Why You Should Have a Good Credit Score for Loan Approval

Why You Should Have a Good Credit Score for Loan Approval

You can survive with bad credit, but it’s not always easy and cheap. Establishing a good credit score will not only help you save money and make your financial life much better. But it will also help you better understand your current credit position.

A good score is typically defined as reaching 700 or higher. So, if you are looking for reasons to maintain a good score, here are a few great benefits to consider.

1. Higher borrowing limits

Your borrowing capacity is based on your income and your credit score. One of the benefits of having a good credit score is that banks/Microfinance Institutions are willing to let you borrow more money because you’ve proven that you are capable of repaying what you borrow on time. With a negative score, you may still get approved for some loans, but the amount will be limited.

2. Save on other types of Insurance

Insurance companies may also assess your credit history. They may be looking for information as other lenders. It could include your history of timely bill payments as well as the amount of debt you owe. What they discover about your credit may influence how much you pay in premiums.

3. Lower interest rates

If you ever want to qualify for a loan, having a good credit score will qualify you for lower interest on nearly every kind of personal loan you might need.

A high credit score means you have a much better chance of qualifying for the best interest rates, which means you will pay lower finance charges on credit card balances and loans.

The less interest you pay, the sooner you’ll pay off your debt and the more money you’ll have for other costs.

4. More negotiating power

Not only can you get lower interest rates with a better credit score, but you can also use it to your advantage during a mortgage negotiating process. To do this, you’ll need to prequalify and check rates with multiple lenders. Then, you can take your rate around to several lenders to see whether they can offer you better terms, either by further lowering the interest rate or waiving fees for the loan costs.

5. Good Reputation

Because of all the benefits, a good credit score is something to boast about, especially – if you’ve worked hard to improve it – from bad to good. If you’ve never had to experience a bad credit score, keep doing what it takes to maintain it. It just takes a few missed payments to get off track.

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