What is the Importance of a Good Credit Score?

Importance of a Good Credit Score

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 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
FAQs

Why is it so important to have a good credit score?

A good credit score provides a borrower with numerous credit-based opportunities, including the desired loan amount, priority over other applicants with low or fair credit scores, a lower rate of interest on the loan amount, and so on.

Can I improve my credit score?

Yes, you can improve your credit score by always paying off your debts on time, avoiding multiple hard inquiries, and keeping your CUR under 30%.

Is it possible to check my credit score for free?

The Paytm mobile application allows you to check your credit score for free. To check your credit score, open the Paytm mobile app, navigate to the ‘loans and credit cards’ section, click on ‘free credit score,’ and check your credit score for free.

What is Good credit score to buy a house?

After reviewing your other financial information, lenders may offer you a home loan if your credit score is 650 to 749. However, the average CIBIL score required for a home loan is 650.

What are the benefits of credit score?

Following are the benefits of credit score:
  • Low interest rates on loans and credit cards
  • Greater Chance of Loan and Credit Card Approval
  • More bargaining power
  • Easily Access Utility Services
  • Easier Rental Property Approval
  • Obtain Higher Credit Limits
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