Reasons why a good credit score is more important than you think
By :
A good
credit score (CIBIL score) has many rewards. With this, not only do you
get a loan effortlessly, but its interest rate is also low. A good credit
score is advantageous for you in many ways. Your CIBIL score shows how your record in financial
matters is.
In this article, we are telling you about the
advantages of having a good credit score so that you too can correct your
score.
Get a loan easily and at a low interest rate
A good credit score does not only give you a loan easily but
it also allows you a loan at a lower rate of interest. Your credit report encloses
all the details of your debt and how you repay it. That is why if it is decent
then the banks will trust you and grant you a loan easily. Apart from
this, if your credit score is good, the bank and NBFC also put forward
pre-approved loans. Good credit score give you an idea that till now you have
repaid your loan at the right time. That is why when you go to obtain a
loan with the bank or NBFC; it will easily offer you the loan according to your
need. Whereas if your credit score is terrible, the bank will not give you
much loan. The bank may refuse to give you a loan according to your requirement.
Good Credit Card Option and Higher Limit
With a good credit score you can easily avail a credit
card. Apart from this, you will have many credit card options available
from many finance companies and banks out of which you can choose a credit card
for you according to your need. You will also get many advantages like
cash back and offers etc. With good credit score, you can apply for a credit
card with a high credit limit. Usually, the credit card comes with a fixed
limit. If you surpass this limit, your score may go down. But, with a
strong score, you have the option to pertain for a higher credit
limit. Apart from this, interest on credit cards also has to be paid less.
It will be easy to transfer loan
If you want to relocate your loan from one bank to another bank, then
other bank must check your credit score before transferring your loan from your
bank. If your credit score is not acceptable, then it is possible that it
rejects your loan transfer application.
What does a credit score depend on?
A person's credit score deeply affects his/her loan
eligibility. The credit score is determined by numerous specific credit
profiling companies. In this regard, it is seen whether you have taken a
loan before or have used credit card etc. The credit score of any person
depends on the repayment history, the ratio of credit usage, the payment on the
current loan and the timing of bills.
A 30% credit score depends on whether you are repaying the
loan on time, 25% depends on secured or unsecured loans, 25% on credit
exposure and 20% on loan usage.
Although the credits score range is between 300 and 900. However,
a score of 550 to 700 is considered very well. Scores between 700 and 900
are considered extremely well.
How can you check your credit score
Many mobile wallet apps have launched the facility to check credit
scores. Now you can see your credit report in the users’
details. Through this, you will also be able to check over the credit
report of active credit card and loan account.
Tips to maintain a Good Credit score
A good credit score (CIBIL score) comes up with many
advantages. Your credit score shows how your record in financial matters
is. If you have a good credit score, you will get a loan easily and at a
low interest rate. That is why it is important that you maintain your
credit score. Here we are telling you how you can keep your credit score
good.
·
Pay bills and installments on time
Loans or any other EMI and credit card dues should be repaid ahead of
schedule. If you keep this habit, then your credit score will improve. Do
not be careless in this regard.
·
Maintain Credit Utilization Ratio (CUR)
The amount of credit limit available to used
credit limit is called Credit Utilization Ratio (CUR). To know this ratio,
divide the total outstanding balance of the card by the total credit
limit. For example, if you have two credit cards with a total credit limit
of 5 lakh rupees, and one card has an outstanding balance of 2 lakh rupees and
another 50 thousand rupees, then according to your credit usage, the ratio is
50%. For a good credit score, it is always advisable to keep credit utilization
ratio below 30%. This indicates that you are not much dependent on credit
card. On the other hand, if your credit utilization ratio is more than 50%,
then the lending company will see you as a risky customer.
·
Check your credit limit regularly
It is also necessary to check
the credit score regularly. By having regular knowledge of your
credit score, you will be able to improve it in time. Credit score tells
you whether you have any other debt or you have not made any mistake in
repaying the loan. Many times it has also been seen that your credit score
should be good but due to many mistakes such as incorrect information made by
the bank, wrong account number, incomplete update of payment history, your
credit score can deteriorate. In such a situation, you can easily solve
this problem by telling the bank about their mistake and correct your credit
score.
·
Payment of different types of loans
A person who has a good record of repaying debts has an equally good CIBIL
score. In this case, if you have not taken any loan yet, then you can take
a loan for your need, even if you repay it on time, your CIBIL score will
improve. To make a good CIBIL score, it is necessary to have a good loan
history. This may include different types of loans secured or unsecured,
short term or long term.
·
Do not close credit card account
You should avoid closing your credit card
account. Keep shopping and paying bills with this. Apart from this,
you should constantly review your joint account accounts, CIBIL score. In
case of a joint loan, a customer has equal responsibility for payment of
EMI. This has a direct impact on the credit score.
·
Do not take many loans simultaneously
Many types of loans and credit cards of many
banks can get you stuck in the debt trap. Therefore, to have a good credit
score, it is important that you do not take more than one loan at a time,
because it affects your credit score.
