Credit Scores have been highly beneficial to lenders, but have they helped customers? Of course! Read on to find out how.
With Credit Scores taking centre stage, lending has become a more convenient and easy task for bankers across the globe. Thanks to your Credit Score, a lender can immediately know whether you’re creditworthy or not; it’s that easy.
It has taken years of evolution in the banking industry to reach where we are today. From early credit approval policies which were based on personal meetings with lenders to instant paperless approvals, banking has surely come a long way.
Now, there’s no doubt that financial institutions have leveraged the wonderful benefits of the Credit Score to enhance their credit product portfolio – it’s almost like a digital revolution… but what about you, the consumer? Have Credit Scores made banking easier for you? Have they empowered customers worldwide? The answer is yes; the reasons are many, so let’s get on with it, shall we?
Who doesn’t like to get their loan or Credit Card application on the fast track? Thanks to Credit Scores, lenders are able to quickly take decisions, thus leading to faster approvals too. Nowadays, customers like you can get your application approved without paperwork, provided your Credit Score is good.
Before Credit Scores, one couldn’t really say how long it would take for a loan or Credit Card application to be approved. Lenders use to handle applications on a case-to-case basis, so it was entirely up to them.
Lower credit rates
Yes, it’s true! With more credit available in the market, costs have come down. Thanks to Credit Scores, the whole process of granting credit has become less expensive and more efficient, thus allowing banks to offer credits at lower rates.
It’s simple economics, if you think about it. When there’s more demand for apples and less supply of them, the cost of each apple naturally goes up, as each apple is more valuable here. Now, where apples are available in abundance, the customer is king, and each seller needs to attract customers with favourable rates and terms – this is exactly what Credit Scores have done to the banking market. They have made the credit game fair for both the lender as well as you, the consumer.
Fair and equal credit decisions
If you backtrack to a world without Credit Scores, you’ll immediately realise why it came into being. Back in the day, credit decisions were taken on a case-to-case basis, and this gave a lot of room for discrimination on the basis of caste, creed, sex, or even race, thus making credit decisions unfair and biased.
Now, one can only imagine the horrific impacts of such decisions. Thankfully, people addressed this boiling issue and introduced ways to overcome subjective approvals and rejections. It is this line of thought that has resulted in the existence of the Credit Score we all know and love today. In short, you could say that Credit Scores have made banking a matter of ‘Even Stevens’.
Additional Reading: Who You Are, As Per Your Credit Score!
Better room for portfolio improvement
Thanks to Credit Scores being regularly updated, a mistake you made a few months ago (like a delayed payment) can be overcome as long as you make your payments by the book and up your credit game. Before Credit Scores came into being, one black mark in the past would just linger on in the minds of lenders thereby making the world of credit transactions a big hassle for you.
More credit products
The information that bankers receive from Credit Scores allows them to create credit products for different segments of customers based on their score. Each product is geared to a different level of risk. For banks to stay on top, innovation is a must. This is why you see so many customised and innovate credit products nowadays – banks are spending time on finding out what kind of credit people of different sections are looking for – you have the Credit Score to thank for this, by the way!
Empowering you with the power of negotiation
A Credit Score is a visible mark of your credit performance, so if you have a good score, flaunt it by all means because you can work out a favourable interest rate on future loans and credit products. Yes, good Credit Scores give lenders a reassuring feeling about you, and more often than not, they’ll surely give you a low-interest loan on favourable terms.
This, ladies and gentlemen, is only possible due to the existence of Credit Scores.
Helping you re-evaluate your credit behaviour
Ignorance is bliss, but not when it comes to your credit history. Imagine recklessly going about your credit decisions without knowing where you stand; you have every chance of slipping into another vortex of trouble. Thanks to your Credit Score, you can get a good insight into how you’ve managed your loan repayments and where you currently stand.
You can then use this information to guide you to make decisions that are, firstly, realistically viable for you, and secondly, going to improve your Credit Score in the future.
Additional Reading: How to Maintain a Good Credit History
Right to information
One of the fundamental benefits of Credit Scores for customers is that they empower the latter with detailed information. Gone are the days when you had to pay for your Credit Score. Today, you can not only get your Credit Score for FREE in less than three minutes, you can also get a detailed Credit Report from Experian and really analyse your credit history.