How Does a Good Credit Score Affect Financial Decisions?
When it comes to applying for a credit card or a loan, each factor matters. And each factor plays a significant role in deciding the interest rate you are charged by financial institutions. One such important factor is credit score. A credit score plays a crucial role in every financial decision you make. Whether it’s buying a motorbike, a car, or a house, when you buy anything on credit, your creditworthiness evaluation is the primary step banks perform before moving ahead. A person with a good credit score gets a loan easily and the one with a bad score struggles.
What Is a Good and a Bad Credit Score?
A three-digit number ranging between 300 to 900 is referred to as a credit score. The higher your number, the better your credit score, and vice versa. When your credit score is between 750 to 900 or approaching 750, your credit score is said to be a good credit score. Whereas, when your credit score is less than 650, it is considered a bad credit score that needs urgent attention. The better your credit score, the more favors you get from financial institutes while applying for a loan. If you lie in the bracket of a bad credit score, financial institutes do not trust your loan repayment ability.
What if your credit score is between good and bad, i.e., 650 to 750? When you have a credit score between 650 and 750, you are among the crowd who have less negotiation power for interest rates and have to pay higher rates of interest compared to good credit score holders.
How To Get A Good Credit Score?
To improve and get a good credit score, it is important to address the following factors:
• Loan And Credit Card Repayment History: Your on-time loan EMIs and credit card bills are some of the important factors credit bureaus consider while giving your credit score. One late payment can lower your credit score considerably.
• Credit Utilization Ratio: It is always advisable to keep your credit utilization ratio to 30% to 40% of the total credit limit. Keeping a low credit utilization ratio helps you not to reflect yourself as credit-hungry.
• Credit Inquiries: Every time you apply for a loan or submit a credit-based application in a short span of time, you hamper your credit score. So, never make unnecessary inquiries for loans and credit cards.
• Credit Mix: If you want to keep your credit score good, it is important to keep a healthy credit mix. An ideal mix of revolving credit, for example, credit cards, and installment credit, for example, a loan with a fixed EMI and has fixed end date, shows your ability to manage different types of debt.
Benefits of a Good Credit Score
A credit score describes a borrower’s responsible behavior regarding loan repayment, and a good credit score describes you as a good debtor. A good credit score is beneficial in different ways.
• A good credit score gifts you low interest rates for your loans and on your credit cards making it easier to pay back the money.
• Getting a loan or credit card approval becomes a cakewalk with a good credit score. Your creditworthiness helps the banks and money lenders trust you in paying back the loan amount.
• Your credit score decides your loan amount. When you have a good credit score, you are selected for a higher loan amount without getting into the grill of negotiation.
• A good credit score is access to the best credit cards. It qualifies you for the best credit cards with lower interest rates and bigger deals, discounts, and offers.
In today’s financial landscape, a good credit score is an invaluable asset that can significantly impact your financial decisions and overall financial well-being. It is crucial for every person to understand and maintain a positive credit history and good credit score, a bad credit score isn’t the end of a smooth financial journey. Careful and financially conscious decisions can help you boost your credit score within 6 to 9 months.
Remember, a loan is a responsible financial decision that not only helps you financially at the moment but also helps you build a good credit score if you pay the EMIs on time. If you want to apply for a loan or check your credit score for free, visit SahiBnk.
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