How Your Credit Score is Used?
A CIBIL score is an important factor that your lenders and credit card issuers look at while evaluating your loan or credit card application. Generally, a credit score ranges between 300 and 900, 300 being the lowest and 900 being the highest. It works as a first impression for your lender, the higher the score, the better are the chances of your credit approval with the most favourable terms, including lower interest rates and potentially lower fees. The decision to lend is solely dependent on your Credit Score. If you have a good credit score above 750, then you are eligible to get quick and speedy approval on your credit applications, along with the low rate of interest as well as pre-approved offers in some cases if you have maintained a good credit history and relationship with the lender. Your good credit score shows the lender that how well you have been managing your credit obligations efficiently during the past and you are likely to continue to do so. These days credit scores are used by several organisations to gauge your creditworthiness. It helps them to make decisions fast whether to lend you or not
What Are Credit Scores Used For?
A credit score is primarily based on the information present in your credit report which is sourced from the credit bureaus. Lenders, such as banks and credit card companies, use your credit scores to evaluate the potential risk posed by lending money to consumers and to mitigate losses due to bad debt. Let’s look at some of the areas where your credit score is taken into consideration.
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Lenders and Credit Card Issuers:
Your Credit Score is one of the important things which is checked by your lender and credit card issuers before approving any form of credit. The lender pulls out your credit information by obtaining a credit report from the credit bureaus to analyse your creditworthiness. If you have a high credit score (750 and above), you will be eligible to receive preferential pricing for loan interest rate from lenders. Good credit score assures a lender that you are managing your finances well and have good repayment ability.
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Landlords:
Landlords might check your credit score before renting you a house to make sure whether you can pay the rent on time or not. Landlords often assume that the better your credit, the more likely you are to pay your monthly rent on time.
- Employers:
Employers also check your credit score before hiring you. However, it must be noted that you will need to permit employers to pull out your credit report.
- Insurance Company:
Insurance companies also check your credit score to decide whether they should insure you and at what rate they should give you insurance. If you have negative information on your credit report, like late payments and collection accounts, you could have a higher insurance rate than consumers without negative information.
- Debt Collectors:
Debt collectors check your credit score to get information that will help them collect the debt from you. This includes your current address and employer information. They may also view other accounts on your credit report to estimate whether you can pay the collection or not.
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Utility Services:
Utility companies also check your credit score when you set up utilities or cell phone service. They may charge a security deposit if there's information on your credit report that makes you look like a risky.
So, these were some of the areas where your credit score is used to know your financial health. Therefore, you need to work towards achieving a good credit score to avail of different advantages.
