Take an FD- linked credit card to better Cibil score

QA few years back, my credit card issuer reported to Cibil that my dues had been written off. After that, I paid all the dues and closed my credit cards. But I haven’t noticed my score increasing. What could be the reason?

Your credit score won’t increase overnight. If you have not paid your due, your score would have taken many years to improve. Now that you have fully paid your outstanding due, your credit record will reflect the fact that you had overdue amounts for a long time but also the fact that you fully paid it off. You have already taken the first step in the direction of a better credit score. But there are several other steps you will need to take to rebuild your credit score.

First you can take some secured credit card ( secured against bank fixed deposit) and make full payments regularly on such cards.

The advantage of a secured credit card is that as long as you use it for really required expenditure, it does not push you into further debt unnecessarily but it still allows you to rebuild your credit history. It will be a two to three year process after which you might have a good credit score, which is enough to get further credit. Life insurance cover is required only if any family member is financially dependant on you. As a thumb rule, you must have life insurance cover equal to 15 times of your annual income (` 45 lakh). You should only buy pure insurance cover plans and should never mix insurance and investment. You have taken the right decision to buy the term plan and buy online term plan as they are cheapest. Recommended online term plans are Bharti Axa e- protect and Max Life online term plan. For a 24- year- old, the 30- year policy Bharti Axa e- protect with a sum assured of ` 50 lakh would cost ` 4,000 a year and Max Life online term plan will cost you ` 4,000 a year.

You should also consider buying the accidental disability cover of ` 25 lakh from Apollo Munich Personal Accident and a critical illness cover from Aviva Health Secure of ` 25 lakh, which pays lump sum in case of disability due to accident or serious illness. Both policies will cost you another ` 6,700. You should also buy a health insurance from Apollo Easy Health Standard – a sum assured of ` 3 lakh and ` 5 lakh additional top- up plan ( Apollo Optima Plus) with a deductible of ` 3 lakh. Both put together, the health insurance will cost you ` 5,500 a year. Your total insurance cost will be about ` 16,200 a year.

The writer is the CEO of Apnapaisa. com. You can send in your queries to movingmoney@deccanmail.com