable person for the job. A low CIBIL score may hinder your chances of getting hired for your dream job.

A CIBIL report which shows 100% credit utilization, significant levels of debt, late and missed payments and delinquencies indicates the irresponsible attitude of the individual. If the report shows many settled dues, bankruptcy, foreclosure then you may be seen as an individual with bad intentions. Companies refrain from hiring such individuals as they believe that poor financial health of an individual will have an adverse effect on his or her performance levels at the job. On the other hand a good CIBIL score and report is associated with honesty, integrity and responsibility towards one’s obligations.

What and how can the employer check credit details

Your credit score and credit report are two different things. Your report does not display the three digit number. Your employer can only check your credit report and not your score. Secondly, they cannot do a credit check secretly behind your back. They can do so only after seeking permission from you. The employer will ask you to authorize him and give a written consent to allow him to have a look at your report. So when you sign the authorization documents, you will know that your credit profile will be evaluated. You may refuse a credit check, but then the employers may reject your job application on the grounds that they were unable to complete their screening process.

If you have negative information on your report what should you do?

If you have questionable items on your report, inform the employer before hand as to what they can expect. You need to be prepared with an explanation for the negative record. Companies would want to know how you took charge of the financial situation when you were faced with adversity. Explain what you did to rectify the situation.

Bottom Line

Having excellent skills for the job is no longer enough to guarantee a placement. Employers have adopted the practice of checking CIBIL report to analyse your trustworthiness and attitude towards your responsibilities. So keep a check on your CIBIL report and improve CIBIL score. This will improve your prospects of landing into a good job when you are competing against other equally qualified candidates.

The Bad Stuff Is Off My Credit Reports – So Why Didn’t My Scores Go Up?

Your credit report and score is a reflection of how responsibly you are handling your debts. If you are looking to finance a new car or home or just looking for better terms on a credit card, you will be evaluated against the yardstick of your credit profile. If your past spending habits and irresponsibility towards your debts have blemished your credit report, then it may become difficult for you to avail new loans.

At this juncture you may think of ways to improve credit score. Getting negative items removed from your report seems one obvious way to increase your score. You may ask for a goodwill adjustment or pay for deletion of entry from your report. Once this bad stuff falls off your report, you should see improvement in your score. But things aren’t so straightforward. Whether your credit score will improve accordingly or not will depend on several factors like the type of negative records (whether they are late payments, collection accounts, charge-offs, bankruptcy), age of these accounts and other information recorded in your report.

It Takes Time to update the credit records

Even if you have asked the creditor to remove the entry, it takes time to flow through the system. A company may take up to 30 days to send the updated information to the credit bureau. Only when the report is updated with new information will you see a change in your credit score. You need to make sure that the updation is done in all the three bureaus. If one particular bureau doesn’t receive the updated info, then you will not see any change in the score from that bureau.

Time of deletion

When a late payment, or a serious negative item like a bankruptcy or a foreclosure appears on your report your score drops significantly. But as time passes the impact of these items on the score starts decreasing. Your recent credit behaviour of on time payments can overshadow your past mistakes to a great extent. Though the older negative items continue to have an effect, it is only in small measure.

So if an old negative account is removed from the report it is unlikely that it will have a lot of positive impact on the credit score. As against this, if a recent collections account drops off the report then it will bring a big boost to your cibil score.

Another point to note is that simply paying off a collections account doesn’t bring any change in your score, it only marks it as paid. As logic suggests if an unpaid account is bringing your score down, paying it off should have a reverse effect of increasing your score. But it doesn’t work like that in credit scores. The fact that a collections record was present on your report is enough to bring your score down, whether it is paid or unpaid. Hence only when you request the lender to delete the entry once you pay, can you see a change in your score. Keep track of whether the collection agency removed the entry after receiving the payment or not.

Different scorecards

Different individuals are rated based on different scorecards. Based on the information in the credit report an individual accumulates points which determine his credit score. The type of scorecard used for an individual depends on the length of the credit history, number of credit accounts, presence or absence of negative records and many other factors. As the credit history changes with time so does the score card used for evaluation. A removal of negative information may result in a switching from one type of scorecard to another. The new credit score is based on different set of factors and the points gained on those factors may not necessarily show an increase from the previous score.

One needs to remember that credit score changes do not happen overnight. A lot depends on how you dealt with the negative account, timing of removal and how much the negative record was affecting the score in the first place. One should at least wait for 30-60 days, to see an improvement in the score once the bad stuff was removed from the report.

It is unlikely that you can get rid of all negative records on your report. If that was the case, everybody would have an excellent credit score. The lenders by law are required to report accurate information. So it is better to work on your financial habits, so that you don’t make credit mistakes in the first place. Take on a liability only if you are sure of repaying it as per the set timelines. Be responsible for timely payments of credit card bills and EMIs. Such good credit habits will always ensure an increase credit score.

 

Four Steps to a Healthier Credit Report

Credit scores are important as they are not only an indication of financial well being and discipline but it also a crucial factor in getting a loan application accepted or rejected. Thus it makes sense for you to be aware of what contributes to making a good or bad credit rating so that you can aim to have a healthy credit report. Here we look at a few aspects that contribute to a healthier credit score.

How to Get a Healthier Credit Score:

Five factors impact CIBIL score calculation and taking care of these factors will ensure that you have a good rating that will allow you to have access to credit if you so require.

  1. Ensure Timely Payments: This is the most crucial factor in the credit score calculation. Thus paying on time is the best way to a healthier score. So whether it’s the EMIs or credit card bills remember to always them before the due date or by the due date. This simple rule will go a long way in maintaining a good score. If you have not done this in the past it is never too late to remedy your ways. While paying on time going forward will not immediately improve the score but it will have a positive impact over a long period of time and the negative impact of late payments each month will reduce. Plus it’s a great way to get you off the loan defaulter list and better your chances of getting a loan approved.
  2. Use the Credit Cards Wisely: Credit cards come with a sanctioned credit limit; this is the maximum amount that the user can spend without paying the dues. Thus if your card has a sanctioned limit of Rs. 100,000 then this means you have access to credit up to Rs. 100,000 per billing cycle. However this does not meant that you actually need to spend an amount equal to the sanctioned limit. Actually it is good idea to keep the spending below or equal to 30%-35% of the sanctioned limit on a regular basis. A low credit utilization ration (usage/sanctioned limit) has a positive impact on the credit score and after the credit repayment history it is the most important factor when calculating the score.
  3. Eliminate Old Dues: If one is looking at getting a healthier credit report card then it is mostly a long term process. Improving the rating takes time but eliminating old dues is something that can have an immediate impact if done correctly. If you have pending dues that are reflected in your CIR then take care of them in the right way to see an improvement in the score. When you repay old dues remember to pay the entire amount and in case you do negotiate with the lender then do ensure that the lender does not report it is “settled”. A settled debt is never a good sign and would not improve the score and may have an opposite impact. Having said that paying an old debt does not mean that the delays and missed payment are removed from payment history but the debt will not show as an overdue amount in future reports which is bound to have a positive impact.
  4. Avoid Credit Enquiries: Needless to say one must apply for a loan only when one requires it! Each time one applies for a loan the prospective lender seeks the credit report of the applicant. This is known as a hard enquiry; enquiries are one of the five factors that influence the CIBIL score calculation. Even when one needs a loan and applies for it then make sure you make a thorough check about the lender’s eligibility criterion and the required documentation. This will ensure that there are no unnecessary credit enquiries and you apply to lenders only where you have a fair chance of getting the loan application accepted.

Staying credit healthy should not be something that one does once in a while and them forgets about it. Inculcating healthy credit habits and being financially disciplined ensures that one remains credit healthy throughout! Just like are financial and physical health we need to take care of our credit health too.

Buying Your First Life Insurance Plan? Here are Things to Keep In Mind

Life is the most valuable asset for anyone and we all shudder at the thought of losing someone we love or for that matter about the loss that our loved ones would endure in case of one passing away.  Though one cannot do anything about the emotional loss that befalls the family in case of death of a loved one but one can take measures to ensure that they do not suffer (especially in the case of dependents) any financial hardships. This is where a life insurance policy comes in; the right life insurance policy would make sure that the dependants are taken care of financially in the event of death of the primary or sole breadwinner. So what should you keep in mind when buying your first life insurance plan?

  • What Life Stage are You In?

If you are buying your first life insurance plan then most likely you are at a stage in life where you have started working recently or have just started a family. However there may be times when you may have missed getting an insurance policy then; better late than never. Each life stage has different requirements and since a life insurance plan is bought primarily to take care of the dependents you need to keep their requirements in mind. As life stage changes so does the number of dependents and the requirements of the family. Insurance needs will be different for an individual who is recently married, both partners are working and they do not have any kids as compared to an individual who has spouse and two kids to support. As the life stage changes so should the insurance cover.

  • How Much Life Cover Do You Need?

The amount of insurance one needs will be dependent on your life stage, your lifestyle and your liabilities too. It is possible that two individuals who are at the same life stage may have different liabilities and hence their requirements may vary. The rule of thumb says that the insurance cover must be ten times the yearly income but there are various methods of calculating how much cover one should have. If one has a loan to service then that should be taken into account when calculating the required life cover, the number of dependents, their education and other requirements etc also must be factored in.

  • Which Plan Suits Your Requirements

There are numerous plans available to take care of the needs of an individual. Term plans give high coverage at low premiums as they are pure insurance plans. Endowment or money back plans guarantee a saving corpus by paying regular premiums and they also provide insurance cover. ULIPs help in wealth creation, though insurance is also provided but the cover provided vis-a-vie the premium is pretty low.  Insurance premiums are dependent on the age, medical health and of course the amount of cover one seeks. Another factor that may impact the premiums is the CIBIL score! Based on the CIBIL score the company will calculate its own insurance score which will indicate the likelihood of a claim. Choosing the right plan based on your requirement is important; for somebody who has just started working and has no liabilities an endowment plan or ULIP could be an option but for someone who wants maximum insurance at lowest premium the Term Plan is the best bet!

  • How is the Claim Process?

As we said earlier an insurance policy is bought to serve the needs of the dependants in the absence the breadwinner. However the policy would be useless if the family is unable to get the funds when they require or the process is too complicated for the family members to follow.  Thus before buying the policy check about the claims process, what is required, how much time it takes and other important aspects related to filing a claim. Do not forget to check the Claim Settlement Ratio of the company as it will give you a fair idea about how the company is at processing claims; it obviously makes sense to choose a company that has higher settlement ratio.

So if you are looking at buying an insurance policy, do keep the above in mind. Also do not forget to try and focus on how to improve CIBIL score so that you can buy a policy without paying higher premiums. A suitable insurance policy is very important for every individual.