Your Credit Score is like a deal-breaker of sorts when it comes to credit applications. Despite this, many fail to realise the importance of having and maintaining a Credit Score.
On the hunt for a loan or Credit Card? You ought to know that your Credit Score is one among the major factors that lenders consider while reviewing loan/credit applications. You can say it is like a deal-breaker of sorts with respect to credit applications. Despite this, many fail to realise the importance of having and maintaining a Credit Score.
If you fall in the category of people who ignore the whole concept of Credit Scores, let us tell you one thing – you can never know when the need for borrowing credit may arise and it’s not easy to build your Credit Score quickly. Let’s discuss the negative impact of a low or no Credit Score, shall we?
Your loan eligibility is lower than others
Compared to those who maintain a good to excellent Credit Score, your chances of getting approved for a loan – be it a Personal Loan, Home Loan or Car Loan – is way lower. Lenders evaluate your creditworthiness before approving your loan application. And for that, one of the first things that they do is fetch your Credit Score from credit bureaus. So, if you do not have a Credit Score or if it’s on the lower end of the scale, then you’ll be categorised as a risky borrower and the chances of loan approval will be pretty low.
You may not get a Credit Card
Everyone’s got one today. It’s almost become a crucial financial tool in people’s lives, especially with all the interesting benefits it offers such as interest-free EMI conversions, discounts, reward points, cashbacks and more. Now, now, don’t you want one too? Well, you should know that your Credit Score plays a big role here too. Lenders tend to reject Credit Card applicants who have a low or no Credit Score. If you already have a Credit Card, then a poor score can hamper your chances of getting a credit limit enhancement from your provider.
Additional Reading: The Banes Of Not Knowing Your Credit Score
You’ll be charged higher interest rates on loans
Yup! Your neighbour might have got a great deal on his Home Loan, but it’s not necessary that you would get one too. Unless you have a good Credit Score like him. Do you? Check your score in less than 3 minutes and for FREE.
Coming back to the point we’re trying to make here – a low Credit Score means you’ll be charged a higher interest rate on loans. For instance, someone with a Credit Score of 750+ may land an 11% interest rate on their Personal Loan, but someone with a score lower than 750 may be offered, let’s say, 15 to 16%. You see the difference, don’t you? So, if you don’t want to shell out a large chunk of your income towards servicing interest payments, then you better up your Credit Score game.
No pre-approved offers. Poor, you!
Pre-approved loan and Credit Card deals are offered mostly on the basis of Credit Score and a proven credit track record. These deals usually pack the best in terms of product features, advantages, application processing time, and rates. But, unfortunately, those with a poor or no Credit Score aren’t offered such pre-approved deals.
Additional Reading: Everything You Need To Know About Pre-Approved Personal Loans
It is no doubt that Credit Scores are an important component of one’s finances. And, therefore, it is a must that if you have a low or no Credit Score, you take the next few months to work on improving it. It’s pretty easy, although time consuming, to build your score – repay your loan EMIs and monthly Credit Card bills on time and in full, do not over-utilise your credit limit, avoid too many loan/Credit Card applications, review your report often for reporting errors, etc.
Additional Reading: Almost 70% Of BankBazaar Consumers Have A Healthy Credit Score
But, first and foremost, start your journey to a good Credit Score by checking where you currently stand. Get your Experian credit report for FREE by clicking the link below.