What is the Importance of a Good Credit Score

A borrower with a good credit score often enjoys credit-based perks like higher negotiation power, lower rate of interest, desired loan amount, etc. Apart from this, a good credit score makes a borrower earn the status of a good debtor. Similarly, a good credit score is one of the most important factors taken into consideration by lenders, banks and financial institutions to determine whether to lend a loan to the applicant or not.

In this blog, we will explain the importance of a good credit score and how you can achieve it smoothly.

What is a Good Credit Score?

A good credit score ranges from 750-900. A borrower whose credit score is closer to 750 or near to 900 is considered to be a good debtor. Banks, lenders and financial institutions often give these borrowers a preference over other applicants. Besides, a good credit score simply proves that the better the credit score, the higher will be the chances of getting a loan or credit card approval.

Credit score can further be explained as-

  • Credit score ranges from 300-900
  • The score showcases the user’s creditworthiness
  • A credit score is generated from the user’s credit report
  • Anything negative in the credit report directly affects the credit score
Read More: Can I Get a Loan With a Credit Score of 550

What is the Importance of a Good Credit Score?

The following points define the importance of a good credit score and what benefits it can offer to a borrower-

  • It depicts the responsible behaviour of the borrower against the credit repayment process
  • A good credit score can be earned 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 good credit score is often seen as a good debtor
  • With a good credit score, the borrower can simply negotiate with the lenders, banks or financial institutions to raise the credit bar
  • Banks, financial institutions, lenders prefer to offer top-notch credit cards to borrowers with good credit score
  • Upon request, a borrower’s credit utilization ratio can be increased
  • A good credit score makes a borrower acquire the desired loan amount along with the power to negotiate the credit amount
  • Banks, lenders and financial institutions charge a lower rate of interest on the borrower’s acquired loan amount

How to Get a Good Credit Score?

Though there are multiple ways to get a good credit score but when followed together, they can bring amazing results within a particular time period-

  • Check credit report twice a year
  • Raise a dispute in case there is any error/issue in the credit report. Resolve the comments in it too at the earliest
  • Always pay credit dues on time
  • Keep the repayment history clean, disciplined and strict
  • Resist making multiple hard inquiries
  • Do not apply for a new loan immediately after the rejection of your previous loan application
  • Limit the credit utilization ratio to 30%
  • Do not leave any outstanding balances
  • Set reminders for loan EMIs and credit card payment due dates
  • Submit the cheque a few days prior to the due date
  • Most importantly, be patient, give some time to enhance your credit report

FAQs
Why is it so important to have a good credit score?
A good credit score offers a borrower a lot of credit based opportunities such as the desired loan amount, priority over other applicants with low or fair credit score, lower rate of interest on the loan amount, etc.
Can I get a good credit score?
Yes, you can get a good credit score by always paying off your debt on time, not making multiple hard inquiries, and limiting the CUR to 30%.
Can I check my credit score for free?
You can check your credit score for free through the Paytm mobile application. Follow the steps to check your credit score- open the Paytm mobile application, locate the section, ‘loans and credit cards’, click on ‘free credit score’ and check your credit score for free.
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