Importance Of Credit Score
The credit score is a statistical method to ascertain the likelihood of an individual paying back the money owed by him/her. There are a number of credit bureaus that evaluate your personal report and send you the score. Every organization has different evaluation systems, and the calculation is based on a wide variety of factors.
There are three major international credit score bureaus that evaluate credit scores for an individual. Equifax, Experian, and TransUnion are the top three organizations offering their services for the evaluation of credit scores. CIBIL (Credit Information Bureau Limited, India) is India’s first Credit Information Company and was established in the year 2000 and is affiliated to the Trans Union based in the U.S.
Role of Credit Score
Whenever you apply for credit, your credit score is perhaps the first thing that is checked by the credit issuer. The process is the same when you are applying for a card, a loan, or a mortgage. Credit reports and credit scores are markers that allow a financial institution to check your reliability for paying off the debt on time. The major importance of the credit score is thus in the risk assessment of the individual or the asset — in this case, you! You need to improve your credit score if it is on the lower side.
This is because of the fact that you won’t be shunned outright if you do not fit the high standards, but the credit you get will be laced with a high-interest rate compared to someone who has a better credit score. Thus, the lower the credit score, the higher is the rate of interest, which eventually results in a higher monthly payment.
In addition to credit scores, banks & other financial entities may also use other internal scoring mechanisms to establish the creditworthiness of an individual
Advantage of Credit Score
A good Credit score ensures that you get many advantages over those having no Credit score or those having a lower score. You are entitled to the following advantages if you have a good Credit score:
Lower interest rates and better terms on credit products
One of the benefits of having a good credit score is that banks might offer you loans and credit cards at a lower interest rate. You can also get other benefits as well such as a discount on the processing fee and eligibility to get a higher loan amount.
Improve your chances for credit card and loan approval
Borrowers with an excellent credit score are considered low-risk and therefore the chances of being approved for loans and credit cards are higher.
Access to the best rewarding credit cards
With a good credit score, you are also eligible to get access to the most rewarding credit cards in the market, including those that offer the lowest interest rates and the best rewards, such as cash cashback, travel points, and other benefits.
Get approved for a higher credit limit on your credit card
With a good credit score, you can also get approved for a higher credit limit on your credit card. Creditors will likely lend you more money because of your proven creditworthiness.
Eligible for a pre-approved loan offer
Borrowers with a good credit score are also eligible for pre-approved loan offers. Generally, a pre-approved loan offer is given by banks to the existing customers who have a good credit history.
At SmartCoin, we understand the importance of credit scores. That’s why we are providing our users with the facility to check their credit scores for free, and not just that, they can get an enhanced report detailing the negative and positive factors affecting their credit score and also useful tips and suggestion to increase their credits score.
Download the SmartCoin app now.
