Benefits of Maintaining a Good Credit Score
Much before the existence of banks, the trend of lending money with a huge interest to be paid has been practiced in our society since the very beginning. Settling these debts has turned burdensome for many due to the borrowing rate being agreed upon resulting in them losing everything they owned. But today, the whole concept & mindset associated with borrowing and funding has changed drastically. With the emergence of banks, borrowing money turned things in a favorable direction for business owners as banks offered money at a lesser interest rate which motivated people to focus more on their work rather than paying interest.
For applying loans such a business loan or even a personal loan for that matter, the bank goes through some guidelines that help them to figure out which person is entitled to get a loan or credit. And for this the Credit Score of an individual or a company is very important to determine the eligibility and amount of credit to be given.
Now the question arises, ’What is a Credit Score’?
Credit Score is an evaluation representing the creditworthiness of a person which is primarily based on digging up a person’s credit file which is linked with one’s bank account.
To be very honest, we cannot imagine our lives without a credit card these days. Therefore it is very important that we don’t mess with our Credit Score.
We are fortunate enough to live in a time where one can get loans disbursed to their bank account in a matter of minutes that too with minimum documentation, all thanks to the world of technology. It is important to keep a check on your payment due dates and make all EMI payments on time to maintain a good Credit Score. Failing to do so, your score can drop to a Poor credit score or a Bad credit score category.
Credit Score can be judged by the range they fall into i.e., 300 to 850, giving a clear reflection where you lie.
- Good Credit Score ’ More Than 650
- Average Credit Score ’ 550 to 649
- Poor credit score ’ 300 to 549
Maintaining a good credit score can be an uphill task for many as there are lots of things one may be doing wrong without even realizing it.
How to overcome a bad credit score which can adversely affect your borrowing capacity in during bad times:-
1. Frequently check your Credit Report:
In our busy schedule, we sometimes tend to overlook basic things that have a huge impact. One should be willing to invest some time to check their Credit Report to avoid any crisis or fall in your credit score due to unknown reasons like frauds which can be rectified. By keeping a constant credit check, you can avoid the slippage to a Poor credit score by acting on time.
2. Failing to pay EMI’s:
Your credit score largely depends on your payment history. The borrowers must keep track of the due dates and act fast by setting a reminder so that it doesn’t slip from your mind. Paying late EMI’s every time can result in a Bad credit score.
3. Applying for high-value loans:
If you wish to apply for a high-value loan, it would be better to waive of at least 50% of your past EMI’s or Loans that are running as pilling up of credit can result in lowering your Credit Score.
4. Full Payment of Credit Card Dues:
If you have a poor credit score, you can definitely improve it by paying the full amount of your credit card along the way.
5. Credit limit:
One should try not to increase their credit limit if they have an average or a bad credit score as it can act as a burden paying it later on. One should try paying their bills on time to achieve appositive Credit Balance. In this case, the bank itself increases your credit limit if you are found to be a responsible borrower.
By keeping a check and bringing down unwanted expenses that can be undertaken later is the best way to handle your Credit Score.
So if you want that your credit score remains above average and favourable for borrowing, make sure you adhere to these recommendations given above as you never know when would you need money for business.