A good CIBIL score is not an option in the day and age that we live in today. If you have just started working or paying your own bills, soon you would think of buying a house, car and taking credit for the same. A good However, anecdotal evidence suggests people in their 20s are most likely to fumble on credit, because they do not have adequate information about what impacts their CIBIL score. Thus, as soon as they lay their hands on credit, the damage is already been done.
In case you do not falter with your CIBIL score, here are some pointers that will help you build a good credit profile, which will help you get a good CIBIL score right from the start.
Understand what impacts your CIBIL score
You need to understand how CIBIL score works and what impacts your CIBIL score. There are a lot of factors that impact your CIBIL score in various measures. From payment history, credit utilization, age of credit, debt mix to number of inquiries, a mix of all these factors affect your CIBIL score.
READ ALSO: 6 things about CIBIL every young adult should know
Choose your first credit card wisely
Now that you have understood what impacts your CIBIL score, you must be eager to build a good CIBIL score yourself. Unlike popular perception, credit cards are not evil and can prove to be an important tool for credit building, only if used well.
You should check not just the rate of interest that the card is charging you, you should also look out for factors such as fee, reward points and the likes and get a card that is best suited to your profile.
For instance, if you intend to use your credit card for purchasing fuel, get a card that has the highest fuel surcharge. Also, do not fall for teaser offers such as waiver of annual fees in the first year that card issuers try to entice you with. There are cards that have no annual fee at all, but come with a lower credit limit. When you are starting out, such a card may be ideal for you. Once you take your credit card, it is important to use it well, so make it a habit to spend small amounts on your card and pay your outstanding amounts in full each time before the end of your billing cycle.
Clear your education loan
The cardinal mistake most young people make is that they immediately switch over to a life of luxury as soon as they get their first job and become slack about the repayment of their student loans. If you have a student loan, make it a priority to clear your outstanding loan as soon as you can. Live the frugal life that you did as a student and try and prepay the education loan that you had availed of. Not only will you have the pleasure of being debt free, it will be a great way to build your credit profile as well.
Inculcate good financial habits
This is a no brainer, but the crux of building good credit and maintaining a good CIBIL score. Just like you have to eat healthy and exercise in order to build your physical health, similarly, you must maintain good financial habits with regards to your credit such as timely repayments of all your credit, especially your credit card, keeping your credit utilization low and maintaining a good mix of credit.
Finally, and most importantly, keep a strict vigil on your CIBIL score and CIBIL report and make it a habit to check your CIBIL score periodically.
Just inculcating good financial habits will ensure that your CIBIL score remains high not just as you begin your life independently, but through the rest of your life.
(About the author: Rajiv Raj is the director and co-founder of www.creditvidya.com)
(Image: Thinkstock)