Credit Score is what defines your credit worthiness. In simple terms, it tells all the lenders such as banks, about the likelihood that you will make EMI payments on time. Higher the credit score, higher the credit worthiness, meaning banks will be happy to offer you a loan / credit card subject to other terms & conditions. Having a bad credit score can actually affect your life. Let’s look at how this is even possible.
Timely repayments and zero defaults will keep you in the good books of various lenders. So when you want to buy a car or a new home, a good credit score will help you all the way, in the form of unsecured personal loans. New credit cards, business loans and personal loans are also easier to come by. If your credit score is less, lenders will stay away.
Below are scenarios that might help you realize the credit worthiness:
1. You want to avail a Personal Loan from banks. You go to the bank and ask them for a personal loan. The first thing the bank manager does is check your credit score. Anything below 650-700, he will reject your application then and there.
2. Your rate of interest in taking a loan is influenced by your credit score. Everything is linked to credit worthiness. If you have a slightly low credit score, lenders will look at you as a high risk customer and hence charge a higher interest. The personal interest rate is directly related to your credit score and repayment capability.
3. Your shopping gets affected as the credit card companies will either not issue a credit card to you or they will reduce your spending balance. It’s true. Credit worthiness is one of the critical components of issuing a credit card.
4. Your employment is under threat. Yes, you heard it. In recent days, A trend that has been catching up is the use of credit scores while hiring by employers. Many financial companies and IT companies are now using credit scores to assess how reliable or dependable a person is. If you have applied for too many loans or have too much credit card debt to be paid off it reflects negatively on your prospects to be hired. Although credit scores are not binding on employers/employees for hiring in India, it is still a good idea to maintain a good one.
5. It’s just the tip of the iceberg. In India, credit scores are relatively a new phenomenon and the impact of the score is mostly felt on your credit related transactions. However, in many countries across the world credit scores are used by phone companies to issue mobile connections, by insurance agencies to calculate premiums and even by homeowners before renting their apartments/houses. It is only a matter of time before credit scores in India also develop to that level.
So, make it a point to keep a tab of your score and track it often to keep it in the green zone. A good credit score can be key to a better quality of life and your ticket to financial freedom. You can check your credit score for free at MyShubhLife.
Our next topic will focus on actions you can take if your score is not in the healthy range. Stay tuned to know more.