Credit is a financial asset people have which allows them to purchase goods with the assurance that the money will be returned in the future. This is what being ‘in credit’ means. With quite a few types, there are two which are the most used – revolving credit and instalment loans.
Revolving credit means credit where a person can resume their line of credit even after they have paid the previous amount. Credit cards are the most common example in this case, where even after a person has paid the required amount, they can again resume buying things with the same credit card.
Instalment loans is quite commonly used in today’s world. Here, a certain amount of money is loaned to a person by an entity, which maybe a bank or some other financial institution. This money is given for a specific purpose and needs to be returned in instalments. Home loans or student loans are the prime examples in this case.
Why A Good Credit Score Helps?
In both the above cases, a person’s credit score can be calculated by the necessary bank which has provided the line of credit or loan. The credit score of a person is basically their credit history and how properly and regularly over time they have repaid the amount which was given. A person’s credit history is very important as it allows the bank to decide whether or not the person is deemed appropriate or applicable for a future loan or line of credit. There are plenty of reasons why keeping a good credit score helps a person. Some fo them are written below –
Getting A Future Loan Or Credit Card Approved Becomes Easier
With a better credit score, money lenders and bankers can easily see that there is no risk of providing a loan. With regular payments over a fixed amount of time, anyone can have a good credit score. If the credit score is bad, which basically shows that the payment has been done erratically, the chances of anyone providing a loan to that person becomes slim. Even though a good credit score is not the sole criteria for the loan to get approved, with other factors such as a person’s income in play, it definitely increases their chances.
Better Rates On Automobiles
It is quite common for people to take out a loan while buying a car or bike. With high prices, it is not possible to provide the lump sum at the time of purchase. These automobile loans require the person to pay a fixed amount along with a levied interest rate. With a good credit score, these interest rates might be lowered, much to the benefit of the buyer. A bad credit score might lead to the person getting the same loan on the same car, but with a higher interest rate. Moreover, in terms of insurance as well, a good credit score allows a person to have lower insurance premiums whenever he or she takes buys an automobile.
The Limit For Loans Becomes Higher
With a good credit score, a person becomes eligible for taking out a bigger loan in the future. This limit is mainly based on a person’s financial income and their history of debt. But with an attractive credit score, the banks become more lenient on the amount of money they give a person, as they have shown great responsibility in returning their previous instalments on time. A bad credit score will lead to the limit of money being much lower compared to that of a person with a proper credit history.
Eases The Process Of Buying A Hous
While buying a house, taking out a home loan is quite common. But money lenders will definitely check one’s credit score before they do so. With a bad credit score, the banks and lenders will definitely be hesitant to provide the person with a loan, considering it risky due to their history of returns. Moreover, even if the loan is approved, the interest rates will be quite high, which again will put a strain in the person’s pocket. To avoid this, a person should always be regular with their payments. In some cases, returning the money before its due period can increase the credit score too.
Getting Jobs In A Government Or A Private Organisation
In today’s times, a company will always check a person’s credit score before they give them a job. Especially in jobs which deal with the financial world or even in the government sector, having a good credit score is quite necessary in order to get approval for a certain job or post.
Thus, we see that there are plenty of benefits which arise from having a good credit score. This is why whenever a person takes out a loan or a credit card, they should use it wisely and make regular payments while returning the amount back.