The Power of Good Credit: 10 Benefits of a High Credit Score
A credit score may seem like just a small number, but it can make a big difference in your financial life. This number can affect everything from the loans you qualify for to the rates you pay and even your job prospects. Having a good credit score can open doors to opportunities that may be harder to access with a lower score.
In this blog, we'll explore the key benefits of having a good credit score and how it can help you financially.
What Is a Good Credit Score?
In India, the most commonly used credit score is issued by CIBIL (Credit Information Bureau (India) Limited), and it follows this 300–900 scale. The higher your score, the better your financial opportunities. Here’s how credit scores are typically grouped:
- Poor: Below 550
- Fair: 550 – 649
- Good: 650 – 749
- Very Good: 750 – 799
- Exceptional: Above 800
A score above 750 is usually considered very good and can help you get better loan terms and faster approvals.
What are the benefits of having a good credit score?
1. Lower Interest Rates on Loans
One of the biggest advantages of maintaining a good credit score (750 and above) in India is access to lower interest rates on loans. Banks and NBFCs consider high credit scores as a sign of responsible borrowing and repayment behavior. As a result, they offer more favourable terms to such individuals.
For example, let’s say Priya applies for a car loan of ₹10 lakh with a tenure of 5 years. Because of her excellent credit score, she gets an interest rate of 8% p.a. Her EMI would be around ₹20,276 and the total interest payable would be approximately ₹2.16 lakh.
In contrast, Rahul has a low credit score and is offered an interest rate of 11% for the same loan amount and tenure. His EMI would be around ₹21,743 and total interest paid would be about ₹3.04 lakh.
Result: Priya saves nearly ₹88,000 just because of her good credit score.
2. Higher Chances of Loan and Credit Card Approval
In India, a good credit score (typically 750 or above) significantly increases your chances of getting approved for loans and credit cards. Banks and NBFCs see high scores as a sign of financial discipline, so they're more comfortable lending to such individuals.
For instance, if you’re applying for a home loan, having a strong credit score improves your chances of approval — even if you're aiming for a high loan amount or longer tenure. It can make the process smoother and faster, helping you secure the funds to buy your dream house.
3. Access to Better Financial Products
A good credit score gives you access to better financial products. For instance, premium credit cards that offer rewards like cashback, travel points, and purchase protection are often reserved for those with good credit.
Once your score is high enough, you can enjoy these benefits and make the most of your financial products.
4. Better Job Opportunities
Some employers check your credit score as part of the hiring process, especially in fields like finance or government. While a good credit score won't guarantee you the job, a poor score could hurt your chances.
If your credit score is good, you’re less likely to face issues in industries where credit checks are common.
5. Easier to Rent a Home
Many landlords check your credit score before renting to you. A good credit score shows that you're likely to pay your rent on time. With a higher score, you’re more likely to get approved for the rental property you want.
6. Lower Insurance Rates
In India, some insurance companies consider your credit score (CIBIL or other credit reports) while determining your premium amount—especially for health, motor, and life insurance policies. A high credit score indicates financial discipline, which makes you a lower-risk customer in the eyes of insurers.
For example, someone with a good credit score might get a lower premium on car insurance compared to someone with a poor credit history, even if both have similar driving records.
Result: A good credit score can help you save significantly—sometimes several thousand rupees every year—on insurance premiums.
7. Avoid Utility Deposits
When setting up utilities like electricity, water, or internet, some companies may require a deposit. If you have a good credit score, you might not have to pay a deposit. But if your credit is poor, you may have to put down a deposit before the service is turned on.
8. Easier Loan and Credit Card Qualification
A good credit score makes it easier to qualify for loans and credit cards. Banks often require a minimum score for certain offers, such as credit cards with rewards or low-interest loans. With a good score, you’re in a better position to take advantage of these offers.
9. Lower Interest Rates on Big Loans
Having a good credit score in India means you're more likely to qualify for lower interest rates on major loans like home loans and car loans. Even a small difference in interest rates can lead to significant savings over the loan tenure — sometimes amounting to tens of thousands or even lakhs of rupees.
10. Better Financing Deals
A good credit score signals that you're financially responsible, which makes lenders more likely to offer you favorable terms. This could include higher credit limits, larger loan amounts, and better rates on loans and credit cards.
Common Myths About Good Credit
No matter where you're starting, improving your credit score can help your financial situation. As you begin building your credit, it's important to know the facts. Here are some common myths about getting good credit:
- Checking your credit harms your score. This is not true. Checking your credit score helps you understand where you stand, and it won’t negatively affect your score.
- Carrying a balance helps your score. False. Carrying a balance on your credit card can hurt your score. Try to pay off your balance in full each month when possible.
- Your income affects your score. This is incorrect. Your income does not directly impact your credit score, though having a higher income may help you manage finances better and improve your score.
To build good credit, make sure to make on-time payments. With regular, timely payments, your credit score should improve over time.
Tips to Improve Your Credit Score in India
To enjoy the benefits of a good credit score, it’s important to keep your score healthy. Here are three easy tips to help improve your credit score in India:
- Check Your Credit Report Regularly. You can get one free credit report every year from each of the four major credit bureaus in India: CIBIL, Experian, Equifax, and CRIF High Mark. Visit their official websites to download your report. Look for any errors and report them if needed.
- Avoid late payments. Paying bills on time is key for good credit since 35% of your FICO Score is based on your payment history. Even a few late payments can hurt your score. Late payments can stay on your report for up to seven years, but their impact reduces over time.
- Pay down credit card debt. Your credit utilization ratio (how much you owe compared to your credit limit) affects your score. Paying off credit card debt can help both your finances and your credit score.
Leave a Reply