A credit score is one of the basic and most important factors that is considered by all the banking and non-banking financial institutions before taking any decision on whether an individual should be provided with any financial aid or not. The details of the applicant who applies for any type of loan or credit card are sent to the Credit bureaus by the banks and non-banking financial institutions to calculate their credit score. Based on the information provided, the credit bureaus analyze the individual’s credit score and based on this score it is decided whether an individual should be granted any type of credit or not. Any score of 650 and above is considered a good credit score and fetches you a lot of advantages and benefits. In this article, we are going to discuss the benefits of having a good credit score.
Benefits of having a good credit score
As already discussed that credit score is one of the major factors in determining an individual’s credibility. So in this way, the better the credit score an individual will have, the more options he will have while borrowing credit from the bank.
Gateway to premium credit cards
An individual might get approved for a credit card if he has a score below 650 but in that case, he will not be able to choose the best rewards or cashback card for himself. He will have to compromise with the one that the bank offers to him. But if an individual has a good credit score, that is a score above 650, he has a pool of options available to him. He can choose a card that best suits him on the basis of reward points, cashback, annual fee, lounge access, and much more.
Check here: A list of All Categories of Credit Cards
Increased approval chances
Responsible credit behavior is depicted for the person who has a high credit score. This means that he is good at paying his dues on time and has a clean repayment track record. This also shows that there are very low chances that an individual will make any default in the type of loan or credit card repayment and hence increases your chances of getting approved for a credit card or any type of loan.
Better chances of getting a high credit limit
If an individual has a good credit score and he applies for an increase in the limit of his existing credit card, there are very high chances that the individual will get approved for this request. The reason behind this is that a good credit limit shows an individual’s responsible behavior towards debt and there are very low chances for any default.
When an individual applies for a credit card, the issuer bank checks an individual’s credit score. Upon checking, if an individual is found to have a good credit score, he becomes eligible for cards with a lower Annual Percentage Rate (APR).
How To Maintain a Good Credit Score?
The cardholders can take advantage of the above-mentioned benefits only if he has a good credit score. These benefits will not be applicable in case the cardholder has a low or poor credit score. But the score can certainly be increased if he wants to avail of the above-mentioned benefits. Following are the ways in which a credit score can be improved.
Maintain a low credit utilization ratio
The credit utilization ratio accounts for 30% of the credit score. The more the credit utilization ratio, the more dependency is shown on maintaining your lifestyle through credit. To have a better credit score, we should aim at keeping the credit utilization ratio well below 30%. This shows less dependency on credit and hence depicts high creditworthiness.
Suggested Read: Credit Utilization Ratio: How Does it Affect Your Credit Score
On-time payments and in full
Another important aspect that should be paid attention to for increasing your credit score is to ensure that you repay all your dues within the due dates and in full. Any delay in paying these dues will have an adverse effect on your credit score. Whether it is a credit card installment or an installment related to any other type of loan, should be paid well in time.
Debt settlement is a situation where a debt related to a credit card has reached such an extent that the cardholder is unable to repay such an amount. Hence, he requests the credit card issuer company to settle his debts which means that both the parties, i.e., the card issuer and the cardholder will mutually decide on a common amount and then the cardholder will have to pay such amount. In this way, the credit card bill will be settled instead of clear. The word ‘settled’ has a very negative impact on the credit score.. Hence, the cardholder should always try to clear his debts instead of settlement.
A regular check of the credit report
The cardholder should regularly check his credit report so that he comes to know about any unwanted errors in his credit report if there exists and can apply for its rectification well in time.
A credit score plays a very important role in determining an individual’s creditworthiness. Every decision related to financing is taken on the basis of an individual’s credit score. An individual can build and maintain his credit score over a period of time. To avail of multiple benefits related to a credit card, such as access to premium cards, low-interest rates, better credit limits, etc, an individual needs to have a good credit score. But if he does not have one, he can surely work on things such as on-time payments, avoiding debt settlement, credit utilization ratio, etc, he can build his credit score and then take the advantage of premium cards.