How Your Credit Score Impacts Your Financial Future?

Who in the world has not heard of this term, in fact, more than we care to admit? Also, who has not been asked by their parents and grandparents to ensure that their score stays good, above a certain limit? But do we truly know what exactly it is & even more importantly, the profound influence it has on our day-to-day lives? After all, what exactly is a low credit score's impact on a personal loan?

Now if we are talking about our home country, this three-digit number, conveniently known as CIBIL, is crucial to unlocking a world of financial opportunities. Still confused? Well, no need to worry, as here we will discuss its workings & how it actually makes a difference to our financial future. So, without any further wait, let’s go ahead, starting from -

What is Credit Score?

Simply put, this is a three-digit number - that’s all it is. Think of it as a report card but about your ability to handle your finances. Now understand that it is not arbitrary, but actually an indication of your credit-worthiness in India. Simply put, this determines the ease with which you can secure any other sort of loan.

Now, this number (CIBIL) is calculated and then managed by Trans Union CIBIL. What it is? Well, it is only India’s leading credit information storer, so they are kind of a big deal.

Which score is Good?

A difficult question to answer. It all depends on multiple factors However, for simplicity's sake, anything above 750 is great. It is considered as a good credit score for instant loan. Just by having such a score will lead to new opportunities, especially regarding various financial products, and services with favorable terms.

Importance of Credit Score

After establishing exactly what this number means, we need to ask — do they really matter? It is only 3 digits, so how come they have that much of an influence on our lives, they must not have.

But if you think like that, then you are incorrect in your assumption. In fact, it is quite useful for your financial journey in India. Only through this can you gain access to -

• Loans: Have you ever tried getting a loan? The first thing they ask of you is your score. Yes, this is actually by design, as it allows them to gauge whether you are a loan risk or not. It will ultimately translate to money saved due to lower interest.
• Credit Cards: This is also needed to apply for a credit card as well. It also directly influences the type of credit card you can even apply for.
• Insurance Premiums: Guess what? A good score will even help with insurance premiums too.
• Rental Applications: In Tier-I cities, landlords (or in high-end societies) might confirm your score before approving your rental application.

Determining Your Credit Score for Financial Future

The good news for you is learning about the score is a simple process. Yes, unlike many countries where you have to pay for this info in India, this report is available free of cost.

Also, once you have gained access to the report and your score, keep in mind that it is not set in stone. Every financial activity you make impacts it, so you must monitor it regularly.

Also, take some time to analyze the report thoroughly. The aim is to look for any discrepancies, and contact relevant authorities if you find one.

Do or Don't to Maintain Credit Score

It gets easy to maintain your credit score if a few do's and don'ts. Ensure you keep all the do's and don'ts in mind and keep your credit score in good shape that opens up future borrowing opportunities. Let's have a look:

Do’s

• Make sure that you are paying your bills on time.
• Credit card utilization must be less than 30% (no reason, it is a good number to target!).
• Only get a new card if you really need it.

Don’ts

• Missing payments of your bills, EMIs, and quite frequently at that.
• Using your credit cards too much; maxing them out.
• Closing non-use old accounts.
• Ignoring any discrepancies in your MSME CIBIL Report.

Conclusion

Whether you want to take any types of personal loan or a business loan, you just need to know the required credit score, you must understand that a good CIBIL score is very important. It can literally impact your financial future.That's why you should start taking care of it right away. Don't wait any longer - take responsibility and check your score right away.