Why Is Credit Score So Important?
Your credit score is a key indicator of your capacity to repay loans to lenders. A credit score is a three-digit numerical representation of your credit history. It is compiled in the Credit Information Report, or CIR, and is based on data gathered from lenders.
Financial organizations consider your credit history and score when deciding whether to give you money, how much, and at what interest rate. Credit rating firms like Credit Information Bureau (India) Ltd collect information and compile credit scores.
What is the importance of credit score?
A credit score is a three-digit number that indicates how creditworthy you are. When you apply for a loan or a credit card, it’s the first thing lenders look at. It provides them an indication of whether you’ll be able to repay the loan on time or not. As a result, maintaining a decent credit score is critical. Making all your payments on schedule, monitoring your credit reports frequently, paying off existing credit card debt, and keeping your credit utilisation low below 30% can help you maintain your credit score.
What factors go into determining a credit score?
Each credit agency uses a different credit scoring model to calculate your credit score. Although your score may differ, the elements that each bureau considers are the same, and they are as follows:
- 35 % payment history
- 30 % credit utilisation
- 15 % of people have a long credit history.
- 10 % credit mix
- 10 % new credit
The advantages of having a good credit score:
A high CIBIL score (750 or more) can help you get:
- Interest rates that are lower
- A larger loan amounts
- Loan approvals are processed more quickly.
- Repayment durations that are longer
The Importance of Credit Scores:
If you have a strong credit score, you will have many benefits over individuals who do not have one or who have a low credit score. If you have an excellent credit score, you are eligible to the following benefits:
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Credit products with lower interest rates and better terms.
One of the advantages of having a good credit score is that banks may give you lower-interest loans and credit cards. Other advantages include a reduction in the processing charge and the possibility of obtaining a larger loan amount.
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Increase your chances of getting a credit card or a loan.
Borrowers with a good credit score are deemed low-risk, which means their chances of getting loans and credit cards are better.
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Access to the top credit cards with the best rewards.
You can also receive access to the most rewarding credit cards on the market if you have a solid credit score, including those with the lowest interest rates and the finest incentives, such as cash back, travel points, and other perks.
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Get your credit card approved for a larger credit limit.
You can also obtain accepted for a greater credit limit on your credit card if you have an excellent credit score. Because of your demonstrated creditworthiness, creditors are more willing to lend you additional money.
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Are you eligible for a loan offer that has been pre-approved?
Pre-approved loan offers are also available to borrowers with good credit scores. In most cases, banks will make a pre-approved loan offer to existing customers with a decent credit history.
As a result, maintaining a strong credit score is critical if you want to take advantage of all the advantages.
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