Finance

Credit Score: Why Maintaining It Is Crucial?

In today’s evolving credit market, defaulters find it increasingly difficult to obtain a loan from banks that actively use credit bureaus. As credit score becomes essential to loan applicants, issues such as what a “credit score” is, how it impacts, and why maintaining it is crucial arise.

Credit Score

Usually known as a three-digit score, a credit score indicates how creditworthy an individual is. When you fill an application for a loan or a credit card, it’s the primary thing lenders look at. It provides them an indication of whether you’re capable of repaying the mortgage on terms or not.

Thus, building and sustaining a decent credit score is essential.

A Good Credit Score

Credit scores are classified into five different categories under the FICO credit scoring model:

  • 300-579 – Poor
  • 580-669 – Fair
  • 670-739 – Good
  • 740-799 – Very good
  • 800-850 – Excellent

Importance Of Maintaining Credit Score

A strong credit score might provide you a significant advantage during financing decisions, whereas a low credit score can make your considerable financial transactions costlier.

Here’s why you need to keep a constant check on your credit score and maintain it.

Loan & Credit Card Approval

Maintaining a strong credit score boosts your chances of getting new credit. In other words, you may confidently ask for a mortgage or a credit card.

Less Interest Rate

If you hold a stable credit score, you will nearly always qualify for the lowest interest rates and pay less in finance costs on credit card balances and loans. The less interest you spend, the sooner you’ll be able to pay off your debt and have more money for other things.

Pre-Approved Loans

Borrowers with substantial credit may also qualify for pre-approved loan offers. In most cases, banks will make a pre-approved loan offer to current clients with a decent credit score.

How Can You Improve Credit Score?

Some of the most fundamental techniques to increase your credit score are as follows:

  • Repayment of monthly loans and debts on schedule and within budget before the specified deadline
  • Minimizing credit extensions and avoiding accepting unsolicited new card offers
  • Self-precaution goes a long way, thus disregarding past-due invoices is a no-no.
  • When you’re having financial difficulties with a borrower, keep the conversation open and make regular payments.
  • Knowing what kind of credit card you’re using
  • Restricting the number of mortgage applications is a sure-fire way of never exceeding your credit limit; not overspending is the smartest move one can make when attempting to better one’s credit score.
  • How Can A Financial Planning Software Help?

Taking help from financial planning software, you can effortlessly maintain a good credit score to help you in your future engagements. A budget management software such as My EasyFi will assist you with all the needful features needed to maintain a good credit score. Features such as smart money tracker, budget builder, debt repayment tracker, and financial planning tools are vital when retaining a decent score.

Conclusion

Creating and maintaining a decent credit score is critical since most of your financial decisions use your credit score as support. If you have a terrible score, plan on increasing it to prepare for the future.

If you wish to take help from the best money management software, contact My EasyFi today and start maintaining your credit score!

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button