Credit score is a parameter based with which banks decide your ability to repay the amount borrowed. While having a low credit score may leave you in financial troubles. Read this blog to know the benefits of good credit score which can help to expand your financial options.
You may have observed a peculiar pattern whenever you try to get instant credit. When you stumble on an app and expect it to disburse a micro-loan, it gets credited into your account immediately. And if, due to financial issues, you end up paying your dues a bit too late, then you won’t be eligible to get the same amount the next time around. Your action will be termed as bad repayment behaviour and you will be expected to improve your credit profile to avail more loan.
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How does credit scores work?
If you are new to the credit game, there’s an easy way to navigate through this tricky terrain. Your credit profile can also be looked upon as your credit score. The number then determines your eligibility to receive future loans. It is calculated based on your payment history, credit utilisation, credit age, and credit type.
Your score assures lenders that you can be trusted with the credit they offer you. This number signifies how safe their amount is in your hands. A low score appears as a red flag to them, and they’ll be alerted immediately. This is what happens when you fail to pay your dues on time, your behaviour will soon be flagged as suspicious. But we know that humans aren’t perfect, everyone slips sometimes.
Before we jump into listing the benefits of maintaining a decent credit score, let’s take a note of some applications that’ll help make your life easy without putting you in any bad books. There are many buy now, pay later service providers like ZEROPAY that are gaining popularity quickly and one of the prime reasons is their ease of use, and their customer-centric approach. With apps like ZeroPay, you won’t get charged any late fee if you fail to make your repayment on time. That gives the flexibility and freedom to manage your finances well.
Let’s delve into the benefits of a good credit score.
You get a lower interest rate on loans
Lenders in India have now started to distribute loans depending on the risk profile of the applicants. This practice has ensured that applicants with a good credit score usually get loans approved with lower rates of interest. If this system turns into a norm, all applicants with a low credit score will face a huge disadvantage.
This simple thing cannot be overlooked, as it becomes so important that even a minute percentage of increase in interest rates can significantly impact your EMIs. Subsequently, that also impacts your finances.
You get quicker approval on loans and credit cards
A high credit score indicates your worth to own a credit card. Based on that, the lender moves your credit application faster. This might also help you when you are in dire need of a quick fund for any emergency that you face. Having a higher credit score will fasten the approval process.
You’ll gain an upper hand in negotiating with your lenders
Lenders usually prefer lending to creditworthy customers. They expect to have their loans repaid promptly. If you’re a customer with a high credit score, you’ll be a desirable borrower to them. It’s an edge you’ll have over other borrowers. Since you own that beneficial element of having a high credit score, you can go an extra mile in negotiating with the lender to get a better interest rate at a lower processing fee.
You’ll improve the chances of getting higher limits on loans
While distributing higher loan amounts, lenders tend to be cautious about the increased risk involved. Even if a person with a low credit score acquires a loan, the quantum of loan provided to them will be much smaller than what he may have originally applied for.
To draw a proper analogy, you always go for a phone with the best features. If you have a great credit score, you can go for an SUV instead of a sedan, because you’ll avail a higher loan amount.
You’ll increase the opportunity of getting pre-approved loans from banks
Consider a pre-approved loan from a bank a privilege. These loans can be a great way to quickly secure a personal credit from a bank. Remember that if you get such a loan, a lot of scrutiny may have gone into studying your credit score and your account activity before it gets approved.
There are immense benefits of having a good credit score. In this article, we have only highlighted a few. A high credit score makes your life easier, it’ll also help you manage your finances well, and gives you better access to beneficial financial products and services. Don’t worry if your credit score is low, there are plenty of ways in which you can improve it. You can also get credit easily on many of the buy now pay later apps, many of them lend you credit without bothering about your credit score.