ATM :: Develop Great Habits For A Great CIBIL Credit Score

Rajiv Raj | Sep 17, 2014, 04.55 PM IST |


We all develop habits that provide a rhythm or structure to our daily lives. Many of us picked up our financial habits from our parents while growing up, but the rules are no longer the same. You need to develop your financial habits to suit your lifestyle. This will help you secure your future with a good credit score.

To explain, let me take you through one story. Anand More and Mohit Gupta were childhood friends. Life took them to different paths, but they did try to meet up once in a while. Both had done reasonably well in their chosen profession. At one such reunion, Mohit mentioned to Anand that he was trying to take a home loan to but somehow his loan application was getting rejected “for no reason”. Anand, who has recently taken a home loan and had studied the matter intensely, suggested Mohit to check his credit score. Mohit applied to CIBIL for his credit report and found that his credit score was a meagre 525 whereas Anand’s credit score was a healthy 810. It’s then when Anand explained to Mohit about a collection of healthy credit habits that helped him fatten up his credit score.

Spend less that you earn
Never spend money until you have earned it. (Thomas Jefferson)
Your parents and grandparents must have given this advice often enough. It’s the simple truth of being credit-wise: living within your means and spending only what you have earned. No, this does not mean that you don’t spend on credit cards or take a loan but limit the amount keeping in mind your current spending capacity. For instance, if you are taking a home loan, ensure that the loan size and EMIs that will follow are manageable and don’t end up putting you in debt.

Put credit to work but do not rely on it
Expectation is the root of all evil. (William Shakespeare)
While credit card is necessary for asset building, it should be a tool in control. Credit is not cash; it is loan that has to be repaid. While shopping it is all too easy to whip out the credit card and pay. However, the fact remains that the end of the credit period is usually just a few days away.

Keep paperwork in order
I am a believer that orderliness begets wealth. (Suze Orman)
Make sure your financial information and records are organised and up-to-date. Set up alerts on your calendar to ensure that don’t miss a payment even if the bill doesn’t come on time.

Have an emergency fund
By failing to prepare you are preparing to fail. (Benjamin Franklin)
An emergency fund keeps you afloat in tough times; when there is an abnormally high demand for funds or a gap in earnings. It is like a safety net that prevents you from falling into the big, wide sea of debt. Without an emergency fund, you would fail to make your regular payments and this will result in a poor credit score.

On time, every time
The bad news is time flies. The good news is you’re the pilot. (Michael Altshuler)
It is important to make your repayments on time; every time without any fail. Even one late repayment will have an adverse effect on your credit score. One of the easiest ways to ensure timely payments is to set up an auto debit system linking your bill payments with your credit card.

About the author: Rajiv Raj is the director and co-founder of CreditVidya.

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