After the banks have upgraded to online technology, obtaining a loan has become hassle-free. However, becoming eligible for a loan is determined by a lot of factors such as stable income, age and above all a good credit score.
The awareness of Credit Score is fast catching up in India as the term is often used during credit card and loan application processes. Besides, credit score is used as a criterion for so many other purposes. Through this article, Creditmantri brings you an in-depth understanding of Credit Score and its benefits.
What is A Credit Score?
A credit score is a three-digit numerical expression that represents an individual’s credit history. The credit score usually ranges between 300 to 900. Banks report your credit details to the credit bureaus every month based on which your credit score is calculated.
What Is a Good and Bad Credit Score?
While you may not suffer much with a bad credit score, a good score definitely wins you great deals on loans and credit cards. As you credit score is calculated based on your credit behaviour, you can get a good score with a strict financial discipline.
Any score above 700 is deemed to be a good score while below 600 puts you on shaken ground and might become a deterrent in availing loans through formal credit system.
Your payment and credit history, credit utilisation ratio, defaults, hard enquiries and mixed credits are some of the factors that determine your credit score.
What’s the Big Deal About a Good Credit Score?
A good credit score may not get you millions but it can absolutely reduce a sizeable amount on your loan payment.
Power of Bargaining: Banks usually prefer the loan applicants who have a good credit score as they guarantee consistent repayments. In such a situation, you can set the terms for the loan and reduce the rate of interest considerably. A good score grants you the power to negotiate as the banks do not want to lose a worthy customer.
Quick Loan Approval: With a bad credit score, the rate of loan rejections is higher. The lenders check through several documents to approve your loan. But the approved loan does not come cheap, you may end up paying a high rate of interest on the loan.
Applicants with the credit score above 700 get quick approval on home loans, personal loans and credit cards with a favourable interest rate.
Impact on Employment: Companies into banking and finance do a check on your credit history to evaluate your potential and credibility. It is a clear proof of your reliability and trustworthiness. If you have not managed your own credit efficiently, the organisation might lose trust in you to handle bigger projects. Hence having a good credit score is an important criterion even for your career growth.
Building a good credit score cannot be done overnight. It requires a certain amount of financial discipline and meticulous spending habits. However, nothing is impossible. A bad credit score is not the end of everything. You can always get back on track with a responsible credit behaviour.
Are you now excited to see your credit score for free? Click here to see it!