How does a high credit score benefit you? What is the importance of credit scores? If you have been seeking the right answers to these questions, you have just arrived at the right place!
All banks and lenders first check your credit score before approving a loan or credit card application. Therefore, a good credit score is important to easily get a loan or credit card approval. There are many other benefits associated with a high credit score.
Here, we have listed the top benefits of a good credit score.
Lower interest rates
Banks and lenders in India have started offering loans as per each applicant’s risk profile. This move has ensured that applicants who have a good credit score can avail of lower interest rates which leads to lower cost of loans. This is very important as even half a percentage of increase reduction can significantly impact loan EMIs and subsequently lead to financial savings. Therefore, one of the benefits of a good credit score is cheaper loans and other forms of credit.
A faster credit approval process
A good credit score is an indicator of an individual’s creditworthiness. This allows banks and lenders to make quick decisions concerning credit applications and helps applicants when they are in a financial emergency. Good credit scores mean quick access to funds through faster approval.
An improved negotiation power
Lenders always prefer to lend to creditworthy applicants who have the potential to repay the loans and credit card bills promptly. Customers who have a good credit score make for a desirable borrower, giving them an edge over other applicants. This also helps borrowers to easily negotiate with the lender for better credit terms and lower interest rates. In some cases, borrowers can also request for the loan processing fee to be waived off.
A higher loan amount
Higher loan amounts translate into an increased risk for the banks and lenders. This is the reason why lenders will insist on the borrower having a good credit score. With a good credit score, the lender will be assured of timely repayment and may be willing to grant a higher loan amount.
- Higher credit card limits
Credit card limits are generally decided based on one’s credit score and current income. A good credit score makes it easier for a card issuer to raise the credit limit for a customer. This is mainly because a good credit score indicates responsible credit behaviour on part of the credit card user and therefore reduces the risk element for credit card issuers.
Easy access to pre-approved loans
A pre-approved loan allows access to a quick personal loan when needed. However, these loans are not available to all customers. Banks perform detailed scrutiny including a check for a good credit score, applicant’s account balance check, etc before sending out a pre-approved offer.
If you have a good credit score, there are higher chances of getting a pre-approved loan from a bank.
Better chances of availing a longer loan tenure
A longer loan tenure results in lower EMIs which can help in managing monthly finances. However, from the lender’s perspective, a longer loan tenure could be riskier. With a good credit score, you could easily get approval for longer loan tenures and reduce the EMI burden.
The importance of high credit scores is increasing in India with every passing day. While we discussed only 7 important benefits of a good credit score, there are many others that you can experience while availing of some form of loan or credit. Having a good credit score makes your life easier and allows easier access to financial products and services. If your credit score is not up to the mark, you may want to begin improving it at the earliest.
FAQs of Benefits of Having a Good Credit Score
- What is a CIBIL score?
A CIBIL™ score is a three-digit numeric summary of a borrower’s credit history. It acts as a reflection of a person or business’s credit profile. The score is calculated using one’s past credit behaviour and credit usage pattern among other factors.
- What are the benefits of a good credit score in India?
A good credit score can mean easy access to various credit forms such as loans and credit cards. Among other benefits, one can get pre-approved loans, lower interest rates on loans, higher credit limit, longer loan tenure, flexible loan terms, waiver on processing fees, etc.
- Is 725 a good credit score in India?
A good credit score is anything above 700. Banks and lenders may be willing to easily approve a loan or credit card application of applicants with a 725-credit score.
- What is a good credit score in India?
A good credit score in India is above 700. In India, banks and lenders prefer to grant loans and other credit to customers with a good credit score.
- Why is credit score so important?
A credit score tells lenders about the applicant’s credit behaviour and credit history. With the help of a credit score, banks and lenders can determine whether it will be sensible to grant a loan or credit facility to a borrower.
- What are 4 ways to build credit?
4 ways to easily build credit include, repaying loans on time, timely payment of credit card dues, keeping credit utilisation to a minimum, and not applying for loans frequently.
- Can your credit score go up in a month?
A credit score may usually take a few months to be built or improved. This is dependent on credit usage pattern, credit behaviour, and the consistency of good credit usage. For your credit score to go up within a short time, you can check for errors in the report and request correction.