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.

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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.