Taking a loan or credit card has become very accessible as there are plenty of financial institutions offering hassle-free loans with flexible tenures. Credit Scores create a great impact on the financial health of a person and the credit choices they make. Having a good credit score will always lead to financial freedom.  The main advantage of a good credit score is getting loans at better interest rates, getting a credit card, and also improving the credit limit of a person.  

Most of the loans are sanctioned if the credit score is greater than 750. This is an information as to why credit scores plays an important role in getting loans sanctioned for applicants.  There are lot of advantages attached to a good credit score that goes beyond loan approvals. The blog gives you the validation of having a good credit score and the advantages of having a good credit score. 

Credit Score is an indicator to lenders and other parties that you pay your bills on time. It also indicates how you have handled credits in the past and a good credit score also is an indicator that you manage your money properly. 

 What is a Credit Score? 

A credit score is a three-digit number that establishes your credit worthiness in the eyes of financial institutions. The score ranges between 300 to 900, 300 being the least and 900 the maximum. The Credit Score is determined on the following factors. They are: 

Repayment History: 

One of the most crucial aspects that impacts credit rating is timely payments. You need to pay your bills on time and regularly increase the credit. Late payments, defaults, bankruptcy can negatively impact your credit score. 
 Credit Utilization Ratio:  

Make sure the your credit card utilization does not exceed 30% of the sanctioned limit. In other words, do not use 30% of your credit card limit. 

Credit History: 

A longer credit history gives lenders enough data to assess the reliability. The older your account it displays your experience in managing credit.  

Mixture of Credit: 

You need to have a mixture of credit that comprises credit cards, mortgages, instalment loans and so on is beneficial for your credit score. This is a validation that you can manage your credit responsibly. 

9+ Benefits of Having a Good Credit Score

The following are the list of advantages of having a good credit scores. 

  1. Better Loan and Credit Card Approvals: 

The greatest advantage of having a good credit score is that it increases your chances of getting approved for loans. Whether you want to apply for a personal loan, auto loan, or a mortgage, a good credit score proves your credibility to the lender enabling them to approve your loan applications. On the other hand, those with poor credit scores might face rejection rates. 

  1. Lower Interest of Loans: 

When you have a good credit score, you will repay it with the interest. When you have a good credit score, not only the chances of loan approval is higher but with one of the benefits of lower interest rate. Effectively a higher credit score will also reduce the burden to pay higher rate of interest and thereby reduce your EMI as well. 

  1. Quick Access to Pre-Approved Loans: 

Customers with a higher credit score find place in the list of premium customers in various banks and financial institutions. They also have the advantage of getting pre-approved loans from such institutions as they have full faith in their repaying capacity. These pre-approved loans come with a lower rate of interest.  

  1. Longer Tenure of Loans: 

When there is a longer tenure of loans, it gives the flexibility on the part of the customer to have more time to repay it. The monthly installments will also be affordable enough to manage for the customer. In a way, a customer with a higher credit score always has an upperhand for a bank to lend longer term loans. 

  1. Enhance Credit Limit Availability: 

A bank gives credit card to a customer who has higher spending or higher credit limit with a person with good credit score. A higher credit limit provides the flexibility to use the credit cards on various high purchasing options. But at the same time regularly exhausting the credit limit will also negatively impact your credit score. 

  1. Access to Elite Credit Cards:   

A good credit score improves the prospects of the customer to get a premium, credit cards from a basic one. A lot of financial institutions cite that a credit score of 700+ as one of the pre-requisites for credit card approvals. 

  1. Command Negotiations: 

A consumer with a higher credit score always has the advantage of negotiating a lower rate of interest with financial institutions on loans. They also have the flexibility and upper hand to choose from the various loan options from multiple financial institution. This gives them the commanding authority over the banks to reduce the rate of interest on loans. 

  1. Balance Transfer Access Service: 

The Balance Transfer tool is one of the valuable tools that customer can make use of. They have the flexibility to transfer their debt to a bank or financial institution with a lower interest rate. Banks make use of the Credit Score to transfer loan balances. 

  1. Strong Reputation: 

A person with higher credit score earns a goodwill among financial institutions and banks. It also gives them a sense of accomplishment. A good credit score indicates you have been a responsible borrower with repaying your debt on time, and kept your credit card usage under the desirable limits. These are commendable achievements on the part of the consumer.  

Conclusion:  

Getting a good credit score might be easier maintaining them is harder. It requires a high level of discipline and financial planning. This will lead you to greater rewards as you are being careful on your credit. When you need a loan lot of financial institutions will be ready to grant on the same with higher credit score. 

FAQs on Credit Score Benefits

  1. What is a Good Credit Score? 

Any credit score above 700 is considered good. This credit score reflects reliable credit history and responsible financial behaviour. 

  1. How can a good Credit Score help me in securing loans? 

A good Credit Score will help you in securing loans at a lower interest rate. It also helps you to negotiate for a longer tenure and giving you the flexibility in terms of EMI. 

  1. How does a good credit score help me to get a good credit card? 

With a good credit score, you are likely to get credit cards with better rewards, lower interest rates, and higher credit limits. 

  1. What is the duration gap between two credit score checks? 

It is advisable to check the credit score once a year to monitor credit heath, check errors, and give you methods to improve credit scores. 

 

Disclaimer: This page includes information compiled from many sources and is only offered for informational purposes. Given that this type of data might change over time, we cannot guarantee that the information supplied or included within it is accurate. It is anticipated that the user would confirm with the relevant source prior to making any choices or actions.