Financial concepts and everything related to it is not simple, but learning about credit score is not that difficult. A credit report is a record of information on how well you have managed your credit, based on the credit report the credit score is provided. It is a number which you can think of like a grade for how well you have managed the credits and other finances over time.
Why your Credit Score is Important?
Your credit report is a file which contains information on your credit, and this data and your application are used by lenders to decide on whether or not to lend money to you, the amount that can be lent and the interest that is to be charged. Though the credit report is collated over time, there is a greater impact on the status of application over the most recent financial data as most lenders consider your current finances. If you have missed paying a few times over the past six years, you might become ineligible for loans or might be charged a higher interest as the lenders consider you as a high-risk applicant. A negative credit score can affect many financial plans and transactions. It is essential to check your credit report often as you get an idea of your credit score and also find any mistakes or fraudulent activity.
Benefits of a Good Credit Score:
There are many benefits to having a good credit score, Some of them are:
1. Improved chances of loan approval
2. Better interest rates
3. More power to negotiate a rate of interest
4. Chances of getting approved for a higher credit limit
5. Insurance premium rates for cars, house etc. is much cheaper
6. Getting an apartment for rent
7. Zero or low-security deposit for utilities like electricity, water, and cell phone connections
What is a Good Credit Score?
The rating of credit score varies based on lenders, as each of them has a separate standard of their own. However, the main aspect is that if one of the credit reporting companies give you a good score, it is more likely that the others will also rate you in the same way. However, a good credit score is not the only criteria for granting loans and credit lines; it is, also dependant on your income and the capacity to repay.
How to Improve your Credit Score?
Since your credit score reflects your payment, more importance is given to the current data.
Do not borrow too much on credit lines: The higher the amount you borrow on your credit lines, the lesser the credit score.
- Please do not apply for new credit lines as that will affect your credit score, do so only when it is necessary.
- Pay off your debts as soon as possible
- Ensure to pay bills regularly and on time. Missing even a few payments will have a bad impact on your score.
Most financial institutes provide you with the credit score on request, and it helps to keep a check by regularly checking your credit history. It is essential to have a good credit score to maintain good financial health, so keep a tab on your purchases, pay the bills on time and relish the benefits that it can offer!