Know what Credit Score means in Daily Life

Credit Score’-sounds like a heavy technical finance word. (I often use it to impress my non-finance friends. Trust me, it works like a charm! 😉 )

But hey! -Why are we even talking about it here?

Well, what if I tell you that these two words have a considerable and far-reaching impact on your life?

That they can shatter your humble dream of buying that 2 BHK near your crush’s apartment, of showing off your swag in the latest sedan or finally beginning your own start-up (even if it is a revolutionary idea) to pieces.

Really? How?  You would ask me.

Really!

It is because banks check your credit score before granting you any loans whether it is home, car, personal or business loan.

But it’s not just banks who may take your credit score into account – surveys have found your credit score can affect everything from whether you’re able to rent an apartment to who may be willing to date you.

  • Insurance companies – check your credit score before giving you any insurance policies. The higher your score, the better your insurance rates may be.
  • Credit Card companies –check your credit score before handing over that exclusive Platinum card to you.
  • Utility companies – electricity, phone, and cable – check your credit score as part of the application process. Yep, cell phone companies check your credit too! Want to buy the latest I phone 7 (On EMI of course). Guess what you need? A good credit score!
  • Certain jobs – especially those in upper management or the finance industry, require you to have a good credit history. They want to see if their cash and assets are in safe hands.
  • Landlords, property managers, and rental agencies – review potential tenants’ credit reports. They look for a pattern of missed payments or other negative information which may require you to pay a larger deposit.

(I know you suddenly have the urge to check your credit score. We will come to that soon!)

Firstly, what exactly do these two words mean?

A credit score is actually a numeric summary of your credit history. It can range from 300 to 900. Generally, the higher the number, the more trustworthy you appear to lenders. The lower your score, the more difficulty you will face.

Credit history comprises the number of times you paid your loans on time, your credit card bills on time, the percentage of total credit limit that you are using, the age of your credit cards and loan accounts (the older, the better).

In India, there are four credit information companies licensed by Reserve Bank of India (RBI) –

  • Credit Information Bureau India Ltd. (CIBIL)
  • Equifax Credit Information Services
  • Experian Credit Information
  • High Mark Credit Information Services.

The most popular one is the CIBIL credit score. This score ranges from 300 to 900, with 900 being the best score.

Living within your means, using debt wisely and paying all bills—including credit card minimum payment on time, are some of the smart financial moves to help you improve your credit score. It reduces the amount you pay for the borrowed money and put more money in your pocket to save and invest.

However, a lousy credit score doesn’t either mean you’re a bad person — it might just mean you put some unexpected bills on a credit card and had trouble paying, or that you missed a car payment when you lost your job. See below what can give you a bad score

  • Paying credit card bills late
  • Not paying credit card bills at all
  • Defaulting on a loan
  • High credit card balances
  • Having an account charged off

 

 

 

 

 

And now the one you had been waiting for – How to check your credit score?

Official CIBIL website- You can get your credit score by filling the ‘CIBIL Online Credit Score Request Form’ and paying a nominal price for the report. You will be asked your PAN number, DOB etc. to complete this form.

https://www.cibil.com/creditscore/

  • Websites like paisabazaar.com and bankbazaar.com – actually provide you with a detailed report on your credit score absolutely FREE!! You can know your chances of getting a loan approval easily.

Now the time for good news!

The RBI had mandated every credit information company in the country to release one free full credit report to every individual from January 1, 2017. It is supposed to be a detailed report carrying the records of your credit history, including repayment track record of all your credit card bills and any current or previous loans. You can apply for it once a year between January and December from one of the credit information companies.

So what are you waiting for? Go and quickly find out your credit score. Or better still, go and impress your IT friends with some finance jargon! 😉

 

How To Master Your Credit Card Points

Remember the day you gave your heart to that ‘Little Black Dress’ at Zara only to find that you are 1000 bucks short on cash and a gentle swipe of this savior helped you walk away from the store with a beautiful dress and a more beautiful smile?

What about the day you finally materialized your Bangkok plan even without the money to pay for the tickets then because you had this angel come to your rescue?

Or the day you reached early at the Airport and binged on all those free (okay, complimentary) chocolate pastries while sitting on an exquisite leather couch in the lounge because of this plastic card?

And the day this savior helped you- little, ‘almost on the verge of broke’ mortal afford that elusive phone, dream home theatre, incredible DSLR camera and thundering speakers through EMI options and the flexibility to simply pay later.

Yes! I am talking about that all time savior we carry in our pockets every day. Our very own, always there for us – Our Credit cards!

 

 

But hey, the benefits of owning a credit card don’t just stop here!

Every time you swipe/use these plastic wonders you gain additional benefits in the form of reward points. “But those points are useless because we never redeem them”, you would argue. Well, it isn’t difficult and once you start redeeming your points, you will only regret all the times you didn’t do it in the past.  

First of all, let us begin with ways to increase your reward points without increasing your expenses.

  • Make unavoidable business purchases using a credit card-  If you are a start-up or even run an old business, try making your day to day business expenses through your card. You will not even realize when you accumulated enough points to be eligible to get a free flight ticket to Singapore.

To all those who would come up with their tax woes after reading this– Small traders and businesses with a turnover of up to Rs 2 crore will pay less tax if they accept payments through banking and digital means from FY 2017-18.It means your vendors benefit too from your credit card swipes!

  • Make purchases from the Credit card portal/website to earn additional points and get amazing deals – Most good credit card companies have their websites or portals where you can get amazing deals on various electronics/hotels/flight tickets and also earn additional points. Just go to Google and type the name of your Credit Card. You will find a login page where you can register and login.
  • Sign up for value Credit Cards( after some research) to enjoy the free signing bonus points that most companies provide to promote their cards – Imagine earning reward points for just getting a new card. Trust me, I am not kidding! 😉
  • Too much traveling? Sign up for Travel Credit cards – Travel a lot? Most credit card companies have exclusive travel cards which provide much better deals on booking flights than the simple cards and you can fulfill your Europe or Australia dream much quickly. There are additional benefits if you are loyal to a particular airline! (We all look for the cheapest flights. I know! )

Secondly, how to redeem these points?

  •  If you have an account in the Bank whose credit card you own, nothing could be better. Just link your card to your account through Net Banking. You will easily see your reward points and how to redeem them from the Net Banking portal itself.
  • Use Google wisely. Type your credit card name and sign in to the rewards page of your particular card. You will be asked your card number, name etc. Choose your gift and click on ‘redeem’. Your gift will reach you soon!

However, there are some things that you need to remember while enjoying the benefits of your credit card:

  • Pay bills on time to avoid late charges/interest – It is of no use to have 2000 reward points which are equivalent to Rs. 500 and paying Rs. 500 as penalty charges because you forgot to pay your bill.
  • Sign up for cards after checking the joining/annual fee – Yes, new cards give you the benefit of additional bonus points. But, do not sign up unless you are sure that the benefit of points is greater than its annual fee!

Just a little effort and research on these plastic saviors and you aren’t far away from MASTERING YOUR REWARD POINTS!