A Credit score is a numerical representation of your creditworthiness and thus credit score is scrutinised by banks and financial institutes before lending money to borrowers. It helps the lender understand the kind of borrower you are. It gives the lender an insight about your repayment trends, how you manage your debt and how responsible you are towards your personal finances.
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The banks also check your credit history to understand if you have any missed payments or have defaulted on loans. Unpaid debt or missed credit card payments can hurt your credit score badly. Thus the credit institutions check your credit score for the following reasons:
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A credit score is denoted by credit rating agencies and is mainly calculated using the credit information provided by financial institutions and banks. Given below are some of the ways a credit score can impact your life:
You may not need credit now, but you may need credit in future to pay for medical emergencies or purchase a car. In such cases, you will need a good credit score to get a loan sanctioned without much hassle. Lenders and financial institutions check your credit score to understand your reliability. A low credit score means you are not a reliable borrower and thus banks may charge a higher interest rate or may reject your loan application. On the flip side, a good credit score means lenders will be willing to sanction your loan at an affordable interest rate as you are a responsible borrower.
Each one of us aspires to own a home one day. Your credit score may prove to be a roadblock between you and your dreams to own a home if you have a low credit score. A low credit score may affect your home loan interest rates or may lead to rejection of the loan application.
Consequently, a good credit score instills a guarantee that you are responsible enough to handle long-term debt like a home loan. With a good credit score, you can approach the best banks and avail loans at an affordable interest rate. If you have an excellent credit score then you become eligible for better terms on your loan.
See Also: How to Apply for Credit Cards Online?
Are you among those who have faced rejection when applied for credit cards? Well, the most evident reason can be a lower credit score. Credit cards are usually offered to premier customers of the bank who have a good repayment history. A high credit score usually increases your chances of getting a credit card approved in your name. Thus If you have an average credit score then you must work towards improving your score and then apply for a credit card.
Credit is the lifeline of every business as it plays a vital role in keeping the business alive. A Credit score is an important factor for getting a business loan sanctioned. But before applying for such loans you must check your credit score. Business loans are generally approved by banks when you have an excellent credit score and a good flow of income. Banks may reject your loan application if they are not satisfied with your credit ratings. On the other hand, a good credit history helps in a quick approval of business loans as well as gives you the capacity to negotiate the loan terms and interest rate.
Nowadays even employers go through your credit score before offering you a job. Credit checks have become a part of the job screening process and so a bad credit score may impact your career as well.
Certain jobs that require individuals to take responsibility or deal with a lot of money need the background verification of the employee. A credit score check for such a job comes under the reference checks and indicates how responsible and trustworthy a person is. Pending loans or loan defaults may hurt your credit score and may pull you down even if you have the required merit to secure the job.
Your credit score may impact your life in some significant ways. Its effects are often hard to perceive but that doesn’t mean they do not matter. If you have an average credit score then work toward improving it. A good credit score eases your financial life and proves that you are a worthy individual when it comes to handling debt and repayments. A good credit score also indicates that you are a professional and can manage your personal finances responsibly.
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