#3 Reasons Why You Should Improve Your Credit Score
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Most of us don’t pay attention to our credit history while others don’t even know what their credit score is.
According to Investopedia, a credit score is a statistical number that evaluates a consumer's creditworthiness based on its credit history. Lenders generally use these scores to calculate the probability of the borrower and his or he repaying capacity.
So, every time you miss that monthly instalment or clear your credit cards and utility bills post due dates, you earn negatives points, which brings down your borrowing power.
Presently the credit score might just seem just another number to you, however, in future, this same can haunt your financial capabilities. Entrepreneur India gives you three reasons why you should consider improving your credit scores.
As we all know good credit score will give you access to loans or credit. But do you know a better credit score can help you save lakhs of rupees?
Giving an example, Arun Ramamurthy, Director, Credit Sudhaar says a difference of 100 bps on a home loan of INR 1 crore for a 20-year term will help to save about INR 10 lakh in interest. Now that is a huge amount.
“One would have to work hard to be able to save that kind of money, which can be achieved just through having a better score. Here, we are only talking about one home loan. During the work life, you are bound to take various other loans. A better score thus will only multiply the savings figure mentioned above,” he added.
When emergency knocks your door and you are short on your finances – nobody wants to spend time standing in a queue outside a bank for loans. And this when your credit score can come to your rescue
Rajat Gandhi, CEO and Founder, Faircent.com says a good credit score will not help you get cheaper credit but also easy access to loans.
“However, while a good score gives more power to a borrower, even those with lower scores can access credit through the lending platform as long as they can prove their ability and intent to repay the loan,” he added.
Your credit report represents a complete and accurate history of your finances and hence, the score reflects how you manage your finances.
So, Adhil Shetty, CEO, BankBazaar notes that having a higher credit score implies a sterling credit history and on-time repayments. A low credit score implies you may have been remiss in making payments on time or have borrowed more than what you should have.
“The only way to improve your score is to borrow within limits and repay regularly and on time. Doing this develops two important characteristics - you learn to budget and utilize your funds in the best possible way, and you become more regular with your savings and investments. And nothing can help you secure your finances than these two traits,” he advised.