Do you know these 9 Advantages of Good Credit Score ?
- 6 April 2020 | 1408 Views | By Mint2Save
Credit score, as the name implies can be understood as the score for your credit history — i.e., on the basis of your history of taking and paying off credits. This work is generally done by institutions called credit bureaus which collects and consolidates information of the individual mainly the financial information from the banks and other NBFCs and give them a Credit information report. Your credit score would also be included in this Credit information report.
This score, in turn, is used by different financial institutions in the process of determining whether you are eligible for loans are not. Therefore, people with high credit scores have higher chances of getting new loans. This is the fundamental benefit of having a good credit score. Other than this, there are also other benefits which are going to be discussed in this article.
Agree or Not?
But before going into the benefits of having a good credit score, it is important to know what the different ranking of credit scores mean so that you can understand what good credit score is.
What is good credit score ? What Credit Score do you Start At?
Credit scores typically range from 300 to 900. The algorithm used to calculate the credit score will differ from provider to provider and thus the exact amount of score for the same person varies from different providers and their interpretations too. Let us consider the CIBIL score for example and understand the meanings of different ranges.
What is the average credit score to buy a house?
Scores in the range of 750 to 900 are to be considered excellent and it indicates that you have been regular with the credit payments and have a great payment history in general.
Banks will offer you loans and credit cards among other benefits which we will discuss later in this article.
If your score is in the range of 650 to 749, then you will be considered good. Banks will consider your credit applications worthy and might offer you a loan, but you may not have the full negotiation power for getting the best deal.
Is Credit Score of 600 Good?
Your score would be considered fair it is lies between 550 and 650. Not all lenders would consider you giving a loan and also the ones that give you will keep high-interest rates on you. You need to take some serious measures to better the situation.
Anything lower than this would be very bad and it would be very difficult for you to get loans.
Here are the benefits of having good credit score.
1. Better chance of approval of Credit Card or Loans:
As said earlier, this is the fundamental benefit of having a high credit score. Just high credit scores does not guarantee approval of loans or credit cards though, borrowers still see other factors such as your income and previous loans. But, having a high score will let you apply for loans confidently and if yours is low, it might be best to not to apply and try to improve your score.
With high credit score, you will easily be approved cards with rewards, that is, they reward you by lifting the need for you to pay the interest if you pay your balance in full in each due. Also, if your credit score is exceptionally good, you can obtain loans other than the traditional ones like peer to peer loans.
2. Lower interest rates:
Your interest rate is often tied directly to your credit score which means that if your score is good, most probably you will be qualified for the lower and better interest rates and also pay low finance charges on the credit card balances and loans. As the interest rate is less, you can pay off the debt fastly and you have saved money which would rather be given to the lender.
3. Better credit Limits:
Better credit score meaning better repaying history which generally means that you are committed to repaying the loans. By having a good score you have already proven your creditworthiness and on the basis of your income and some minor other factors, creditors will be more likely to give you higher credit limits. But, even when you have income and do not repay taken loans due time, your credit score would be low and thus you would be offered credit with high limits.
4. Higher negotiation power
With your high credit score indicating a strong history of your payments, you will have higher negotiating power in different circumstances if you are not satisfied with the terms. You could be able to get a lower rate on your home loan or sometimes could also avoid paying a certain fee on it and you could also negotiate for longer repayment of loans and for lower APRs (Annual Percentage Rates).
5. Car Insurance with Better Terms:
If you have more credit score, the company cannot keep you away on the basis of your credit history, you can obtain more premium benefits on insurance.
Although this is might not be true, insurance companies seem to believe that people with low credit file more claims and thus if you have bad credit, you might end up paying more amount for your insurance.
6. Getting Approved for a Job:
Though employers need your permission to see it, many actually request to see your credit report before granting your job applications. This is because they will think that your financial struggles might cause a distraction from your job like in your performance and your alignment to other job opportunities or some shady tricks. By having a good credit score thus a good financial history, you can show to them that you are away from serious troubles.
7. Approval for Apartments and rental Homes:
Many house owners these days are including credit scores in their processes of screening the tenants and deciding whether to give them a loan or not. Examining your credit history will give a better insight for them as will you be paying the rent on time or not. If you have low credit , then you may have low chances of getting into an apartment. If reasons for that bad score include any unpaid rental balance or any evictions, then that would severely damage your chances.
So, having a good credit score will save you the time and work of finding a house owner who could be willing to give accept you. You might find people who would approve your rental application even when you have a bad credit score, but you might be needing to pay an additional security deposit.
8. You can avoid Security Deposits on Utilities:
When you are creating a new account with utility companies, you generally are expected to pay an initial deposit for a kind of insurance against the losses of unpaid or underpaid bills. These could range from a $100 to $200 which are a huge inconvenience, especially When hard times occur suddenly and you have to relocate without a proper plan. When you have a good credit score, you won’t be asked to pay a security deposit when you relocate.
These mostly cover all the advantages of having a high credit score. But having all these advantages will give another advantage as well…
9. Bragging Rights:
A good credit score is also something to be proud of as you credit history is without any bad remark and also if your have made it good from being low it would be done with a lot of hard work. But, you need to keep maintaining this same level or go to higher level and keep doing whatever needs to be done. Only a few missed payments could throw you away from the track and start lowering your score.
Now knowing how the credit scores are calculated, good ranges for them and the benefits of having a good score, let us consider some of the ways by which you can increase your score.
The most obvious way for improving your credit score is to make your payments regularly. This will make your credit history good and thus your credit score would be increased. Other than this, it is also good to practice to Lower Your credit utilization ratio which essentially is to apply credit only when extremely needed and not often. This and not applying frequently for new credit cards generally makes your score good and also prevents hard inquiries which deplete your score.
How long does it take to build credit?
Credit scores are like indicators of your financial health. It takes from -3- months to -24- months to build a credit score. Having a high credit score implies that your financial history is great and you are less likely to default on payments which would propel lenders to offer you loans and credit cards. Other than this, there are many other benefits including better terms for car insurance, less prospect of facing rejection while applying for a job or for a residence and also could avoid security deposits. Adding to all of this, you could also be proud of your high credit score and acquire bragging rights!
How can I Quickly Raise My Credit Score?
While there is no short cut in quickly increasing your credit scores, keeping all credit facilities under check is often considered the sole vital reason for improving and sustaining a good credit score. Here are a few tips to raise / maintain a credit score:
(a) Paying the Credit Card dues in full:
Often, the credit card companies insist on paying the minimum amount due and want you to avoid the whole amount for which you are billed. It is always recommended to pay the total amount due, so that no extra interest is charged and other service charges can also be avoided. Being timely on the credit card bill payment shall always give a good image to the algorithm deciding your credit score.
(b) Timely Repayment of Loans:
Any sort of loan availed, irrespective of its type (housing, car, mortgage, personal, educational etc.), requires timely repayment. It has become relatively easier for us to get loans and many have availed facilities just via a phone call or a few clicks on the mobile. However, not many are found interested in serving the liability with the same amount of enthusiasm. It is, thus, recommended to pay the installment at its due date and avoid any penal interest as well as damage to credit scores.
(c) Sorting Disputes Pertaining to Credit:
There have been examples in various loans, where there has been dispute between the lender and the borrower. These can be due to excessive interest charged, or application of other charges (hidden charges), which were not known to the borrower. In either of the case, the reputational damage is more to the borrower and he should compel himself to sort the dispute, as early as possible.
But how good your credit score is, you need to maintain discipline and clear all the dues in time. Otherwise, it could rapidly start to fall down!