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Three advantages of a good Credit Score

By Rajiv Raj
September 26, 2015 12:20 IST
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Here's how you can reward yourself for having a good CIBIL score.

Photographs: Luigi Torreggiani/Creative Commons

In the difficult times that we live in today, achieving the perfect CIBIL score is none too easy. So if you have maintained good credit behaviour and managed to bring up your score to 750, it is indeed time to reward yourself. Here are few things you can consider doing if you have a satisfactory CIBIL score.

With expenses mounting, most of us take the help of credit to support our needs and expenses. Credit these days is available readily, but the problem with that is, if spending is not kept under check, your outstanding debts could spiral out of control and you can find yourself grappling with a financial mess.

What's worse, it could bring down your CIBIL score drastically. This will even put your chances of getting further access to credit in jeopardy. But if you have none of these problems to worry about, it is obvious that you have maintained a good CIBIL score. But what next?

Here are things you could do to put your CIBIL score to good use.

Opt for a better credit card

If you have been considering the offer of a particular card issuer because it gives you significant fuel consumption benefits, frequent flier benefits or just gives hefty rewards on shopping, you could consider taking that card now. However, do ensure that your research and groundwork is thorough and the benefits that your new credit card issuer has assured you of is not a smokescreen.

Also bear in mind that when you make an application for a new credit card, or apply for any new credit for that matter, your CIBIL score comes down temporarily.

This is because a 'hard inquiry' is made by the lender on your CIBIL score and report to review your creditworthiness as a part of their loan approval process. However if you keep a hawk eye on your credit card spend and pay all your outstanding bills on time, you have little to worry about!

Get a balance transfer on your new credit card

If you think that your new credit card is really good and is offering you a better rate of interest as compared to some of your other existing cards, you may even consider a balance transfer on to this new card.

A balance transfer may be really lucrative as your interest outgo may come to a naught for the first few months. If maintaining multiple credit channels open is bothersome for you and you are also fearful of the fact that your spending may go out of control, a balance transfer can be your ideal solution.

However, do remember that a balance transfer is neither free of cost nor is it a standardised product.

Each lender has a different transfer fee and a nominal processing fee that you will need to cough up. The other thing to remember is that even as you carry out a balance transfer, do not close your existing cards.

Closing your cards brings down your overall utilisation of credit. This too has a detrimental impact on your CIBIL score.

Shop for a home loan

If you do not have a roof over your head that you can call your own yet, use your good CIBIL score as a trigger to go shopping for home loans. As you probably know, the economy is on an upswing and inflation is under control. There have been a series of rate cuts this year and there are promises of more such rate cuts.

In financial parlance we are in what is called a 'low interest rate regime'. So if you have been deferring your decision to purchase property, now is the time to take action on it.

What's more, buying your own house will give a further boost to your CIBIL score, and take it up further a few notches. A home loan approval is a stamp of your lender's confidence of your repayment capability over the long term.

Do not worry if your CIBIL score comes down a bit initially as a hard enquiry is carried out by the lender before approving your loan. As you start repaying your loan on schedule, your CIBIL score will go up eventually, taking up your score much above 750.

While these are a few things you can do to utilise a good CIBIL score, do bear in mind that credit is always a slippery slope.

So continue your vigil on your credit card spend, credit utilisation and timely repayments. This will ensure that your CIBIL score remains intact over a prolonged period of time and you have access to credit whenever you require it.

The author is a credit expert with 10 years of experience in personal finance and consumer banking industry and another 7 years in credit bureau sector. Rajiv was instrumental in setting up India's first credit bureau, Credit Information Bureau (India) Limited (CIBIL). He has also worked with Citibank, Canara Bank, HDFC Bank, IDBI Bank and Experian in various capacities.

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Rajiv Raj