We know that credit card is used to make money when we need and repaying it before deadline without interest. But do you know about credit scores? If not, do check out this blog. In this blog, I will tell about the credit score, the advantages of having a high credit score, tips to increase your credit score, and some cons of owning a credit card.
What is a credit score?
A credit score is a number between 300–850 that depicts a consumer’s creditworthiness. The higher the score, the better you look to potential lenders. A credit score is based on credit history: number of open accounts, total levels of debt, and repayment history, and other factors.
For example, you want to buy a guitar and you have no money. You take money from your credit card and buy a guitar. If you pay the amount you drew from your credit card before the deadline, you will be having and maintaining a good credit score. If not, you will have to pay interest from the first day(money taken day) onwards, and your credit score decreases.
Conversely, a credit score of 700 or above is generally considered good and may result in a borrower receiving a lower interest rate, which results in their paying less money in interest over the life of the loan. Scores greater than 800 are considered excellent.
- Excellent: 800 to 850
- Very Good: 740 to 799
- Good: 670 to 739
- Fair: 580 to 669
- Poor: 300 to 579
There are some factors, which will determine your credit score. Those factors are how much money you drew, how much time you took to pay that money back, your credit types, credit length and its history, and so on…..
All you need to remember is to pay off the money as soon as possible.
Advantages of having a high credit score:-
1.As I described earlier, you will have lower interest rates on credit cards and loans.
2.No need for huge paperwork for getting a loan. If you have a good credit score, you will have more chances of getting a loan.
3.You can borrow more money from the bank. Let me give a small illustration on this point. There are 2 persons(A and B) who want to start a rice mill. Person A has a credit score of 703 and Person B has a credit score of 485. They both went to the bank for taking loans for their business. Who do you think to have a high chance of getting the loan and more money? Person A. You know now the advantage of having a high credit score.
4.If you have a good credit score, you will get good rental houses or apartments in metropolitan cities.
5.If you want to claim any insurance, you will have a chance of paying less, if you have a good credit score.
You have many advantages of having a high credit score. The above ones are the basic things that can be helped by having a high credit score.
Tips to increase the credit score:-
1.Pay your bills on time!!!
2.Know all about credit card rules and bank rules, before owning them. Not all banks have the same credit rules. Choose the best credit card that opts you.
3.Don’t have many credit cards. Have a maximum of 2 cards. It’s enough.
4.Don’t close your credit card account and regularly check and use them, eventhough you have enough money.
5.Use apps like Cred, to track your credit score and to get many advantages like cashbacks, reward points….
6.Have a mixed type of credit type, like a student loan, business loan, and so on… so lenders will think you will have the potential to pay off the loan.
7. Don’t tempt and overuse credit cards, which you can’t pay. You will lose your credit score and also will be in debt. Be careful of it!
Some cons of owning a credit card:-
According to me the only con is not being able to pay off the bills within time and interest charges. But if you pay off the money you owed on time, then it is not a big deal.
A credit score can significantly affect your financial life. It plays a key role in a lender’s decision to offer you credit. So it’s your choice of how you use them.
Productivity Wall 