Credit scores are used by banks and other lenders who provide loans, mortgages, credit card companies, and even car dealers financing auto purchases, to make decisions about whether or not to offer you credit and what the terms of the offer (such as the interest rate or down payment) will be. With your hard-earned money being so important, your credit score becomes just as valuable. While you can survive with a bad credit score, it makes life unnecessarily difficult.
So, why do we need a high credit score?
Well, a high credit score is very helpful when you are trying to save money. It also helps when you apply for loans and insurance. In some places, it even affects the type of house you can rent or buy and the type of job you can get.
Your credit score teeters somewhere between 301 and 850, with a score equal to or above 750 being the ideal. Over your lifetime, your score will rise and fall according to your financial health, and it will affect your eligibility to receive credit, competitive credit card perks and interest rates.
If you’ve been paying your bills diligently, you can enjoy some of these perks of high credit.
What is a Credit Score?
A credit score is a numerical Score that summarizes your credit history and credit risk for lenders. If you are applying for any kind of a loan, be it an education loan, credit card or even a home loan, the bank or lender will check your credit report and credit score to understand your risk profile (i.e. how likely you are to pay back the loan) and decide whether they want to issue the loan to you. In India, presently there are four credit bureaus that are tracking millions of customers and their credit use:
There are of course many other benefits to having a high credit score, and this is what we will be discussing in this article. Here are 10 benefits of having a high credit score.
A bad credit score indicates a poor payment record, and few banks and lenders are willing to risk doing business with someone with a low credit score. Having a high credit score, on the other hand, shows that you are responsible and diligent when it comes to making payments. This means that you lower your risks as a borrower, and so banks and lenders will be more likely to approve your credit applications.
When you have a high credit score, you have more leverage to negotiate lower interest rates on new credit cards and loans. Why? Because banks and lenders can see that you’re more capable of paying them back diligently and so will be more open to offering you better repayment plans. Most lenders include a minimum credit score in their requirements — and the higher your credit score, the more negotiating power you have over rates.
The interest rate is one of the costs you must pay when you borrow money, and these rates are usually tied to your credit score. Obviously, the higher your interest rate, the more money you need to pay, which is hardly good for your finances. However, with a high credit score you’ll almost always qualify for low-interest rates and thus will be charged less on credit card balances and loans.
When you give your credit application, banks and lenders will look at your income and credit score before they approve it. When you have a high credit score, banks and lenders are willing to let you borrow more and thus will give you a higher credit limit. This is because your score shows that you pay back your borrowed money on time. Some loans may be approved even with a bad credit score; however, the amount you can borrow will be significantly lower.
Like most other loans, banks and lenders are more likely to give an attractive rate on your home loan when you have a high credit score. Someone with a high credit score is an ideal customer for banks and lenders. So they will be more than happy to attract you with better deals
Nobody likes waiting a long time for a credit application to be approved. Well, your credit score is connected to the speed of your approval; a bad score will mean a slower approval process with greater background checks, and a good score will mean a faster okay.
The most attractive credit card deals come with perks such as low-interest rates, better reward programs, cash back deals, higher credit limit, admissions to Plaza Premium Lounges at airports, discounts and zero annual fees. These exclusive credit cards are only accessible to people who have high credit scores. What’s more, as long as you keep up your credit savvy habits, banks will be willing to approve better deals in the future.
Looking for a new car? With a high credit score, you will have more bargaining power and you may be given access to better deals and better car insurance rates. Insurance companies will often look at your credit score when evaluating what kind of rates they should offer.
With today's hectic lifestyles, knowing that your financial transactions are secure and that most of them will go along smoothly is a huge weight off your mind. And that is almost guaranteed when you have a high credit score. Remember a healthy mind is a happy mind, and what makes a mind happier than lack of stress?
Your credit score plays an important role in how you shape your financial future. Keeping a healthy credit score helps you immensely when making plans for a secure future, so keep these points in mind when you are making an important financial transaction and be sure to keep that credit score high.
Even potential employers can take a look at your credit score if they have your permission. Employers want honest and reliable workers, so while other factors such as your job experience and education will have an impact on your chances of landing a job, a high credit score may also help.
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