A borrower with a good credit score often enjoys credit-based benefits such as greater negotiating power, a lower rate of interest, the desired loan amount, and so on. Aside from that, a good credit score earns a borrower the status of a good debtor. Similarly, a good credit score is one of the most important factors considered by lenders, banks, and financial institutions when deciding whether or not to lend a loan to an applicant.
In this blog, we will discuss the significance of having a good credit score and how to achieve one.
What is a Good Credit Score?
A good credit score is between 750 and 900. A borrower with a credit score near 750 or near 900 is considered a good debtor. Banks, lenders, and financial institutions often favour these borrowers over other applicants. Furthermore, a good credit score simply demonstrates that the higher the credit score, the better the chances of getting a loan or credit card approval.
Credit score can also be defined as-
- The credit score ranges from 300 to 900
- The creditworthiness of the user is demonstrated by the score
- The user’s credit report is used to generate a credit score
- Anything negative on the credit report has a direct impact on the credit score
What is the Importance of a Good Credit Score?
The following points define the significance of a good credit score and the advantages it can provide to a borrower:
- It represents the borrower’s responsible behaviour in relation to the credit repayment process
- A good credit score can be obtained if the credit repayment history is strict and strong
- Lenders, banks and financial institutions mandatorily take a look at the borrower’s credit score before rejecting or approving a loan or credit card application
- A good credit score increases the chances of loan or credit card approval
- A borrower with a good credit score is always given preference over an applicant with a low or fair credit score
- A borrower with a high credit score is commonly considered a good debtor.
- Borrowers with good credit can simply negotiate with lenders, banks, or financial institutions to raise the credit bar
- Banks, financial institutions, and lenders prefer to provide the best credit cards to borrowers who have a good credit score
- A borrower’s credit utilization ratio can be increased upon request.
- A good credit score enables a borrower to obtain the desired loan amount as well as the ability to negotiate the credit amount
- Banks, lenders, and financial institutions charge a lower interest rate on the amount borrowed by the borrower
How to Get a Good Credit Score?
By keeping a check on certain aspects, one can build a good credit score within a particular time period-
- If there is an error or issue with your credit report, file a dispute. Resolve the comments in it as soon as possible
- Always pay your credit card bills on time
- Maintain a clean, disciplined, and strict repayment history
- Refrain from making multiple difficult inquiries
- Do not apply for a new loan immediately after your previous loan application was rejected
- Limit your credit utilization ratio to 30%
- Do not leave any unpaid balances
- Set reminders for loan EMIs and credit card payment due dates
- Submit the cheque to repay your credit amount a few days before the due date
- Most importantly, be patient and allow yourself some time to improve your credit report
