Credit Score: If you have ever applied for a credit card or loan on any bank app or other finance app, then you must have come to know about the credit score. We also know credit score as CIBIL score. So you will also know how useful a good credit score can be to us. A good CIBIL score gives you leverage in taking a loan. This is also necessary to meet your higher loan requirement at lower interest.
If your credit score is good then you can easily get loan for any work but if it is in bad ranking then it can affect your work. Overall, your credit score is an important number in your life that will impact every aspect of your life financially.
Your credit score affects your ability to get a loan, rent a home, and even determine the price of your insurance. While a good credit score means many financial options, a bad score limits your options. To keep your credit score in good shape, it is important for you to understand what factors affect the score and improving it can help you deal with financial problems in your future.
Understand Credit Score
A credit score is a number calculated by a credit bureau based on your credit history. This shows how you have done credit management so far. It depends on many factors, which are as follows:
- Payment History: Whether you have made all the payments on time or not.
Credit Utilization Ratio: What percentage of your total credit are you always using?
Credit History: This shows the age of your existing credit accounts.
Types of Credit: These show that you have many types of credit accounts, such as loans and credit cards.
New Credit Inquiries: Recent applications for credit.
A high credit score tells lenders that you do not pose much of a risk in giving a loan and that you get many loan offers at low interest rates. On the other hand, a low credit score indicates greater risk and limits your borrowing possibilities. Also, you get more interest on these loans.
Why is credit score important?
Credit score affects your financial transactions. Especially when you are considering taking a loan or credit.
- Loan Approval: Lenders will use your credit score to check whether you will be able to repay the loan taken or not. A good score improves your chances of loan approval.
- Interest Rate: As credit score increases, interest rates will increase, meaning less interest will have to be paid.
- Loan Limit: A good credit score increases your chances of getting a loan, which helps you borrow more when needed.
- Easy Approval: A good credit score provides easy and quick approval for credit cards or loans as well as for rental properties.
Your credit score is more than just a number, so keep it good so that you can easily avail of it when needed.
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