A good credit score is longer an option in the world that we live in today. With rampant use of credit, it is an imperative to have a good credit score. Only with a good score can you access cheap and timely credit. To maintain a good one, you need to make timely repayments on all the credit that you have accessed. The credit behaviour will not only determine your score, it will also impact your chances of accessing credit when you need it the most.
If you are handling your own finances, you are only too aware of the fact that you need to pay your utility bills on time to avoid extra expenses such as overdue payment fee. Despite the many rumours and misconceptions about utility bills impacting your CIBIL score, it may serve you well to know that payment of your bills does not impact your score. At least not yet.
However, this is not to say that it cannot happen soon. In the future, the following monthly expenses can be impacted by the credit behaviour and your credit score.
Currently, your credit score plays a large role in determining whether or not the application for your home loan will go through. With a stellar score, you have a good chance of lowering your interest rates. However, with growing asset quality concerns, there may soon be a time when your repayment record is also assessed regularly. This means that if your numbers drops during the time that you are servicing your home loan, you can end up paying a higher rate of interest, as you will be deemed a “riskier” borrower based on your score.
In the future, your landlord may well ask for a background check through the submission of your credit report. If your score is good and your credit report is blemish free, you may be able to get a rented apartment sooner as compared to those who have a poor CIBIL score. You may even have greater negotiation power with the landlord on the rent you pay each month with a higher score.
At present, those with a good CIBIL score are likely to qualify for better interest rates on credit cards at the time of approval. Once you start using your card, you can build the credit score by repaying the entire outstanding amount in full within the billing cycle. However, if you carry over balance to the next month, you end up pay an interest on the same. So far, this interest rate component remains the same. However, if you carry a large balance each month, you may end up paying a higher rate of interest. This means your score may determine the interest rates that you pay each month.
During the approval of an education loan the credit score of a working parent is taken into consideration. The repayment of the loan starts after the completion of the tenure of the loan. In the future, if the creditnumbers of the parent deteriorates at the time of servicing the loan, it may result in higher EMIs for the loan applicant, as the interest rate applicable on the loan will increase.
Currently, your credit score has nothing to with the insurance premiums you pay for specific insurance products such as property insurance or homeowners insurance. However, there may be a day in the future when insurers use score based assessment models to determine the amount of premium you will pay on such products on a monthly, quarterly or annually.
Currently, all you need to do if your vehicle insurance expires is automatically renew your insurance through one click of a button. You can even avail of the facility of comparing the features and benefits and premium rates offered by various insurers in case you want to change the insurer. However, in the future, ones credit score may determine the premium rate that you may have to pay on the vehicle you own.
CIBIL, India’s largest credit bureau is planning to include your mobile bill repayment records to the credit history of an individual. If this becomes a reality soon, your mobile bill repayment record will be a part of your credit history. This in turn means that your CIBIL score may well decide your tariff in the future.
At present, the repayment of all the credit lines you have accessed be it secured credit such as home loans, car loans, gold loans or unsecured credit such as personal loans and credit cards has an impact on your score. Repeated delay or the inability to repay your credit on time may have a disastrous effect on your credit and you may find yourself in the loan defaulter list. It is thus in your interest that you make regular repayments to keep your credit records in order. As far as utility bills are concerned, the may not have an impact on your score now, but timely repayments on the same, will keep you stress free!