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Importance of Credit Score in Today’s Time

A good credit score can help you to get that thing you’ve been thinking about. The real deal is that not everyone has a good credit report. A credit report is a record of an individual’s financial transactions. These would mostly comprise information regarding personal and home loans, as well as credit card payment history. A person who is planning to buy a new house can apply for a loan but it’ll be again based on their credit score. A good credit score is needed for first-time home buyers

How is it calculated?

Each person’s credit score is calculated based on a number of factors, including EMI payments, credit card bills, credit history, credit limit utilization, and so on. The data is routinely shared by all lenders and bankers with these credit bureaus, which subsequently construct the score.

A credit score is often a three-digit number ranging from 300 to 900, with the higher the number, the better the score. While other bureaus’ rating methods, like CIBIL and Equifax, may differ, they all fall within the same range. However, because each bureau assigns a different weighting to different parameters, the results could be rather disparate.

Here’s how the scores connect to a person’s financial status:

  • Loans would be rejected or issued at very high-interest rates if the credit score was between 300 and 580.
  • 581 and 650 – Poor credit; loans may be accepted, but interest rates will be high.
  • 651 and 710 – Fair; loans with fairly high-interest rates would be allowed.
  • Loans would be granted at market rates if your credit score is between 711 and 750.
  • 751 and 900 – Excellent; loans will be authorized quickly and at reasonable rates.
  • As a result, the higher the credit score, the easier it is to obtain credit cards or loans. A low credit score might lead to loan denial or higher interest rates.

How can you increase your credit score?

Now that you understand the link between credit history and credit score, here’s a quick approach to boost your score:

  • Make timely payments on your invoices.
  • Remove any outstanding loan or credit card payments.
  • Use only a portion of your credit limit.
  • Pay your loan EMIs on schedule.
  • Applying for many credit cards or loans is a bad idea.

Your financial condition is as important as your physical health. To be healthy, one must practice discipline, and to have a good credit score, one must pay attention to all financial factors.

Don’t forget that having a decent credit score can help you develop wealth. So, don’t forget to check the results on a frequent basis.

Make the most of your good credit:

You’ve deemed a good risk once your scores reach about 700. You’re in good shape when they’re over 760. Because lenders will be competing for your business, you should anticipate the best rates and conditions available.

Also take a look at your auto insurance, especially if your credit has improved significantly since your policy was set up.

What can you do in such a scenario?

Request a re-run of your rates if your existing insurer does not examine your credit at renewal time. It’s also an excellent opportunity to do some comparison shopping. You may make progress on essential financial goals such as preparing for retirement, strengthening your emergency fund, or getting out of debt faster with all the money you save. That is the true value of a high credit score. You’ll finally have some options to get ahead instead of asking for loans, paying too much, and making do with what’s leftover.

Zoya

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