A credit score is like a report card but here it is the measure of your trustworthiness i.e., whether you are worthy enough to be provided a loan or a line of credit.
Your credit score gives the business that you are lending from an idea of your ability to repay the amount of money loaned to you. Therefore, it is really important that you maintain a healthy credit score at all times.
The general range for a credit score is mostly between 300-900 and varies for different models and the optimum credit score is considered to be 750 or above.
Importance of Good Credit Score in a loan
Makes you eligible for loans
The most important thing is that a good credit score for personal loan is that it helps you in securing loans and credit cards. A good credit score is a suggestion of your ability to repay the loans that you take and also a low amount of debt helps the lender to understand that you are financially responsible and lowers your chances of rejection.
Lower rate of interest
Another benefit of a good credit score is that while taking out a loan or a line of credit, the score might help you in getting low-interest rates. The banks and lenders review the repayment history and consider lessening the amount of interest on loans.
Higher credit card limits
The benefit of a good credit score is not only getting low-interest rates but also a high amount of loans as a good credit score increases your credit limit. Having a high score give the impression that the person is financially stable and is capable of repayment in the provided time.
While a bad credit score will inadvertently result in lowering of your credit limit.
Quicker loan approvals
Long credit history can get you a loan pre-approved for customers who also possess a good credit score. A high credit score provides one of the biggest positives by providing approval of quick loans. This means that you don’t get a waiting period and your loan request is approved instantly.
For the future
If you’re not even looking to apply for a loan or a credit card in the present or the near future, you should still strive to maintain a good credit score and credit history.
In the future, if you find the need for taking out a loan to buy a house or a car or even for other financial needs, a good credit score will ensure that you get a loan in the quickest and easiest way possible.
Good credit history will also help to determine the loan status even if the credit score is low during the time of request for the loan.
A loan plays an important part during times of financial crisis so make sure that you keep your credit score ready for it. you should know when you have to take personal loan
You can check your credit score through CIBIL if you have trouble in understanding it you can look up how to check the CIBIL score.