Credit Card Details
As you step into the world of adulthood, the concept of credit becomes a vital stepping stone for your progress in the real world. Credit churns out the outcomes of every financial decision which you will happen to make during a lifetime. From renting a vehicle to purchasing a home, credit is the pervasive link that cannot be avoided.
The fact that credit cards and credit scores make an equal mention of the word ‘credit’ means something important. Interestingly, without understanding anything about credit, you cannot have either of them.
Analogous to many aspects of life, credit does not come without its fair share of risks. A line of credit can prove to be a blessing to some and it could mean a burden for another. So, what are you meant to do about your credit?
Let us understand everything that you need to know about a quick line of credit through this article.
What is Credit?
Credit is any means which allows you to obtain a service or goods before making payment for the same. The concept of credit rests on the assumption that you will pay for such benefits at a later date. Since you stand to make a gain from this arrangement at the expense of another, credit usually comes at a cost.
From interest payments to monthly repayment schedules and miscellaneous charges, you can find yourself returning the cost of this benefit in any one or more forms. Remember that any item you procure on credit may cost you more than it would if you paid for the same in cash upfront in the long run.
Since credit offers you a decent advantage and benefit at potential risk, it has become a facility in the modern world. Undoubtedly, only those who show a credit-worthy reputation become eligible to benefit under such an arrangement.
If for some reason, your financial condition or habits fail to paint your image as a trustworthy person, it may be somewhat tricky for you to obtain credit.
Today, various credit bureaus are operational in India. They act as the nodal agency which regulates credit policies and grants a score to individuals. Based on this credit score, you obtain a financial reputation in the real world.
CRISIL is among the most popular credit rating agencies which are operational in India. Financial institutions share information about your credit activities with CRISIL and other agencies on a periodic basis. Consequently, based on your credit activity, a score is awarded to you.
This score varies between a range, but most importantly, the categories of this range determine whether you have a good, average or bad credit score. Several credit activities continue to impact this score on a regular basis. This includes repayment of credit card dues, debt burden, type of credit, credit search enquiries by financial institutions and more.
What Makes Credit Score Important?
Earning a good score is vital for many reasons. On any given future date, if you need to take a loan, you can negotiate for a good rate of interest from the bank and, in general, find it easier to get the credit facility.
In the rare case that your credit score falls down on the scale used to calculate such a score, you may find it troublesome to avail additional sources of credit and may have to pay higher rates of interest on such credit.
Thus, it is necessary to build a good credit score, making it easier for you to avail additional credit facilities. Apart from this factor, a good credit score portrays a positive financial position to another party, which may prove to be beneficial for you in the long run.
How To Manage Credit?
Maintaining good credit requires some proactive actions to ensure that you do not commit mistakes. The following tips might prove to be useful to manage your credit and consequently impact your credit score positively.
- Always make a budget. Aim to follow the budget as far as possible so that you can achieve your financial goals and refrain from deviating from them. A budget acts as a guide and a constraint at the same time but plans to take you directly to your goals.
- Always apply for only that portion of the credit that you can afford to pay back to your creditors. Anything which is beyond your means does not merit going after, even if you are in an emergency.
- Always consider other options of credit before choosing any one particular option. Different sources of credit offer easy funds at varying rates of interest. Sometimes prepaid card options may prove to be more convenient than other options.
- Do not rely on a single source of credit at all times
- Always put a limit on your credit limits and plan to stick to them at all times.
- Strive to make all the due payments on your credit at the time when they fall due. In addition, if possible, make more payment than the minimum due amount.
- Always maintain an emergency fund that may come in use in case an unforeseen situation comes up. You will not have to rely upon credit sources at a time such as this one, should you find yourself hard fallen.
- Avoid the habit of overspending and make sure that unauthorised purchases are made at a minimum.
- If you find yourself in a difficult debt situation, aim to get out of it at the earliest.
- Avoid making any unrealistic expectations about your credit situation.
To Sum Up
Your credit situation may not seem to be an important decision element when you are in your early twenties. However, as time progresses, you will come to realize just how relevant your credit decisions are for your financial position.
You may not understand everything about credit at first, but you will comprehend why it is a crucial financial decision with time. These are among the most important facts about credit. Depending on your current position, you may need to begin considering matters about credit at some point in time in your life.
The earlier you begin credit planning, the better it will be for your overall financial welfare.