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Benefits for Individuals Having a Good Credit Score

Highlights

  • What are the benefits that customers with a good credit score can enjoy?
  • The benefits include Lower Interest Rates, Higher Loan Amount, quick loan approval, etc
  • The benefits include Lower Interest Rates, Higher Loan Amount, quick loan approval, etc

Credit Score is a kind of financial scorecard that affects your life in different ways, without you even realizing it. This is a term you must have heard several times, but many often misunderstand the importance of their credit scores. Simply put, a credit score is a three-digit score that determines an individual’s creditworthiness. In India, the score can range from 300 to 900. But a good credit score is considered to be 750 and above. The closer to a person’s score is to 900, he or she is considered to be more creditworthy and financially responsible. A credit score is an essential metric for lenders to determine an individual’s creditworthiness.

A good credit score can bring a range of benefits to customers and the unfortunate part is that a lot of people don’t realize its full potential. A credit score is derived from your credit report that is nothing but a record of all your financial transactions. The report is maintained by several credit bureaus in India, such as CIBIL, Experian, etc. Individuals are advised to maintain a good credit score so that they can enjoy benefits like Lower Interest Rates, Pre-approved Offers, Higher Limits on Credit Card, Higher Borrowing Limit, Quicker Approval, etc.

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In this post, we will cover the benefits of a Good Credit Score that customers can enjoy. So, if you want to understand them, keep reading it.

What are the Benefits of a Good Credit Score?

Lenders differentiate between good and poor credit scores with a number. A score of 750 or above is considered good by lenders. Credit scores below 600 are considered to be poor. While a poor score makes loan approvals dicey, a good score not only helps you gain approval but also several other benefits. We are showing various benefits of a good credit score below. Do check them.

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Quick Loan Approval

Anyone can require money to meet his/her financial needs. A loan is available these days to meet such needs. Lenders provide basically two types of loans – Secured and Unsecured. When any lender offers the loan amount, it doesn’t want to face credit risk especially in the case of unsecured loans. So, people with a good credit score can get quick approval. The reason: Any lender would prefer lending to a borrower who has been financially responsible.

A good credit score indicates that a person is more likely to pay the loan on time. Any lender would like to lend to an individual with a good credit score rather than a person who has a history of missed repayment and defaults. One of the indirect benefits of a good credit score is a person can get money instantly to fulfill his or her needs due to quick loan approval. As soon as the lender approves the loan, the amount gets disbursed into your account.

Lower Interest Rates

The most important thing an individual looks while applying for any kind of loan is the Interest Rate charged by the lender. Interest rates directly affect the repayment amount. The higher the interest rates, the higher will be your repayment amount. So, when we are talking about the benefits of a good credit score, we cannot forget to mention the availability of lower interest rates to an individual with a good credit score. When you have a good credit score, every lender wants to provide you a loan because of your responsible repayment behavior. So, you can negotiate a lower rate of interest with your lender because several lenders are competing to give you an offer you cannot refuse.

Several lenders offer interest rates according to the credit score of an individual. So, an individual with a poor credit score may face rejection or get the loan at higher interest rates. Lenders try to minimize their credit risk by charging higher interest rates while sanctioning loans to people with poor credit scores. Simply put, a good credit score ensures lower interest rates and reduces the repayment burden for borrowers.

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We are showing interest rates of personal loans, home loans, car loans and gold loans of top lenders. Please check.

LenderPersonal Loan Interest Rate (per annum)Home Loan Interest Rate (per annum)Car Loan Interest Rate (per annum)Gold Loan Interest Rate (per annum)
State Bank of India (SBI)9.60% - 13.60%6.95% - 7.60%7.75% - 8.45%7.50%
HDFC Bank10.75% - 21.30%6.90% - 7.65%7.70% - 13.55%10.05% - 17.95%
ICICI Bank10.75% - 18.49%6.95% - 8.05%9.30% - 12.85%11.00% Onwards
Bank of Baroda10.25% - 15.60%7.00% - 8.40%7.50% - 10.30%9.75%
Axis Bank12.00% - 24.00%7.75% - 8.55%9.05% - 11.30%13.00%

Note – The home loan interest rate marked against HDFC Bank is of HDFC Limited, the parent company of the former.

Higher Borrowing Limit

Usually, lenders decide the final loan and credit card limit according to an individual’s monthly income. But apart from this, the credit score can also impact the borrowing capacity of an individual. When a person has a good credit score, lenders are more confident of getting the money back from the borrower. That’s why individuals with high credit scores can expect to get a higher loan amount due to their good repayment record. On the other hand, if an individual has a low credit score, lenders may hesitate in providing a higher loan amount.

Similarly, individuals with high credit scores can get a higher credit limit on their credit cards. Here, the reason is the same. A good credit score indicates that an individual is disciplined with his or her repayment behavior. And this encourages lenders to give higher credit limits to such customers. And not only this, but customers can also get better schemes, offers and privileges on credit cards from lenders.

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Pre-approved Offers on Loans

When customers have a good credit score (750 and above) because of their timely repayment and responsible financial behavior, lenders see them as a creditworthy borrower. Lenders provide pre-approved loans to such customers without asking any questions. Let’s understand this in this way. Suppose you have an SBI Credit Card and you have been making timely payments of your card bills. Seeing your repayment behavior and credit utilization ratio, SBI may offer you a pre-approved personal loan at lower interest rates.

The amazing part is that customers don’t need to provide any documents to get this loan amount. They only need to give their consent and the loan amount will be disbursed into their accounts. So, you can understand how beneficial it is to have a good credit score. You can also contact your lender to check whether you are eligible for a pre-approved offer or not.

Opt for Balance Transfer Facility

One of the significant benefits of a good credit score is customers can ensure maximum savings on their respective loans with the help of the Balance Transfer Facility. With this facility, customers can transfer their outstanding principal balance to some other lender at lower interest rates. You must be thinking about the role of credit score in this. Well, before permitting any borrower to transfer his or her loan balance, lenders check their credit score. So, borrowers with good credit scores can easily be eligible for the Balance Transfer facility while individuals with low scores may face difficulty.

Moreover, eligible customers can get lower interest rates due to their good credit scores. With low interest rates, they can save both in terms of EMI amount and overall interest outgo. There is one other thing also – Lenders also provide top-up loan amounts over and above the existing loan amount to people with responsible repayment behavior.

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Personal Loan Interest Rates October 2020
Fullerton India14.00% - 33.00%
HDFC Bank10.75% - 21.45%
ICICI Bank10.75% - 18.49%
IndusInd Bank11.25%
Kotak Bank10.99% - 20.99%
RBL17.50% - 24.00%
Standard Chartered Bank11.00% - 15.00%
Tata Capital10.99% - 18.00%
Home Loan Interest Rates October 2020
Axis Bank7.75% - 8.55%
Bank of Baroda7.00% - 8.40%
Citibank8.20%
HDFC6.90% - 7.65%
ICICI Bank6.95% - 8.05%
Indiabulls Housing Finance Limited8.80% - 11.05%
Kotak Bank7.20% - 9.30%
LIC Housing6.90% - 7.90%
Piramal Capital & Housing Finance9.00% - 9.10%
PNB Housing Finance7.90% - 9.20%
Reliance Home Finance8.75% - 14.00%
State Bank of India/SBI6.95% - 7.60%
Tata Capital9.20% - 9.35%