Wednesday, 8 March 2017

Do not let Cash Crunch Impact your CIBIL Score

No one wants to get in a cash crunch. However, life is unpredictable and you can never tell when you are going to get short on cash. A good example of this is the bold step of demonetisation taken by our Hon’ble Prime Minister Shri Narendra Modi recently. Although it has been a while since the movement started, the effect is still there. In many parts of India people are still having money problems. There are still long queues outside of ATMs and inside of banks.
Although in an event of cash crunch you do have to face a lot of inconveniences, it can also impact your CIBIL score. By not paying attention to your credit score you can make things even worse for yourself.
Here are some of the ways you can deal with a cash crunch and protect your credit report from damage:
1. Save Money by Cutting Expenses
The most important thing you need to do to is cutting on expenses. You can’t afford to spend on luxuries when there is a shortage of physical cash. So, round up your expenses and identify the ones you can do without. For instance, you might want to stick to eating homemade food only, doing with whatever clothes you have in your wardrobe, etc. for the time being. Use the saved money in repaying your credit card bills, loans, and also other important expenses that can’t be ignored.
2. Try to Get Longer Credit Periods
If you are a businessman then cash crunch can be especially troublesome for you, as you have to pay your vendors and employees apart from handling your own personal expenses. Thus, what you can do is explain your situation to them and request for longer credit periods. People are usually quite understanding, and if your vendors have been associated with you since a long time they will be happy to extend credit terms to you. 
With favorable credit periods, you will be able to keep your business operational, and thus make money while paying your loans and credit card bills.
3. Using Plastic
Since the government is pushing electronic payments they have lifted many types of credit card charges. Thus, now is a good time to use credit cards as much as possible. Not only you will get some respite this way, you will also save money as well. However, be sure to keep your credit utilization in control as excessing usage can be detrimental to your credit score. Ideally, you should not spend more than 30% of your credit limit. Thus, if the limit on your credit card is Rs. 2 lakhs then you should spend less than Rs. 60,000 a month.
Many people have started using credit cards excessively due to the demonetization. However, this has resulted in many of them ruining their credit reports. If you really have to use credit cards often then maybe you can talk to your bank about it and explain that your excessive utilization should not be put in a bad light. Understanding your situation your bank may decide not to have CIBIL record your activities in a negative way.
4. Staying Alert
Cash crunch can easily cause panic, and you can end up making rash decisions that can affect your credit score negatively. While you should perform a credit check irrespective of whether there is a cash crunch or not, its significance is definitely greater in that particular event. You can easily get your CIBIL rating online and you can even pay the fees the same through wire transfer or credit card, etc. For instance, CIBIL has a simple online process for a customer who wants their CIBIL rating and CIBIL report. You can fill out a small form, submit fees, and get your report in a few days. By checking your report every once in a while during cash crunch you can see if your score is dropping. In case it does, then you can take appropriate measures to prevent further damage and recover the lost points.

Cash crunch is never fun for anyone. However, you should not let it affect your credit score as improving it later can take a long time. So, stay focused and stay positive even in the most difficult cash crunch period. Like all bad times, it too shall pass. 

1 comment:

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