Your creditworthiness to banks and other financial organizations is shown by your credit score, or CIBIL score, which is three numbers and ranges from 300 to 900 in India. Your credit score has an impact on your financial behaviour and credit card usage.
The bank will look into a number of things, including your credit score, if you ever need a loan. Your credit score will show whether you qualify for a loan or not. Therefore, it is generally good to have a high score before asking for a loan.
Credit Reports and Credit Scores
Why is a Good Credit Score Needed?
You may benefit from having a good credit score in a variety of ways, including the following:
Better chance of loan approval and credit card
It would be quite difficult to obtain a new credit card or a loan if you have a poor credit history. However, even if you have a high credit score, there is no assurance that you will be approved for a loan because banks also consider other variables. such is if you have any outstanding loans and the nature of your income. However, a high score increases your likelihood of being approved for a loan and a new credit card.
Low-interest rates on loans and credit cards
One of the fees associated with borrowing money is interest. Additionally, your credit score directly affects your interest rate. If you have an excellent credit score, you might be able to acquire the best interest rates. However, if your credit score is low, your interest rate can be greater and it might be difficult for you to repay your loan.
Difference Between an Excellent and Good Credit Score
When your credit score is over 650 you are considered to have good credit, and when it is over 750 you are considered to have outstanding credit. You receive greater perks when your credit score rises. You have excellent credit card usage habits if your credit score is flawless. And this will qualify you for low interest rates and high approval rates. However, even if you have a decent score, getting credit approval will still be preferable than having a high credit score.
Disadvantages of Having a Low Credit Score
Risky for big lenders
The large banks would be reluctant to lend to you if you had a poor credit score because they would view you as hazardous. You would still be able to borrow money from smaller banks, albeit they may need to have better reputations.
Paying more for the loan
Low credit scores are acceptable for loan approval. However, the prerequisites would be difficult to meet. You must make a significant interest payment. In the end, it would take you longer to pay off your complete loan since you would have to spend more money to pay off your interest rate.
What Affects Your Credit Score?
Your ability to make prompt credit card payments has an impact on your credit score. Your credit score is increased by your payment history, which shows that you are reliable.
Credit utilization rate
Your credit utilization rate has an impact on your credit score as well. This ratio shows how much of your available credit you have used so far. Use 30 percent of your credit limit.
Conclusion A high credit score might be beneficial to you in many ways. And by clearing your debts as they become due, you may keep your credit score stable and even raise it over time. You should not have any outstanding debt from prior loans, and you should be aware of your credit utilization rate. A credit card app may be used to monitor your credit card usage patterns.