Establishing a good CIBIL score is vital for young professionals since this can positively impact their ability to access credit in the future. One should avoid excessive debt, manage credit responsibly, and stay disciplined with their finances in order to achieve a strong credit score.
As a matter of fact, maintaining a good credit score for young professionals is no different from other professionals. Here we describe the important steps they, like everyone else, can take to improve their credit score.
Here are six key steps you can take:
Understand your credit report: Begin by getting a copy of your credit report from credit bureaus like CIBIL. This report will provide insights into your credit history, including any outstanding loans, credit card balances, and repayment history.
Pay bills on time: Regular payment of bills, including credit card bills, EMIs, and utility bills, is vital for building a good credit score. Even a single missed payment can have a negative impact on your score.
Maintain a low credit utilisation ratio: Keep your credit card balances low in relation to your credit limit. Ideally, your credit utilisation ratio should be below 30 percent. This demonstrates responsible credit usage to lenders.
ALSO READ: CIBIL Score: How to use credit report to plan finances? Here are 5 ways
Diversify credit types: Having a mix of credit types, such as credit cards, personal loans, and auto loans, can positively impact your credit score. However, avoid taking on unnecessary debt simply to diversify your credit portfolio.
Regularly Monitor Your Credit Report: Check your credit report on a regular basis to ensure that all information is accurate and up to date. Dispute any errors or discrepancies that you find, as they could negatively affect your score.
Long Credit History: The length of your credit history also plays a role in your credit score. Therefore, it’s beneficial to maintain old accounts in good standing, even if you’re not actively using them.
However, it is vital to note that building a good credit score requires time and responsible financial behaviour.
So, by following these steps, young professionals can establish and maintain a good CIBIL score, which obviously can open up a number of opportunities for accessing credit at favourable terms in the future.
Frequently Asked Questions:
Besides lower rates of interest, what other tangible financial benefit does high credit score provide to the borrowers?
A high credit score exhibits responsible credit behaviour, which may prompt lenders to offer higher credit limits on credit cards as well as loans.
What is the impact of high credit score on insurance policy holders?
A high credit score typically leads to lower insurance premiums.
Does a high CIBIL score offer better rental opportunities?
Landlords may also check your credit score when evaluating rental applications. A high CIBIL score can, therefore, raise your chances of securing rental housing, particularly in competitive rental markets.
ALSO READ: How do savings and investments impact your CIBIL score?
What is the key disadvantage of a low credit score?
Among several disadvantages, one of the key disadvantages is that you are likely to be offered higher interest rates even when a loan is approved.
How often should you check your credit score?
Most experts recommend to check the credit score at least once a year.
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Published: 16 Apr 2024, 08:49 PM IST