Ever wondered how a good Credit Score can impact your life? Here are some ways in which a good Credit Score can be rewarding.
It’s hard to imagine a world without Credit Cards and loans. The banking industry has evolved from traditional cash payments to convenient and fast digital transactions. Paperless transactions are also gaining ground. With banking having come a long way, financial lenders have capitalised on the Credit Score as a key decision-making factor while offering a loan. Now, let’s take stock of how the average consumer benefits from a good Credit Score.
Additional Reading: Best Rewards Credit Cards From SBI, HDFC, Kotak & Citibank
What is a Credit Score?
It is a three-digit number that summarises your financial history. Your Credit Score is the chief determinant of the approval or rejection of your loan applications. Typically, your score is based on your past credit repayment. Therefore, a good score depends on how judiciously you use your Credit Cards and your repayment history, among other factors.
A high score is a result of of sound money-management skills and timely payment of debts. Simply put, your Credit Score is proof of whether you pay your dues such as loan EMIs and Credit Card dues in full and on time. Financial institutions such as banks and mortgage companies check your Credit Score to judge whether or not to offer you credit.
Additional Reading: 7 Credit Report Myths Busted
How does a good Credit Score impact your life?
A solid credit history is necessary for becoming creditworthy and improving your access to loans and credit. How, you ask? Here is a compilation of five ways in which your Credit Score can make a huge difference:
- Loans: Be it a Personal Loan, Home Loan, or Car Loan, you may have to opt for one at some point in your life. Having a high Credit Score works in your favour by convincing lenders that you can repay the loan on time. This increases your credibility as a borrower.
- Jobs: Globally, it is not unusual for employers to check the Credit Score of potential candidates. This trend is gradually becoming popular in India. A bad Credit Score hints at the reckless lifestyle choices and lack of seriousness about monetary matters. This can also reflect on the chances of high debt, which might interfere with a candidate’s performance at work.
- Going abroad for professional or educational purposes: If you visit a country outside of India for educational or professional purposes, institutions consider the Credit Score before issuing you a Credit Card or granting a loan. This is particularly common in the US and the UK. In such circumstances, a low score can prove unrewarding for you.
- Higher limits and lower interests: In terms of taking a loan, even a slight decrease in the interest rate can make a huge difference by reducing the amount to be repaid. With a good Credit Score, you can enjoy lower interest rates. Great, right? Here’s more. A high score makes you eligible for loans with higher limits.
- Emergencies: Emergencies bring with them the unprecedented need for credit. When pressed for credit, a high Credit Score can come in hand by increasing your chances of getting a loan.
Additional Reading: Who You Are, As Per Your Credit Score!
How to increase your Credit score
Low Credit Score? Don’t worry. A low Credit Score is not the end of the world, especially when there are several ways to reconsider your credit behaviour and improve your score. A few tips to buckle up and revive your Credit Score are mentioned below.
- It is always wise to pay your bills on time. Apart from fetching a great score, it will keep you on track with your finances.
- Instead of utilising the entire credit limit, try restricting yourself to just about 30%.
- Never let your accounts get out of sight. This will help you prevent loan defaulting.
- Examine your credit report and report discrepancies, if any. Watch out for charges due to identity theft or Credit Card frauds.
- Think before discontinuing your old Credit Cards, as it implies a dip in your financial activity and reflects badly on your Credit Score.
Additional Reading: Things You Should Know Before Checking Your Credit Score
Now that you know the many benefits that an excellent Credit Score can bring you, check your Credit Score for free here. Feel free to check out the suggested link below for more insight on Credit Scores. We wish you the best on your journey to becoming a Finance Guru!