Today, when we are going cashless with e-payment apps and credit cards, making cashless payments has become easy, but this is only one side of cashless payments with credit cards. Maintaining a good credit card history can help you with your future endeavors and plans. Good planning can help you in the long run, for example at the time of retirement when you no more have to worry about the work, have all the time to do what you love, go anywhere you want to go at any time, and even start a small business then your planning must be good, one way to do this is to maintain a good credit score.
Nowadays many companies before giving a loan checks your creditworthiness and for this CIBIL (Credit Information Bureau of India Limited) founded in 2000 has given a parameter that can be used to gauge one’s credit history and present it in the form of a three-digit number called CIBIL score. This score can even be used by the banks to ascertain how likely and fast the person taking the loan will pay it back, not only this, but a good score can also help you to get another credit card if required. CIBIL score for the citizens of India ranges from 300-900, generally a score of 750 or more is considered good.
Factors that affect credit score and their solutions:
Improper credit utilization
Improper utilization means you have reached more than the upper limit of your credit cards. And if you have a very high percentage of your limit, then your credit score shows your creditworthiness is bad or very good. Because a low credit score indicates financial risk, Further it will lead to Higher interest rates on credit cards and loans.
Keep your credit balance low
You have to maintain a minimum balance of credit so that you will be capable of doing loan repayment. Credit taken far from your minimum budget will create an impact on your financial budget. A credit score indicates how much of your available credit you are using. It is good to stay under the credit limit i.e 25%, and even if you are paying your credit in full every month even then also it is good not to exceed your credit score.
History of past repayment
History of past payments plays an important role in applying for Loan. Before getting a loan there are many procedures needed for getting your loan approved, one of them is keeping a check on your past behavior in repaying the debt. If your past debts are all paid in full and within the expiry date, then your credit score is good. But if your debt is still pending and irregular, then it will have a bad impact on your credit score.
Pay your bills on time
It is the major step that you have to take if you want to live a happier life because if you don’t pay your bills today, you have to pay them by tomorrow and with the higher interest rates on your credit it will create a huge burden for the future then you will have to pay a huge debt. As more than 1/3rd of your score is based on your credit payment history. It can also be helpful to set up payment reminders or automatic payment deductions from your bank account at hard times of repayment time. It can be avoided if you pay your bills on time.
Length of debt servicing
What is the tenure of repayment on a loan or How long you have been availing debt-servicing, whether it is of new applicants or older ones, it has all been affected by your credit card score. If you are a new applicant it will be difficult for you at first, as you don’t have any experience of taking a loan before. so, Taking a loan or credit for new applicants will show a lower credit score than the people who have already been taking credit for a while. It will be easier for them to get a loan faster than new applicants.
Reduce the time of debt repayment
Next time when you take a credit loan then remember to repay the loan on time as this might affect your plans. So remember to repay your loans on time.
New credit applications
As we have discussed in the above point, new applicants find it difficult to get credit and they also have low credit at first. Lenders usually have to bear with the credit score of applicants for giving a new credit. Do they see how many times you have applied for credit and out of those how many are approved or rejected? So applying too many times and getting rejected can have a bad effect on credit scores.
Check your credit report for errors
Before applying for new credit you must check your credit report, this reduces the chances of your new credit being rejected and you can take a new credit whenever required.
Maintaining a good CIBIL score can help you have a great retirement ahead, in the following way:-
A lower credit score will keep your insurance cost down
If you are planning for life insurance then getting a good interest rate must be your priority, if you have a good CIBIL score then you might be able to negotiate the interest rate and might get insurance on your terms.
You get the option to refinance your mortgage
If you go through a rough time then having a good credit score can help you to easily refinance your mortgage and you can avail cash about your score.
Moving to a different location
In old age, if you have a change of mind and want to relocate to a small house as it becomes very difficult for you to manage a big house then a good score can be used to avail approval from the owner of the new house.
Helps you to provide Financial help to anyone in your family or friend
If anyone in your family or friends is going through hard times and ask you for financial help then you can use your credit score to help them instead of paying them from your pocket.
You can follow your passion and maybe start a new business
If you have been planning to start a small business and continue to work even after retirement then you can use your CIBIL score to finance your business without having to worry about your savings.
Conclusion
After having read the entire content, by now you must have got an idea of how you need to prepare for your retirement if you want to have a happy life after. Not only after retirement but having a good credit score can help you in many ways and help you take some good financial steps. Anyone can avail of the benefits of a good credit score, all you have to do is be proactive and monitor your credit score regularly.
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