Shubh Laabh
How Important is Good Credit Score
To get a loan one must have a Good Credit score. It’s important to have a good credit score and let’s learn how to improve it. A good credit score helps to get more credit from the bank. This can lead to a very good Interest Rate from the banks. However, a poor score may result in the bank refusing to grant a loan.
Sometimes, someone with the same income and age is sanctioned a loan at a lower rate, compared to other who has low credit score. In banking, offers are based more on discipline and spending habits than income. And the report card banks use to assess this is called a credit score.
Credit score is a small three-digit number, but it impacts the offers bank gives. In India, it typically ranges from 300 to 900, and banks use it to determine whether borrower is safe to lend. A good score can help to secure better interest rates and faster loan approvals, while a poor score can close the doors of many banks.
How credit score is calculated –
Credit score is based on spending patterns and calculations. Credit bureaus like CIBIL look at whether borrower make timely payments on loans and credit cards, how much credit limit is used, and how often borrower applies for new loans or cards. Frequent loan applications indicate stress, which impacts credit score.
Importance of Credit Score –
Often people think that credit score is useful only at the time of taking a loan, but in reality it has an impact on many places. Good score can help to get a home loan more easily and at concessional interest rates. Credit card limits and Approvals also depends on credit score.
Sometimes,
banks may outright refuse a loan due to a low score, even if one have a good income.
Mistakes that lead to Low Credit score –
Credit Score Importance in India: The biggest mistake is not making timely payments. Even a single late EMI or credit card bill can cause credit score to plummet. Moreover, paying only “minimum due” is also not a good habit as it indicates that one is struggling to repay the loan. Repeatedly using the entire credit limit, applying for multiple loans or cards in a short period of time and closing old accounts can also harm the score.
Credit Score Importance in India : How to improve credit score –
The good thing is that improving credit score is not so difficult, one just need regularity and payment discipline. Firstly, every payment should be timely done, it makes the biggest difference. Don’t use full credit limit, rather limit it.
If one is starting out, it may be helpful to take a small loan specifically Consumer loans or Gold loans, and repay it on time or use a secured credit card. Also, avoid applying for loans or cards and most important credit card loans as they are given on very high interest rates repeatedly without any need.
If any mistake or discrepencies are seen in the credit report, get it corrected immediately. It takes time, change doesn’t happen instantly. One should keep in mind that improving credit score doesn’t happen overnight. It takes time. But if one follows the right habits over a few months, gradually improvements can be seen in credit score.
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Rohan Umak