Having a good credit score will make your financial life smoother. It determines your creditworthiness. Credit is important for individuals and businesses alike in today’s competitive financial world. A good credit score determines your eligibility for loans, credit cards, and credit for the purchase of something exclusive. A good credit helps in getting attractive insurance options and can even present a more responsible image in the eyes of potential employers. Let us read on to find out the importance of having a good credit score and credit history.
Top Benefits of Having a Good Credit Score
- Helps you get loans and credit cards at lower interest rates: The interest rate that you get on your loans and credit cards is related to your credit score and credit history. You will be eligible for the best interest rates with a good credit score. When your interest rates are low, you can save money and also have enough money for other expenses. You will end up paying off your debt soon.
- Helps in getting higher loan amounts: Even with a bad credit rating, you can qualify for loans. But the amount will be limited. You will not get approved for loans with higher amounts. Banks and lending institutions will be willing to lend you money when you have demonstrated that you can repay your EMIs and credit card bills on time without defaulting.
- Higher credit card limits: You will be eligible for credit cards with higher limits. Having a good credit history suggests that you can handle credit well. So banks and lending institutions will consider giving you a higher line of credit.
- Quicker loan approvals: When you have a good credit history, your loan application gets approved immediately and does not have a waiting period. Banks and lending institutions give pre-approved loans to consumers who have a good credit score and a long credit history.
- Helps you get rental houses and apartments easily: Landlords are now using credit score as a parameter for renting out houses or apartments. If your credit score has been affected due to outstanding rental balance or expulsion from a house, it will lower your chances of getting an apartment or a house for rent. On the other hand, if your credit history is good, you will get easy approval for renting out a house or apartment.
- Helps you in getting better car insurance rates: Insurance companies come up with something called the insurance risk score. This is calculated using the information from your credit report and insurance history. If you have a bad credit score, they will typically charge higher insurance premiums. People who have a good credit score will pay lesser insurance premiums.
- It will add value to your visa application: Your income tax record is taken into account by countries like the USA and the UK when reviewing your visa application. So, having a good credit score adds significance to your visa application. Your visa application will get easily approved with a higher credit rating.
- Helps you get a cell phone on contract without any security deposit: Cell phone service providers check your creditworthiness to give you a contract. If you do not have a good credit history, you may have to choose plans that cover only expensive phones. You may have to pay more for the contract until you have established yourself with a service provider. If you have a good credit score, you do not have to pay a security deposit. You may also get a discount on the buying price of the recent phones before you sign a contract.
- A Matter of Pride: It is a thing to be proud of to have a good credit score. People sometimes work hard to maintain their credit score and also take their credit rating from bad to good. They require a lot of financial discipline. If you have a good credit score, continue to maintain it. A few missed payments will hurt your credit score.
- Future Impact: Having a good credit history will have a positive impact on your financial future. Even if you have a good credit score now but had a negative credit score earlier, lenders might write you down for loans and credit cards. Thus, having a consistently excellent credit score is vital for your future.
You can improve your credit score by practicing the following:
- Repay your monthly EMIs and debts on time (on or before the due date)
- Communicate with the lender and make arrangements for repayments. For instance, if you are facing some financial difficulty, you can reschedule your EMI date.
- Do not ignore overdue bills.
- Monitor your credit report periodically.
- Check your credit history and credit score from time to time
- Avoid closing old credit cards as you will lose track of the good credit history.
- Do not put in too many credit card applications or do not have too many loans.
- Limit your expenditures, and this will improve your credit score
- Keep a low credit utilization ratio
Check Your Credit Report and Credit Score For Free
There are four credit bureaus in the country – Transunion, CIBIL, Equifax, Experian Credit Information Company, and High Mark Credit Information Service. From 2017, the Reserve Bank of India (RBI) made it compulsory for all the four credit bureaus in the country to give one free credit report to the consumers in the country. Thus, you can get 4 credit reports for free. Also, you can subscribe to any one of the four credit bureaus and get your credit reports and credit score. Do a free credit score check and get a free credit report at creditmantri.com, which has its credit score powered by Equifax.
You would have read and understood the importance of having a good credit score. It is essential to maintain and improve your credit score. This has a great impact on your current and future financial life.