Have your ever been refused a loan owing to poor credit score? Well, that would have been when you didn’t know what a credit score is. Let us put the past behind now. To ensure you don’t have to face the situation ever in future, get to know what credit score actually means and why it is important that you maintain a good credit score in front of banks.
A credit score is, in simplest of terms, a numerical expression of how likely you are to pay back your loan in time. Now you get why you were refused the loan. The credit score is a three digit number which is produced by analysing your income, number of good standing accounts and past history with transactions in general. It normally is a number between 300 and 850.
Credit scores are generated by credit scoring models like Vantagescore and FICO using reports provided by credit bureaus. Three of the major credit bureaus are Equifax, Experian and TransUnion.
It is absolutely possible for a single individuality have multiple credit scores at a time. This is because each of the credit models differs from each other in the criteria they use for calculation. The variation in numbers never mean any single one of them is wrong.
For your credit score to be deemed good, it must lie in the range of 700-800. The higher the score you have, the greater are your chances of getting a loan or a credit card approved. This kind of statistical analysis of a loan applicant was begun for the banks to filter customers who might not pay back their money on time.
Well, it is absolutely important that you maintain a good credit score for you stable future. There are numerous reasons for this.
- With a good credit score to your name, you prove yourself as a person who has controlled financial habits and solid plans. The banks will be more willing to work with you than reject your applications.
- A good credit score shows that you pay back your credits on time. If you are a person who pays the credit card bill on time and who spends only a portion of the card limit, the banks will upgrade you to a better card with more savings points and rewards.
- You will be availed loans even multiple times from the same banker if you have maintained a good credit score in the past. They might even be willing to give you an extended tenure on payments and low interest rates on the loans. They will trust you easily with large sum loans for starting a business or investing in a house.
- A good credit score will make it a lot easier for you to avail yourself loans in case of emergencies. If you have a sudden health care need which will cost you a huge amount, having a good credit score will ensure that you get the sum as quickly as possible.
So the next time, you take loans or buy credit cards, make sure to pay back in time. This will help you maintain a good credit score and thus have a secure future.