[Answer]-Storing the customized django auth_user model

Use the set_password functionality provided by django User

x = MyUser.objects.create(
    username = #something,
    ...
 )
x.set_password(#something)
x.save()

Now, set_password would apply the hashing algorithm, and store the encrypted password for you, where as what you are doing would just set the plain text password, which is the issue.