You had a great college life. You had everything you needed except money. You had to beg your parents for pocket money. Now you have just got your first job and you have your own money. You just want to buy everything you ever wanted. Designer clothes, sneakers, a fast bike and the latest smart phone and laptop. Weekends spent partying. This is your first job and you want to live life king size. But should you just blow your money away?
College life was good, but the fees were high. Fees had to be paid after every semester. You availed an education loan to complete your engineering. Now you have an education loan to repay.
You are now in a dilemma. Should you enjoy life or should you repay your education loan? The first thing you do on getting a job. Pay back your education loan. If you delay the repayment of your education loan, your credit score (cibil score) would get affected. Banks send the details of your loan repayment to Cibil each month. Credit Information Bureau (India) Limited or CIBIL, is a credit information Company. Based on your repayment history, you are given a cibil transunion score between 300 to 900. If you fall behind in the repayment of your education loan, you could get a bad cibil score. A bad cibil score means any loans you want to avail in the future from banks, would not get sanctioned. Imagine you wanted to avail a home loan in the future to buy your dream home and you had a bad cibil score?
You can actually build a good cibil score using a credit card. All you have to do is avail a credit card and make your repayments in time. (within the billing cycle). This is one of the best ways to build a good cibil score.
You have got your first job. Your mobile is ringing each day. Surprise…it is the banks who are calling you. They want you to avail a personal loan and a credit card. You have a credit card, No problem. Get another one. This is what the banks tell you.
So should you apply for the personal loan? Should you apply for a new credit card? If you apply for too many personal loans and credit cards, banks view you as credit hungry. It gives a sign that you are not in control of your finances. Your credit report has a section called enquiries. When you apply for a personal loan or a credit card, the bank where you have applied, requests cibil for your cibil score. Enquiries made by banks or financial institutions are called hard enquiries. Every time you apply for a loan from a bank and the bank requests your cibil score, there is a hard enquiry on your cibil report. Your cibil score would keep going down, if there are too many hard enquiries.
You have availed a credit card from a reputed bank. The bank gives you a credit limit which is the maximum amount you can spend using your credit card. The credit limit is fixed depending on your income and the usage of the credit card. You must make sure you do not spend more than 30-50% of your credit limit. If you have a credit limit of INR 2 Lakhs on your credit card, make sure you do not spend more than INR 1 Lakh on your credit card every month. This will help you maintain a good cibil score.
So follow these tips diligently and enjoy the benefits of a good cibil score.
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