Now that we have understood a few basics of managing and handling a credit cart, Nikunj Gandhi tells you how to improve your CIBIL score
Building up a credit history is very pertinent to determine your creditworthiness for any future purchases via the medium of loans, advances, new credit cards. CIBIL has been appointed as a kind of your big brother to keep a check over your financial performances. The credit card companies send regular reports about your credit performances at intervals to CIBIL, based on which your credit score is maintained. A few quick pointers shall help you maintain a respectable score and build up a decent credit history:
A judicious use of the card shall help in developing a good score.
2. Paying the card dues promptly on or before the due dates.
3. Opting for the credit cards from the banks that give you the highest credit limit. Higher the limit, better is the score.
4. In case of credit card account closures, the same should be done at intervals for different cards and not at one go. Closing many credit cards at the same time drastically reduces all your credit limits which in turn affects your score.
5. In case if the bank offers a voluntary increase of your credit limit, it’s always beneficial to take it.
6. Higher the interest rates that the banks charge on your outstanding balances, the lower will be your credit score. Hence it’s always beneficial to use the cards with the lowest of interest rates.
Security issues & disaster recovery plans
Many concerns have been raised over the safety of the usage of credit cards. Of course a misuse of a credit card is a grave threat and can lead to disastrous consequences, but that shouldn’t be compelling enough reason not to use the benefits that a card has to offer. As said before, a judicious use of the same can really work in your favour and all that is required are some of the basic precautions that could prevent the card from being misused. Also, the misuses are always glorified and horror stories told as to how some sucker was scammed. But any wrong doing shouldn’t be deterrent enough, after all, if you equate it over the percentage of transactions that are facilitated by the cards globally, it doesn’t stand an iota of occurrences as a percentage. Here are a few measures to ensure against any eventualities:
With the advent of cloud computing, it’s always convenient to create a password protected file containing all the data pertaining to the credit cards like card numbers, expiry dates, issue dates, statement dates, credit limit, cvv no, verified by visa/mastercard secure passwords, ATM pin, telephone pin, customer care numbers and whatever more information that you may deem fit to add. In case of any loss of cards, it’s always beneficial to fetch the file online from anywhere or ask someone to fetch the file for reporting the loss of cards. The card can then be immediately blocked from any misuse, once all the relevant data can be collated from the online file.
In case of online transactions, it’s always safe to have an additional layer of security by registering with verified by visa/mastercard secure. This ensures that an additional password is asked every time an online transaction is undertaken. Of course, this has now become mandatory. Also, with the advent of the OTP (One time password) becoming mandatory by RBI, it has ensured a third level of security to the transactions.
Most general insurance companies provide insurance against card misuse and this helps in limiting your liability in case of a fraud/misuse. The premium for availing these insurance services vary from Rs 200-Rs 500 per annum, but it helps in securing your cards against any eventuality.
Most card companies offer mobile updates for any transactions done via the cards. Hence it’s pertinent to register your existing cell number for receiving the alerts. The same alerts could be availed over emails as well.
You could issue a directive to the card company to call you and verify if a transaction has been done by you, over some prescribed limit. This helps if a high value transaction is attempted without your knowledge.
In retrospect, it’s very easy to succumb to the credit card lures, which if not handled judiciously, could spiral into a debt trap. The perils of being vulnerable to such a predicament is not only detrimental to your own personal finance by way of erosion of capital, but could prove disastrous at a macro- national level when the citizens of a country become victims to the compounding effect instead of being the beneficiaries. It could lead to a perpetual debt scenario where a substantial chunk of the earnings get used up in settling debts instead of being invested in income-generating assets.
I hope this helps you in making an informed judgement whether to go plastic. To conclude with a quote, ‘Modern man drives a mortgaged car over a bond-financed highway on credit-card gas!!’.
Nikunj Gandhi is an Equity Investor and can be reached at [email protected]. These are his opinions and not necessarily of the newspaper’s.