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Why Do You Want a Good Credit Score?

IndianMoney.com Research Team | Posted On Friday, January 25,2019, 11:25 AM

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Why Do You Want a Good Credit Score?

 

 

What is credit score?

Credit Score is a three digit summary of creditworthiness and is important to avail credit from banks and other institutions. All financial institutions check your credit score to take lending decisions. A credit score is evaluated based on transactions related to credit accounts and settlements.

What is a bad credit score?   

A credit score ranging from 300-500 is considered to be a bad credit score. A low credit score generally results from late payments or long standing dues. A bad credit score indicates poor financial health. The banks may reject the loan application of borrowers with low credit score. It may also lead to the person getting blacklisted.

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SEE ALSO: 10 Credit Score Myths

Why Do You Want a Good Credit Score?

How to improve credit score?

  • Credit mix: Credit mix is the percentage of secured vs unsecured loans. Maintaining a good credit mix shows how responsible you are in handling different types of credit and paying off multiple loans. Credit mix has 10% weightage in credit score.
  • Review your credit report on a regular basis: There are various online websites that allow you to check credit score for free. You can check your credit score as often as you want called soft enquiry. This will help keep finances in order. By staying informed on credit score, you can make better financial decisions.
  • Maintain a good credit utilization ratio: Always maintain the credit utilization ratio below 30%. Make sure not to come too close to your credit limit, as it has negative impact on credit score.
  • Space out credit applications: Do not apply for loans at multiple banks. If your loan or credit card application is rejected, do not apply for the same immediately with another bank. Wait for a period of 6 months and then apply.
  • Open a Secured Credit Card: A secured credit card is secured against fixed deposit. One of the most important criteria of a secured credit card is that it is issued only against a fixed deposit with any bank or NBFC.

SEE ALSO: Credit Score Calculator

What Is a Good Credit Score?

A credit score in the range of 700 and above is considered as good and lenders sanction loans and credit cards. With a credit score in this range, banks are willing to negotiate lower interest rates. A good credit score helps get loans sanctioned quickly. A good credit score also gets better interest and terms on loans.

Reasons You Want a Good Credit Score:

There are plenty of reasons why you must have good credit score. Listed below are some of them:

  1. Loans: Banks and other lending institutions enquire on credit score before sanctioning loans. A good credit score reflects how well you can manage debt and banks are convinced on repaying ability.
  2. Credit cards: Before issuing credit cards, banks take into account factors like income and repayment. An individual gets credit card only when he has a good credit score.
  3. Rate of interest: A good credit score helps the applicant negotiate a better interest rate on loans and credit cards.
  4. Higher limits: A good credit score not only helps you get loans at good rates, but also higher loan amounts and higher credit limit.
  5. For availing loans in future: Make sure to maintain a good credit score to avail loans in the future. A good credit score comes in handy when you apply for a loan.

SEE ALSO: Tips To Improve Your Credit Score For A Home Loan

Want to instantly increase your credit score?

To increase your credit score instantly, use Experian boost that helps improve credit score by keeping track of payments of utility bills and mobile bills. Experian boost helps reflect a positive credit score and the services are completely free of cost. This helps customers with poor credit score improve and get access to loans and credit cards. 

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