The majority of lenders consider a CIBIL score of 750 out of 900 ideal. A report by Economic Times India further revealed that 80% of loan applications get approval if the credit score is 750, according to the bankbazaar. Before a lender can approve your loan application, they must ensure that you can make your payments on time. A good score shows that you are responsible, while a bad score indicates that you are likely to default on a loan. Whether you already have a credit card or plan to apply for one, learning how you can improve your credit score is crucial. Additionally, you must learn what credit scores are and why they are essential.
Good Credit Scores Have Hidden Perks
We all know a good score means lenders approve your loan faster. Loan interests are also affordable when you have an ideal rating. But did you know a good score can lower your security deposit? For instance, when renting an apartment, management companies check your credit report. Property owners also perform tenant screening, and they will focus on the credit score before leasing an apartment. If you have a poor score, expect to provide more collateral. You might also pay high deposits for utility services when your score is low. Other little known benefits of high scores include access to best mobile phone deals, low insurance rates, and access to cashback credit cards.
Facts That Determine Your Score Range
While there are other types of scores, FICO is the most popular, with 90% of lenders around the world using it. Chances are you have heard it mentioned or read about it before, but did not understand how it works. You also probably don’t know how lenders calculate your score before approving your loan request. Next time you are evaluating your score or applying for personal loans, keep in mind only five factors determine your credit score. These aspects include payment history, amounts owed, length of credit history, the number of accounts, loans, and approved credit. Though scores vary from lender to lender, they typically range between 300-850. These numbers fall into categories on a credit score chart, ranging from very poor to excellent. Understanding how creditors calculate scores and where you fall under these categories can help you improve your credit performance.
Poor Credit Scores are Expensive
Bad credit is the reason most lenders are rejecting your loan application. If you pay credit card bills past due dates, your primary worry should not be late fees. Besides making it tough to get a personal loan, a poor score will make your job search experience hectic. If you thought bad credit influences how much you pay for insurance rates and security deposits, it’s time to evaluate your borrowing habits. Potential employers will not ask for references only. They also want to know how responsible you are with finances. Just like lenders, employers want to deal with someone capable of managing finances when allocated managerial duties. Surprisingly, a large population has a minimal understanding of how credit scores can affect their lives. In fact, 62% of 1002 respondents surveyed by TransUnion CIBIL in 2017 admit they didn’t know lenders check credit reports to determine the terms and conditions of a loan.
A lack of knowledge is the one reason most people have bad credit ratings. Fortunately, building good credit is possible, provided you practice good spending habits, pay bills on time, and keep balances under your credit card limit. In case you don’t have a credit score, make an effort to attract debt, and pay off on time. Building a strong credit history and maintaining high scores are essential if you want to enjoy low-interest rates and affordable fees on insurance, cell phone services, and housing.