The credit score or CIBIL score in India is three digits ranging between 300 and 900 and displays your creditworthiness to banks and other financial institutions. This credit score affects how you use your credit card and your financial habits.
If you ever need a loan from the bank, the bank will check several things, including your credit score. Your credit score would indicate whether you are eligible for a loan. Hence, having a high score is always advisable before applying for a loan.
Why is a Good Credit Score Needed?
Having a good credit score provides you with many advantages, some of these are-
- Better chance of loan approval and credit card
If you have a low credit history, it would be highly challenging to get a new credit card or a loan. But even with an excellent credit score, it is not guaranteed that you will get the loan since the banks assess other factors as well. Such as, whether you have any previous loans and what your income consists of. However, having a good score boosts your chances of getting a new credit card and a loan.
- Low-interest rates on loans and credit cards
Interest is one of the costs you are liable to pay when you borrow a loan. And your interest rate is in direct connection with your credit score. You may get the best interest rates if you have a good credit score. However, if you have a low credit score, your interest rate might be higher, and paying off your debt would become challenging.
Difference Between an Excellent and Good Credit Score
If you have a credit score of over 650, then you have a good credit score, and if you have a credit score of above 750 then you have an excellent credit score. The higher your credit score is, the more benefits you get. If your credit score is perfect, you have great spending habits using your credit card. And this will make you eligible for low-interest rates and high chances of approval. But even if you have a good score, you may get approved for credit, but it will be better than a high credit score.
Disadvantages of Having a Low Credit Score
- Risky for big lenders
With a low credit score, the big banks would hesitate to give you a loan since you would be considered risky. You would still get a loan from smaller financial institutions that may need to be more reputable.
- Paying more for the loan
You can get a loan with a low credit score. But the terms and conditions would be challenging. You need to pay a high-interest rate. You would be spending more to pay off your interest rate, and overall, it will take you longer to pay off your entire loan.
What Affects Your Credit Score?
- Payment history
Your credit score is influenced by how timely you are with paying off your credit card bills. Your payment habit displays your reliability and boosts your credit score.
- Credit utilization rate
Your credit score is also affected by your credit utilization rate. This rate signifies the amount of credit you use compared to your total credit limit. You should use 30% of your credit limit.
Conclusion
Having a good credit score would help you in many ways. And you can maintain your credit score and boost it with time by paying off your bills when they are due. You should not have any previous loans that need to be paid off, and be aware of the credit utilization rate. You can also use a credit card app to keep track of your spending habits using your card.
Author Bio
My name is Emma Perez, and I have a keen interest in the field of writing. I have written a couple of articles on various gemstones, fashion and would love to express my opinion on more such stones. Hope it has maximized your knowledge of gemstone jewelry and satisfied your quest to buy moldavite jewelry from an authentic place. We believe in quality and offer the same in our information and products.
