India is estimated to have about 30 Cr middle income group populations and is expected to grow to about 55 Cr by the year 2025-26. This clearly indicates that the demand for loan and credit is going to grow exponentially in the coming years. While Indian middle class, till about a decade or so back, had been averse to credit but realizing the needs like housing, car or even an overseas vacation without credit has slowly changed the mindset and is going to further fuel the growth the demand for credit.
However, the awareness on account of credit and finance management is negligible. The Indian populace needs to understand the responsibilities of a borrower and also understand how good credit behavior will help them realize the financial objectives. For this, it is necessary to be completely aware about the following important factors that will help in managing good score on the CIBIL report.
Timely repayment is most important
We need to value the fact that as a responsible borrower, we need to ensure to repay all the EMIs in due time. This should happen without any delay, of even one day. The unawareness of this critically important factor can lead to jeopardizing the credit profile and refrain the lenders from extending any further credit. It has mostly been observed that once the borrower gets into the vicious cycle of delayed payments it becomes highly difficult for him to keep up the payment dates. The best way to go about addressing the issue is to separate the amounts towards these payments much before the due date, at least a week in advance and not keep it for the last day.
Credit Cards can both build or ruin the credit score
Credit card is a great instrument and people do not know that it helps in building the score to a great extent. But for the ones who are unable to manage these instruments properly, these can lead to severely impact the credit profile negatively. One needs to tread caution while using the credit cards. It is advisable that the credit cards are not used beyond 50% of the credit limit at any given point of time. This will lead to building the credit score and will also help in keeping one away from maxing out on the available limits. The closer you get to the prescribed limits the sever the impact on your credit score.
It can even lead to a situation of no return where one’s outstanding is completely out of his repayment capacity and leads to permanent impairment of the CIBIL report and CIBIL score. This will only force one to look for bad credit loan personal if a need arise.
Shopping around for a loan
We as Indians are fond of bargaining and owing to this genetic structure, at the time of need; we may apply with various lenders (including banks and non-banking financial companies). This is only going to hurt the credit score and will also give and impression that you are credit hungry. This will lead to rejection of the personal loan amount. Do not apply with various banks to check the applicable rate of interest. Each time an enquiry is run on the credit bureau, the score may get impacted negatively.
It is very important to be aware of our roles and responsibilities since availability of credit plays a highly important role in our financial life today. A regular check on the credit bureau report will only help in making us realize the gaps in us being a responsible borrower.
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