How A Good Credit Score Can Help You Save Money


A good credit score is not only a determinant of your financial health but is also like a blessing in disguise. While there are several indicators of economic well-being such as a fat bank balance, appreciating assets and a portfolio of investments, credit history too is an important part of this list.

A credit score is a numerical value that is used to assess a person’s trustworthiness and ability to pay back a certain debt. The higher this score is, the better it is. You will be eligible for better loan facilities in the future if you have a good credit score. However, there is more to this score. Not only will it make it easier to get a credit card approval, it will also help you save some of your hard-earned money. Wondering how? Read on to find out.

But first, for those who do not know what a credit score is, here a simple explanation. A credit score is a three-digit number that ranges from 300 to 900. A good score is anything that is 700 and above. This number is arrived at after taking into consideration a number of factors such as how you pay your bills, manage your loans and use your credit card.

Here is how a higher credit score will benefit you:

  1. You can borrow at a lesser cost: One of the most promising benefits of having a high credit score is this: The cost at which you borrow will be relatively much lesser when compared to other market rates. What this means is that you will pay a lesser amount as interest on loans such as personal, home, automobile, education, etc. Consequently, you will end up saving this money. In fact, in the recent years, many lenders are opting to go for ‘risk-based pricing’. Therefore, the interest rates charged will vary, depending upon the applicant's profile strength. Those with a bad scorecard will have to pay a higher rate of interest on their debt.

Let us take this example to understand this better.

  • For a person with a bad credit score, the rate of interest offered on a 1-year personal loan of Rs.2 lakh would be 12.99%.
  • The total interest paid on this loan will be Rs.14,352 and the monthly EMI will be Rs.17,863.
  • On the other hand, a person with a good credit score may get the same loan at the rate of 10.99%. In such a case, the total interest paid will be lesser, at Rs.12, 105.

  • Your credit card charges will be lower: You will be charged lesser interest rates on credit card balances. Paying off credit card debt will be very difficult when the interest rates are hefty. Generally, they may range from 10% to 20%. If you have an outstanding balance on your credit card and do not want to get further engrossed in debt, lowering the interest rate could help. But how? Should you move to another card? No! Build a good credit score so that the lender will see you as trustworthy and lower your interest rates on all credit card-based charges. An impressive scorecard will also give you the power to negotiate with your lender for a lesser rate of interest

  • Other credit card perks: There are also a number of other benefits that you will be eligible for if have good creditworthiness. Firstly, you will be able to hold a card that comes with a high credit limit. You will also qualify for cards that offer a number of perks such as priority boarding in flights, loans on credit cards, better cashbacks and reward points, air miles, discounts, and freebies such as complimentary movie tickets, meals at restaurants and special discounts on ticket bookings.
  • Better loan transfer rate: If you have a loan in hand and are looking for a cheaper lender for a loan balance transfer, a good credit score is a true blessing. Not only will you get a faster approval, lenders will want you to opt for them because of your trustworthy behaviour. When you transfer your debt at a much lesser cost, you will be able to save a lot of money in the long run.

  • Waivers: You can also up your game with a number of waivers on charges such a transactions fees, processing fees etc. Though all banks may not offer this, there will be some lenders who go all the way to waive off certain costs.

  • The privilege to negotiate: Your credit score will give you the edge over others and this will make you a ‘preferred borrower’. You will have the privilege to negotiate your interest rates and other costs related to borrowing better than others.

  • Cheaper automobile insurance: Surprisingly, insurance companies too have a tendency to believe that those with good points will turn out to be ‘less-risky’ in their behaviour. It is believed that those with a poor credit score will file more claims as against those with a good score. Therefore, people with a bad score will have to pay a higher premium. Those with an impressive score will have the benefit of paying a lesser premium.

  • Faster approval: If you submit an application for a credit card or a loan, the rate at which you will receive approval will be comparatively faster than when compared to another applicant with a lower credit score. Though this does not directly fetch you cash, you will get access to funds in a much more hassle-free manner.

Factors that affect your credit score:

  • Level of debt: The amount of debt that you currently have has a direct relationship with your credit score. As much as 30% of the credit score is affected by the loan amount that you may have in hand. This is the aggregate of all the debts that you hold, including your credit card outstanding amount. Your credit card utilisation ratio and debt to income ratio also come into play when the score is computed.
  • Credit age: The longer you have been holding a credit card, the better it is for you. This is because this reflects how well you are able to handle credit and how well-versed you are. On the contrary, if you are relatively new, then it might be harder for the lender to trust you. This is why the ‘age of credit’ is one of the most important factors that determine your eligibility level for a new credit card.

  • Type of debt: There are different types of debt that you can have. These may be asset-based loans and non-asset-based loans. Having only one type of credit will jeopardise your credit score. Ideally, having a balance of loans for various types of assets will help you in the credit score aspect.



At Millennium Credit Solutions, we believe that life is easier with excellent credit.
We have a dedicated staff devoted to assisting you with your future financial needs.
We provide advice and information on how to best manage your current credit to maximize the impact to your qualifying ability.



Call now for free expert advice: +91 95350 61366

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