Whether it is for emergencies, medical situations, or buying an expensive product, having a healthy corpus of funds is crucial. You have to manage your expenditure to ensure savings every month. Savings are also vital if you are planning on taking credit in the future. There are various ways to manage your personal credit effectively.
Availing a loan or credit card is easier than ever. What’s significant is managing them. Making sure that you stay in control of your finances can help you avoid debt accumulation.
Smart Hacks to Manage Your Personal Credit Effectively
Hence, you have to be knowledgeable right from the beginning, even before you avail of a personal credit card.
Here are a few points that will help you manage your personal credit smartly:
1. Features and Benefits of the Loan or Personal Credit Card
Increased competition has compelled financial institutions to provide additional features with their products.
You have to check and compare all features before applying for a loan or personal credit card. Do so, will help you to manage your credits more effectively.
2. Increase Your Credit Score
The CIBIL score or credit score is a 3-digit score assigned to anyone who has availed credit. The score ranges from 300 to 900 and determines creditworthiness and your ability to repay debt. You are more creditworthy if you have a high score.
Generally, financial institutions prefer customers who have a credit score of 750 or above. A high credit score also enables you to avail of lower interest rates on personal loans.
You have to keep a personal check credit score. Also, you have to know how to increase the CIBIL score if the same is low.
There are various ways of how you can do the same:
a) Make use of your credit card
You can avail of a plain vanilla credit card if your CIBIL score is low. These credit cards don’t have attractive features but are superb for increasing your score.
Or, you can take a secured credit card with all the benefits and features of a premium one. Secured credit cards are sanctioned against a fixed deposit.
Using a credit card regularly is one of the ideal and fastest ways to improve your CIBIL score.
b) Refrain from applying for too many credits
A lender will make a credit inquiry every time you apply for a personal loan. Each inquiry will lower your score. Hence, you must refrain from making too many credit applications.
This is one weakness so many people have. There are those people that cannot do without credit. They are just used to borrowing so much.
However, you need to know that this one of the easiest ways of hurting your financial health. In fact, if you have so much credit you will never have peace of mind. You will spend most of your time thinking about the credits.
Many credits will never allow you to focus on other things. You will spend so much time thinking of how to pay back these debts. To make sure you stay free of these debts there are things you need to do. First of all, you need to make sure that you only borrow when it is necessary.
Avoid borrowing money to fund lifestyle habits. This will hurt you in the long run. Just borrow when you definitely need to. For instance, when you have a very special medical case you can rush to borrow.
If you are borrowing to fund a project like buying a motor vehicle then that will not be right. There are some exceptional cases where you can do so. However, if the need is not that dire you can avoid or save towards the same project.
There are so many cases where people from credit companies might approach you. Make no mistake. Most of these credit companies or only in business to make profits.
They might care so little about you. You need to develop a way of resisting such a loan offer when you do not need them.
A proper plan will help you to do this. Try and come up with a plan that includes all the things you need to do for a certain period of time. You can look for other alternative ways of looking for cash other than borrowing from credit companies.
For instance, you can try out some of your family members or friends for financial help. The good thing with such loans is that they are interest-free. This will help you to stay away from the many credit companies out there.
c) Always be aware of your Credit Card Interests-
If you want to go for a Credit Card or any other financial lending arrangement, it is important to understand how the interest works. If the rate of interest is very high, it is probably a good idea to avoid going for that credit card. This would force you to go into a debt cycle and keep on paying EMIs and interest because of the high rates. Credit card interest calculators like SoFi allow you to calculate the interests of your credit card.
d) Pay your debt in time
Paying the credit card bill in time is vital if you want to increase your score. Delayed payment will invite a high rate of interest and late payment fees. If you are in a position always make sure you repay back your debt on time.
The best way to do this is to make timely debt repayment pledges. For instance, you can promise to repay back your debt at the end of the week or the month. During these times most people usually have money and paying back the debts becomes an easy thing.
The good thing with paying your debts on time is that it helps you to become a responsible debtor. When you do this consistently for long you may develop this habit. This way you will be able to repay back your future debts on time.
Paying your debts on time will also help you to grow your credit limit. Other than that you will also gain the trust of most lenders in the market.
e) Never use too much of your credit limit
You must keep an eye on the credit limit when using the card. Utilizing 30% or less of our credit limit will improve the score. The secret to achieving this is to always borrow the right amount of money. Do not over-borrow. You might end up exceeding your credit limit.
f) Always pay the total amount due
Paying the minimum amount due will lower your credit score. Further, you still have to pay the full bill amount the next month even after you pay the minimum. Hence, always pay the full amount to increase your CIBIL score.
g) Break your purchases into monthly installments
Paying for your purchases in EMIs rather than the total amount is an efficient way to manage your credit and savings. You can pay for almost any product on EMI online with your credit card.
h) Make sure to save every month
Your salary account will not provide any interest. Hence, keeping any funds in it will not generate any returns. What you can do here is to transfer at least some from your salary account to your savings account, which provides an interest of 4% p.a.
Follow these hacks mentioned above and you will be able to manage your personal loan or credit card more effectively.
We all cannot do without credit. However, it is also not wrong to say that credits have also landed some people in some serious problems. To make sure that you do not get affected in any way, you have to manage your credit well.
The tips mentioned above are some of the ways you can use to manage your personal credit. Follow them keenly for the best guidance on the same. These tips will help you to manage your credit in the most effective possible.