When it comes to managing your finances, there are a few tried-and-true principles that everyone should follow. Building an emergency fund, paying off debt, and living within your means are all crucial steps toward achieving financial stability. However, there’s another piece of advice that often gets overlooked: maintaining a good CIBIL score 750+.
Your credit score is a critical component of your financial health, and improvement in your CIBIL score can open up a world of opportunities. From favorable loan terms to access to the best credit cards, a high credit score can help you save money and achieve your financial goals. In this article, we’ll explore why having a good credit score is so important so without further ado, let’s dive in!
Importance of Maintaining a Good Credit Score
1. Better Terms and Availability on Loan Products
Having a high credit score can be a game-changer when it comes to your borrowing power. Lenders prefer to do business with borrowers who have a proven track record of responsible credit management, and a good credit score is often the key to unlocking the best loan and credit card products on the market.
With a strong credit score, you’ll be able to compare rates and terms from multiple lenders, giving you more leverage to negotiate better deals. And if you’re looking to finance a big-ticket item like a car or home, a high credit score can help you secure higher credit limits, making it easier to achieve your financial goals.
2. Lower Rate of Interest
Maintaining a good credit score can pay off in more ways than one, and one of the most significant benefits is access to lower interest rates on loans. When lenders review your credit history and see that you have a solid track record of paying your bills on time and managing your credit responsibly, they’re more likely to view you as a low-risk borrower.
This can translate into lower interest rates on everything from personal loans to mortgages, potentially saving you thousands of dollars in interest charges over the life of the loan. By consistently keeping your credit score in good shape, you can position yourself to take advantage of the best loan rates available and keep more money in your pocket.
3. Quicker Loan Approvals
Having a good credit score can also lead to quicker loan approvals. When you apply for a loan, lenders will typically check your credit score to determine whether you’re a good candidate for the loan. If you have a high credit score, lenders will view you as a low-risk borrower and may be more likely to approve your loan application quickly.
This can be especially helpful if you need to access funds quickly for an unexpected expense or to take advantage of a time-sensitive opportunity. With a good credit score, you can potentially receive loan approval in a matter of days or even hours, giving you the peace of mind and financial flexibility you need to achieve your goals.
4. Get Approved for Higher Limits
Your borrowing potential is determined by two key factors – your income and credit rating. A high credit score is advantageous as it indicates that you have a good track record of repaying your debts on time. This is viewed positively by banks and financial institutions, and they are likely to be more willing to lend you larger amounts of money.
Conversely, a poor credit score may limit your borrowing options, with financial institutions being more cautious in their approach. While it is still possible to secure some loans with a low credit score, the amount offered may be less than what you were hoping for. Therefore, it’s essential to maintain a good credit score if you wish to have access to larger loan amounts.
5. Security Deposit Waivers on Utilities
Utility companies may review your credit reports and credit scores to evaluate your ability to make timely payments. If you have a weak credit history, the utility company may require you to pay a security deposit before initiating their services. This is because they perceive you as a higher risk for non-payment or late payments. The security deposit is used as a guarantee to ensure that the utility company is not at risk of losing money if you fail to pay your bills on time.
6. Better Car Insurance Rates
Your credit score can impact more than just your ability to borrow money – it can also affect the cost of your auto insurance premiums. Insurance companies use a variety of factors to calculate your insurance risk score, and your credit history is one of them. If you have a low credit score, you may be seen as a higher risk to insurers, and as a result, you could end up paying more for your auto insurance.
On the other hand, if you have a good credit score, you may be eligible for lower insurance premiums. This is because insurers view you as a low-risk borrower who is more likely to make payments on time and take care of your vehicle. By maintaining a good credit score, you can potentially save hundreds of dollars a year on your auto insurance premiums, allowing you to allocate your funds toward other financial goals.
Maintaining a good CIBIL score is an important part of leading a financially secure life. It improves your chances of acquiring credit and also helps you to reap the benefits of lower interest rates. Taking steps to build your credit score can be tedious, but when done correctly, it can be greatly rewarding in the long run. You should make sure to review your CIBIL report regularly and take corrective actions if required.
Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap, India’s first app-based credit line. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters, and when they want to get a loan. He has made it his life’s mission to help and educate people on various financial topics, so email him your questions at [email protected]