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How Credit score affect quality of life
A credit score represents your creditworthiness. It is a three digit numerical expression which usually ranges between 300 to 900. A credit score is calculated by credit bureaus on the basis of information they receive from banks and NBFCs with regards to your credit-related activities.
A Cibil score indicates how much you can be trusted by the lenders. The higher your score more trustworthy you appear and lower your score, the least trustworthy you will look. Although, apart from taking loan credit score can have a bearing on various other aspects of your life as well.
Thus, it is of utmost importance that you handle your finances well and work on improving your credit score. Some of the areas in life where credit score has its impact are:
- Interest on you Loan: How much interest you will pay on your loan, whether it is a mortgage loan or an unsecured loan, will be determined based on how good is your credit score. This means when you apply for a loan, whether secured or unsecured, the rate of interest will be decided by the lender on the basis of how high your credit score is.
If your credit score is less, you will be charged with a higher rate of interest whereas, if your credit score is high, the rate of interest levied will be much lower.
- It influences your Relationships: Credit score reflects how you are managing your finances. So, a lower score indicates that you have been reckless at times and in a relationship, if one partner is not managing the finances well, then it can create financial problems for both. It would lead to arguments and stress, especially when it is a case of mortgage debt.
To manage finance well, it is vital that both of you get on the same page; otherwise, they have the potential to ruin your relationship permanently as well.
- Loan approval: Are you thinking for an auto loan? As per ‘Credit Karma,’ your credit score is the most significant factor in the approval or disapproval of your auto loan. Your plans to own a car can go for a toss if you have not maintained a good credit score.
In some cases, you might get approved for an auto loan even with a low credit score, but in such cases, the rate of interest on the loan will be on the higher side.
- How you pay for your Expenses: A good credit score will attract pre-approved credit cards with good rewards and a high credit limit. Whereas if your credit score is low, it might even lead to a reduction in your current credit card limit if you do not pay on time.
Also, if your credit limit is reduced, it will have a bearing on your credit utilization ratio, resulting in it to go higher and adversely impacting your credit score even further.
From the above discussion, it is clear that credit score has the potential of impacting your life those areas as well where you might not have imagined. Therefore, it is of utmost importance that you work on improving your credit score if it is low or manage it well to keep it maintained in case your credit score is high.
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