Tips to ensure a financially disciplined 2018
ET CONTRIBUTORS|
Jan 22, 2018, 06.30 AM IST
By Vaishali Kasturev
The beginning of the year is the time to look ahead and make new resolutions. A significant number of these resolutions pertain to living a healthy and diciplined life. Resolutions vary from avoiding junk food to junking bad habits.
When we talk about resolutions and disciplined life, one must not forget the resolution to be more financially disciplined - in the way we spend and more importantly, in the way we handle our debts. Being financially disciplined not only enables one to save more but also improves one's credit score. Following are some of the tips that one can employ to ensure a financially disciplined 2018.
Pay when its due
Always pay your loan EMIs by the due date. This will help better your credit score and make you more credit worthy. A credit score plays an important role at the time of loan disbursal; a score above 700 is viewed as a good credit score by lenders. If you have paid your dues on time, your credit report, in the accounts section, will reflect '000' or 'XXX'. If not, then the report with reflect the number of days by which your payment has been due—030 for 30 days, 060 for 60 days and so on. Set reminders on your phone to help you remember payment due dates.
Cut credit utilisation
Credit utilisation is the total amount of debt that the borrower has in relation to total earnings. This shows the repayment capabilities to the lender. If you have a lot of credit cards with high credit limit, chances are your credit score is deteriorating, even if the cards are dormant. Try and keep only a few credit cards. It helps reduce your credit utilisation and also make it easier to remember payment due dates. As a thumb rule, you should utilise only 40% of your credit limit. For example, if you are earning Rs 10 lakh an annum, your credit limit should be only up to Rs 4 lakh. Roughly 30% of your overall credit score is determined by your credit utilisation.
Monitor credit report
Your credit report will help you assess your financial behaviour and identify the various areas of improvement. To track your progress in improving the score, you would need to monitor your credit report. Monitoring your credit report also helps identify possible frauds. If you identify any error or a fraudulent account reflecting in your report, you should inform the credit bureau or the concerned lender about it.
Check your loans
If you are a guarantor or a co-applicant on someone's loan, do monitor their repayments. In case the person you have guaranteed starts defaulting on their loan payment, then it would affect your credit history and in future might become a reason for your reduced credit score. Wishing you a financially healthy 2018.
The author is Managing Director, Experian Credit Bureau and Country Head, Experian India
Disclaimer: The facts and opinions written in this column are those of the author and do not reflect the views of economictimes.com.
The beginning of the year is the time to look ahead and make new resolutions. A significant number of these resolutions pertain to living a healthy and diciplined life. Resolutions vary from avoiding junk food to junking bad habits.
When we talk about resolutions and disciplined life, one must not forget the resolution to be more financially disciplined - in the way we spend and more importantly, in the way we handle our debts. Being financially disciplined not only enables one to save more but also improves one's credit score. Following are some of the tips that one can employ to ensure a financially disciplined 2018.
Pay when its due
Always pay your loan EMIs by the due date. This will help better your credit score and make you more credit worthy. A credit score plays an important role at the time of loan disbursal; a score above 700 is viewed as a good credit score by lenders. If you have paid your dues on time, your credit report, in the accounts section, will reflect '000' or 'XXX'. If not, then the report with reflect the number of days by which your payment has been due—030 for 30 days, 060 for 60 days and so on. Set reminders on your phone to help you remember payment due dates.
Cut credit utilisation
Credit utilisation is the total amount of debt that the borrower has in relation to total earnings. This shows the repayment capabilities to the lender. If you have a lot of credit cards with high credit limit, chances are your credit score is deteriorating, even if the cards are dormant. Try and keep only a few credit cards. It helps reduce your credit utilisation and also make it easier to remember payment due dates. As a thumb rule, you should utilise only 40% of your credit limit. For example, if you are earning Rs 10 lakh an annum, your credit limit should be only up to Rs 4 lakh. Roughly 30% of your overall credit score is determined by your credit utilisation.
Monitor credit report
Your credit report will help you assess your financial behaviour and identify the various areas of improvement. To track your progress in improving the score, you would need to monitor your credit report. Monitoring your credit report also helps identify possible frauds. If you identify any error or a fraudulent account reflecting in your report, you should inform the credit bureau or the concerned lender about it.
Check your loans
If you are a guarantor or a co-applicant on someone's loan, do monitor their repayments. In case the person you have guaranteed starts defaulting on their loan payment, then it would affect your credit history and in future might become a reason for your reduced credit score. Wishing you a financially healthy 2018.
The author is Managing Director, Experian Credit Bureau and Country Head, Experian India
Disclaimer: The facts and opinions written in this column are those of the author and do not reflect the views of economictimes.com.
