Thursday, 18 January 2018

Does My Credit Score Really Matter?

Your credit score is something that will follow you your entire life. From loan applications to credit card applications, and jobs to insurance schemes, it will play a major role in everything that’s related to finance and career, whether you like it or not. So, is your credit or CIBIL score important? The answer is “yes”. However, most people know have limited knowledge on the subject and make mistakes because of that.
So, let’s first understand why your credit score really matters.
The Significance of Credit Score
When you apply for a loan, then the bank considers a variety of factors. However, the credit score tops them all.
The reason why your score has such a huge impact on your loan applications is that it represents your creditworthiness. It also sheds light on the risk factor.
So, if your score is high, then you can expect to get an attractive home loan interest rate and an easy approval. Similarly, if it’s below average, then you can have some trouble getting a loan, and that too on favourable terms.
A similar situation can be found in the insurance industry. It’s possible that you may have to pay a high premium for your car insurance if your credit report is not up to the mark and the score is poor.
Companies and institutions, especially the financial institutions like banks have lately started screening candidates on the basis of their CIBIL score. So, if you are looking for a job but have a poor score, then you may miss out on some of the best career opportunities as well. 
An Excellent Score is as Good as a Perfect Score
So, by now you must know why your credit score is important. But how much is good enough?
A lot of people get so concerned about their financial security that they start micromanaging their expenses and bills just to achieve a perfect score. For instance, if we talk about CIBIL, then one could think about achieving the perfect score of 900 (the highest score available under the CIBIL rating). But the thing is that it’s totally unnecessary.
People fail to realize that a credit score is also a representation of the risk factor. The higher the score, the lower the risk. However, there is always some level of risk, which is why a perfect score is almost impossible or doesn’t exist in the first place.
If you have an excellent score (say 750 or above for CIBIL), then that’s enough. You don’t need to go out of your way and put an unnecessary burden on yourself to achieve something that’s impractical or even possible.
Other Factors
It’s true that a good credit score can help you get a low home loan interest rate, attractive terms, and easy approvals. However, it’s not the only thing that matters. In fact, it’s possible to have your loan application rejected even if your score is high. The following are the reasons why:
Bad Credit Profile of Partner 
If you are applying for a joint loan, then it means the credit report of both you and your partner will be reviewed.
It’s very much possible that if the credit score of your partner or co-applicant is low then your loan is rejected even if your own score is good.
Incomparable Monthly Income
Your monthly income should be high enough to justify the loan amount and the EMIs. For instance, if your monthly income is Rs. 30,000 and your loan amount is so high that the EMI stands at Rs. 25,000 per month, then it’s natural for the bank to wonder how you will be able to repay the loan with such a small margin and cancel the application.
Credit Report Remarks
There are some aspects of your financial history that can leave marks on your credit report that are hard to erase. For instance, if you have defaulted on a loan in the past, then it’s considered a serious offense. So, even if you somehow are able to improve your score, if the next lender checks this remark in your report, they will not consider the score at all and downright reject your credit request.
Your credit score is really important, which is why you must do whatever possible to ensure it remains high. Take help if needed, but never compromise on the score as recovery could be extremely difficult.

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