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What is credit score and how good credit score helps

To increase financial growth, people are moving towards credit and debit cards. The use of credit cards has been increasing since 2017, in 2017 there was 19.28 percent of people from 142 using credit cards, the highest was 82% from Canada. In 2019, there were 22.8 billion credit, debit, and payment cards in circulation worldwide which are supposed to be increased by 2023. 9 countries that use credit cards more than cash, are Korea, Japan, Canada, the USA, UK, Australia, France, Sweden, and China.

Most people are still unaware of credit and debit cards. A credit card can be considered a medium to get an instant loan from an ATM and repay the amount used within the due date. The user gets a limited time to use the credit card and renew it further. The period could be a month or a couple of months and at the end of the month, the user gets a due date to repay the amount as soon as possible.

Now, here come the credit scores. The user repays the amount, the credit card is rewarded with a credit score, based on the person’s repayment history. A person having a good credit score is likely to get additional benefits such as a quicker loan approval process, low-interest rates, and better repayment options. A good credit score may also help in getting discounts, many apps give a discount based on our credit score. Hence, having a credit card might be a better option to improve our expenses.

In India, there are four credit information companies licensed by RBI such as Experian, Highmark, Equifax, and Credit information bureau (India) Limited (CBIL).  Half of India’s working population of 400mn people has an active credit card. The most popular is CBIL. A credit score is a 3-digit number varying from 300 to 900, with 900 being the best score and 300-500 is considered the poorest. The majority of credit card ranges from 700to900, and a good score is anything above 700.

Advantages of having a good credit score:

1- Better car insurance rates.

2- easy clearance for rental houses and apartments.

3- get approved for higher limits.

4- Low-interest rates on credit card loans.

Once we demonstrate that we can pay back whatever we have borrowed on time, banks will be willing to let us borrow more money. The less one pays in interest, the sooner person will pay off the debts and the more money person will have for the expenses.  We may still get approved for some loans with a bad credit score, but the amount will be more limited. It is important to check our credit scores while repaying or seeking loans because you may have a good credit score and might be able to use it. Your credit score might be an important indicator to the lender of your ability to repay loans.

Repaying the amount seems to be very important as it depicts your worthiness of getting good credit scores and loyalty, else bank may take quick action over the user. Here are some ways to improve the credit score:

– Pay the EMI’s and credit card dues on time.

– Do make too much use of the credit card limit.

– Review your credit report regularly.

– Avoid applying for multiple loans or credit cards within a short period.

People who keep their credit scores better get a chance to save more. Hence, you can make sure that your credit remains good so that you will be able to access the credit opportunities whenever needed.

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