Nine Benefits Of A Good Credit Score And How It Could Help You
Discover 9 benefits of a good credit score and how it can improve your finances. From lower rates to better loan terms, learn how it can work for you.
Don’t we all hope for easy, hassle-free access to funds especially on a rainy day? One way to ensure easy access to money is to be in the good books of banks and other financial institutions by maintaining a good credit score.
The credit score of a person is like a report card of an individual’s credit history based on repayment behavior of personal loans, home loans, credit card payments to banks or non-banking finance companies (NBFCs). A three-digit number is assigned to every individual by independent credit agencies, namely TransUnion CIBIL Ltd India, Experian and Equifax after a thorough analysis of the borrower’s previous loans and repayments.
Higher the credit score of an individual, the greater is the individual’s repayment capacity, while lenders view a low credit score as a potential red flag. So, how much is a good credit score? While credit scores for individuals range from 300 to 900, anything above 700 is considered to be a strong number and puts you in the driver’s seat as far as getting loans is considered. So let’s see what the benefits of a good credit score:
1. Pre-Approved Loans
Loans which are disbursed instantly to selected customers of banks or NBFCs are called as pre-approved loans. Having access to a pre-approved loan would mean that the bank has full faith in your repaying capacity. Some of the advantages of a pre-approved loan is that they are at reduced interest rates compared with market. However, these loans are strictly given to people with an impeccable credit history, in other words, those with a high credit score.2. Attractive Loan Products
A longer tenure loan not only gives the customer the advantage of more time to repay it, but also easier monthly installments to pay. However, customers with high credit scores tend to have an upper hand for a bank to lend longer term loans.3. Lower Interest Rates
A number of public-sector banks in India have publicly declared differential home loan rates linked to the credit score of an individual. So higher the credit score, lower will be the interest rates for an individual and vice versa. Private banks and non-banking financial institutions too follow this practice with unsecured loans.4. Easies Fund Access & Approvals
A higher credit score is akin to having a VIP status when it come to access to funds. Financial institutions feel assured in lending to such entities since the likelihood of them defaulting is lesser. Consequently, bank approvals are faster and paperwork too is kept to a minimum for those with a high credit score.5. Key Deciding Factor In Unsecured Loans
When it comes to secured loans such as home loans or car loans, the house or the car itself act as a collateral in case of a default. However, in case of unsecured loans, such as personal loans, where there is no particular thing that the loan can be pledged against, a decent credit score becomes an important deciding factor for banks and financial institutions’ lending decision lend.6. Higher Credit Limits On Credit Cards
A credit card company or a bank tends to give higher spending and withdrawal limits, or a higher credit limit, to a person with a good credit score. A higher credit limit would mean spend higher amounts with a credit card that comes with a higher limit. In fact, regularly exhausting the credit limits could also pressure the credit score.7. Access To Premium cards
A good credit score comes in handy if you would like to move up the ranks and own the premium gold and silver-coloured credit cards from a basic one. A number of banks cite a good credit score of 700 and upwards as a pre-requisite for credit card approval and better offers.8. Stronger Negotiations
Can you imagine banks and financial institutions making a beeline to lend to you instead of the other way around? A person with a high credit score commands the negotiations when it comes to loans with financial institutions. You can also get to pick and choose various options that banks have to offer.9. A Good Reputation
The biggest benefit of having a high credit score is the sound reputation and goodwill that comes along with it among financial institutions and banking circles.Conclusion
Look to improve your credit score gradually and take it higher as this can ensure quick access to funds at lower interest rates. So, make sure you don’t miss out or delay on any loan payments under any circumstances as the benefits of a good credit score are too good to be ignored.
IIFL Finance ensures that you get hassle-free loan with a process that is geared towards making everything easier for customers. At IIFL Finance the loan is given at an attractive rate and is disbursed quickly.
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