What is a Credit Score?
A credit score generally ranges from 300 to 900 representing your creditworthiness. Factors like repayment history, length of credit, new credit, etc., play a vital role in determining your score. A score usually above 750 is considered good and shows that you can repay your loan amount on time. Since personal loans are offered without any security, lenders typically check your credit score to ensure you have a good credit history. Therefore, a good credit score is crucial when considering applying for a loan.
Let us look at why having a good credit score is essential.
Importance of Having a Good Credit Score
- Low-interest rates: One of the advantages of having a high credit rating is that lenders will be ready to offer you loans at lower interest rates. You might also get discounts on interest rates for your loans.
- Eligibility for loans: A high score makes you eligible to apply for getting any loans. It also indicates that you are a low-risk borrower.
- Credit Cards: Having a good credit score will help you get credit cards with attractive offers and suitable deals.
- Higher loan amount: Having a good score suggests that you can handle loan repayment without defaulting. Hence, lenders might consider offering higher loan amounts.
- Quick approval of loan: Lenders and banking institutions offer pre-approved loans to existing customers with a consistent and lengthy credit history. One of the most significant advantages of having a high score is that lenders approve your loan immediately without taking much time to verify.
- Adds additional value: Having a high score gives extra weight to your financial status, especially if you plan to apply for a visa.
- Benefits for the future: A high credit score comes in handy when you apply for any loans in the future. Therefore, it is always best to maintain a score of above 750 to get maximum benefits in many ways.
You are automatically considered a credible borrower when you have a good credit score. However, you must also maintain the score by making timely repayments and clearing past debts. Therefore, you can negotiate with lenders and get personal loans at comparatively low-interest rates quickly with a good score.