Credit score is determined based on an individual’s credit history. Every financial step and every financial decision of an individual will be recorded in the credit history of the individual. All the loan/credit card payments, defaults and much more make up the credit history from which a credit score is derived. It is very important to maintain a good credit score in order to avail loans and credit cards at a good rate of interest and with no trouble.
Why you should maintain a good credit score!
There are several reasons as to why you should maintain a good credit score, preferably above average. The average credit score is said to be about 750 and anything below 750 is a bad credit score. Listed below are several reasons as to why an individual should maintain a good credit score.
- Loans- Banks look to your credit score when determining your eligibility to grant loans. A good credit score will instill confidence about you in banks and financial institutions.
- Credit cards-Before banks check your eligibility criteria for income and other factors, they check for your credit score. The banks require the individual to have a credit score of a minimum 750 or more in order to be eligible for the credit card. The bank will reject the application right away if the applicant has a poor credit score.
- Rate of interest- A good credit score will get the applicant a lower rate of interest when it comes to loans and credit cards.
- Higher limits- A good credit score will not only get you a lower rate of interest on your credit cards and loans but it will also help you in getting a higher loan amount with your loans and higher credit limit on your credit card. A bad credit score, on the other hand, will result in lower credit limit.
- For the future- Even if you don’t see yourself applying for loans or credit cards in the near future, ensure that you still maintain a good credit score or credit history. A good credit score will come in handy when you apply for home loans/credit cards or other kind of loans in the future. Having no credit score or credit history is just as worse as having a poor credit history or poor credit score.
Tricks of maintaining a good credit score!
Now that you know how important credit score is, it is important to know how to achieve or maintain a good credit score. Listed below are few steps to maintain a good credit score.
- Make payments on loans and credit cards on time
- Do not default on loans and credit cards
- Keep your credit card balance low
- Do not close old credit cards
- Do not apply for too many loans or credit cards unless needed
- Maintain a balance of secured and unsecured loans
- Maintain a good relationship with the banks and financial institutions
- Opt for collateral loans whenever possible