The credit score is a method for measuring your creditworthiness. The first thing lenders check when applying for a loan or credit card is your creditworthiness. This gives them an idea of whether you will be able to repay the amount borrowed. Therefore, it is vital to maintain a high credit score. The nation’s credit bureaus calculate a credit score, considering several factors, such as payment history, credit risk, credit composition, credit inquiries, and credit history. For those of you who do not know, a credit score will range from 300 to 900. Lenders generally consider a credit score of 750 or higher to be ideal. So you should always take steps to get closer to a 900 credit score. Let us take a look at the importance of healthy creditworthiness.
Why do we need to maintain a good credit score?
- Eligible for loans: A high credit score gives you the ticket to qualify for loans and credit cards. If you have an excellent credit rating, it indicates that you have paid off your debt and have experience in managing credit. This gives lenders good reason to offer you a loan, as you have a slight chance of default.
- Credit Cards – In addition to loans, having a good and good score will also help you get your credit card with more significant rewards and benefits. With a credit score of 750 or higher, you will receive credit cards that meet your needs.
- Low-interest rate: One of the most significant advantages of having a good credit rating is that banks can offer their loans at a lower interest rate. Given your payment history, you may receive discounts on the interest of the loan.
- Higher Credit Card Limits – A higher credit score gives you a lower interest rate on your credit cards and loans and helps you get a higher loan amount. A bad credit rating, on the other hand, leads to a lower credit limit. A high credit score indicates that you can manage credit adequately, so banks may consider offering you a credit card with a greater credit limit.
- Faster loan approvals: Many lenders offer pre-approved loans to consumers with a long credit history and high creditworthiness. More immediate bank loan approvals are one of the main benefits of having a high credit score. Your loan application will be approved instantly, and there will be no waiting time.
- Added value to a visa application: having a high credit score will give your visa application good weight. Most countries, such as the United States or the United Kingdom, will consider your income tax records when applying for a visa. Therefore, a good credit rating could give an additional boost to the visa application.
- Better job opportunities: While potential employers can’t see your credit history, they can see a version of your credit report that includes payment history. Employers approach it from an accountability perspective. They believe that if you use credit responsibly, pay your bills on time, and are not overworked; you are likely a responsible employee as well. On the other hand, bad credit can make employers hesitant during the hiring process.
- Easier to rent an apartment: Households regularly check consumer credit for the same reason that lenders do. You want to make sure you pay your rent on time and in full every month when you live there. Your excellent credit rating gives them the security that you are most likely to obtain.
- Get a contract mobile phone with no deposit: Another downside to having bad credit is that wireless service providers may not award you a contract. Instead, you will have to choose one of those usage-based plans that the more expensive phones have. At the very least, you may have to pay more for your contract until you reach an agreement with the provider. People with a good credit rating avoid paying a deposit and can benefit from a reduced purchase price for the latest mobile phones by entering into a contract.
Tips for Maintaining a Good Credit Score
- You should pay all your bills or EMIs on time.
- Avoid delays in paying bills.
- Be sure to pay off loans and credit cards bills.
- Maintain low credit utilization.
- Do not close old credit cards, as this will cause you to lose good credit.
- Try not to submit multiple loan applications at the same time.
- Don’t apply for various loans or credit cards unless you have to.
- Balance secured and unsecured loans.
- Maintain good relationships with banks and financial institutions.
- Check your credit report regularly.
- Check your creditworthiness from time to time.
What is a good credit score? If your FICO score is above 670, you have good credit. Good credit has many benefits, including access to better credit cards and lowers interest rates. Therefore, it is vital to understand how your credit habits can improve or affect your credit score. Once you know how to get good credit, you can take advantage of all the positive financial opportunities that come with good credit.